MONEY: Some important questions to ask your investment advisor

Question: I need some help with my investments, as I have lost so much money in the market this year. I have an advisor, but he doesn’t seem to know what to do. Marcel

Dear Marcel: Great question! There are many different viewpoints on how to invest so let’s cover the basics and provide some questions you can ask your financial advisor to get you making money.

Not everyone responds the same with loss and, although we like to think we are rational in our decisions, research and evidence suggests that all investors (and some advisors) tend to sometimes act irrationally with errors in judgment caused by greed, emotion, and the fear of loss.

Basically, there are two ways that most Canadians invest in the market today: fixed income investing, or guided stock portfolios (Exchange Traded Funds/ETFs plus Mutual Funds/MFs).

To take advantage of upswings you want to be invested in securities, but to add stability to your investments you also want to hold fixed products too. Let’s talk about both.

When analyzing the markets from a long-term perspective, the fixed income portfolios win every time through laddered techniques. They are certainly not as glamorous as picking stock, however because of their stability and security, almost all large corporate and government pension funds are done through this method.

Fixed income products consist mostly of different types of bonds and buying them is much like buying real estate. You can’t turn around and sell them immediately after the purchase for a profit, as you can with stocks. It is a guaranteed product that over time will have a higher value than your purchase price, typically without the loss of your initial investment.  Most people who invest in real estate and want a tangible asset, choose to diversify their investments in institutional bonds because of the similarities.

Managed products and advisor services now have embedded fee-based structures that are designed to protect the advisor and brokerage firm, with the goal of limiting potential damages to their client’s portfolios. Large firms will showcase their sophistication in wealth management, financial and estate planning, trusts, business planning, and business successions. These firms will also have proprietary programs that follow specific methodologies for picking and choosing different stocks such as managed programs with varying annual fees.

Of course, if any of my readers have questions about saving for the future or need specific advice about how to retire debt free and wealthy, you can always email me your questions on my website at: www.askthemoneylady.ca

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Written by Christine Ibbotson, national radio host, YouTuber and author of three finance books plus the Canadian best-seller, How To Retire Debt Free & Wealthy. Go to www.askthemoneylady.ca or send a question to info@askthemoneylady.ca