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If you’re looking for a pro to help you manage your investments, there’s no shortage of advice on what questions to ask when interviewing a potential financial advisor. But what about after the hire? How do you ensure your future’s going according to plan?
These three questions are a great place to start.
How Do My Funds Compare to Other Similar Funds?
Hopefully, you invested in good growth stock mutual funds with a long history of above-average returns. Even so, it’s a good idea to sit down with your financial advisor periodically for a performance check. Your funds should perform much like the S&P 500—it swings up and down but consistently trends upward in the big picture.
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If one of your funds has a bad quarter, don’t panic. Remember, you’re in this for the long haul. It takes time for a fund to ride out the stock market’s fluctuations and live up to its potential. Before you make any sudden moves, take a closer look by comparing the fund to others in the same category.
If one of your funds has a bad quarter, don’t panic. It takes time for a fund to ride out the stock market’s fluctuations and live up to its potential.
Let’s say one of your aggressive growth stock mutual funds has taken a dip. Check other aggressive growth stock funds to see how they’re faring. If they’re down 17% and your fund is only down 15%, you’re doing pretty well in the grand scheme of things. Stay the course and give it two or three years to bounce back.
If a fund continually lags way behind its category peers, talk to your advisor about your options. Just keep in mind that moving funds should be a rare event, and it usually costs money. Take fees and commissions into account to make sure changing funds is really worth the expense.
Am I On Track to Reach My Goals?
Part of any successful retirement plan is taking the time to make sure you’re on track. Your advisor should have no problem meeting with you annually to discuss your progress—and more often when you have concerns or are transitioning into retirement.
If you don’t have a specific target in mind yet, it’s time to get serious about putting your goals on paper. The Employee Benefit Research Institute (EBRI) found that workers who calculate how much money they’ll need to retire comfortably aim higher when it comes to their savings goals. An experienced advisor can help you pinpoint your magic number and show you how to reach that goal with confidence.
Workers who calculate how much money they’ll need to retire comfortably aim higher when it comes to their savings goals.
Just be prepared to give it all you’ve got. According to the ASPPA Journal, studies show that retirement success depends more on your savings rate than any other factor. Dave recommends investing 15% of your household income into Roth IRAs and tax-advantaged retirement plans, because 15% enables you to build a solid future while still enjoying life today. If you’re already contributing 15%, give yourself a pat on the back—you’re doing great! If not, that’s okay! Work with your advisor to devise a step-by-step plan for getting there.
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Do I Need to Make Any Adjustments?
If there’s one thing you can count on in life, it’s that things change. Buying a new home or expanding your family? Tell your financial advisor. Major life changes can affect your risk profile and your long-term financial picture. A true pro will take recent developments into account and make sure your investing strategy stays in line with future goals.
Other changes happen beyond your everyday view. For instance, a new state law could impact your tax liability. Your advisor should alert you to any legal or regulatory changes you need to know about so you can make informed choices about your investments.
Honesty Is the Best Policy
You should feel confident that your advisor will answer as many questions as you need to ask to understand how an investment works.
If your financial advisor gives you the runaround, find someone else. It’s your money. You deserve an honest picture of where you stand and where you’re headed.