Starting to invest may seem like a daunting task – there are many options on how you can approach it. Once you have identified that you personally have the ability to invest, there are a couple of main avenues you can explore based on several factors, such as size of account, fee preference, and advice needed.
Do it yourself (DIY)
There are many platforms that range from the big banks to smart folios that will let you build your own portfolio. This assumes that you have the sophistication and emotional capacity to build a diversified portfolio that matches your short and long-term goals. The benefit to this type of structure is a lower fee, but a disadvantage can be that your emotions may hinder your ability to achieve long-term gains.
An investment advisor is a traditional broker in the financial services industry. Movies like ‘Wolf of Wall Street’ have been based on this type of profession. An investment advisor can provide advice for a fee or commission when building an investment portfolio. This takes some of the pressure off the individual but still relies on a base level of sophistication as the portfolio decisions are shared. The investment advisor provides advice on the investment decisions, but at the end of the day, the client makes the decision on whether to buy or sell. A large benefit to this structure is having an investment professional available to manage your personal emotions when times are bad and provide sophisticated recommendations that should line up with your short and long-term goals.
A Portfolio Manager has a fiduciary duty to their clients. This means that they can trade on behalf of their clients to work towards their financial goals. This traditionally aligns the overall goals of the client and portfolio manager with a model where everyone benefits from the accounts increasing in value. A portfolio manager should manage the emotions of the clients and provide a buffer between the clients and their investments. Portfolio managers are usually paid a fee for invested capital and can provide other services such as financial planning, estate planning, and tax strategies.
Many investment firms have account minimums, and individuals should always be aware of the fees and value associated with the avenue they pursue.
If you have any questions or would like to discuss further, please feel free to connect with one of our portfolio managers.
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