Category: Archive

Business Matters Investment goals, financial advice

February 16, 2011

By Staff Reporter

By Kevin FitzGerald

I’ve recently been left a small inheritance, and for the first time in my life I have to address the need for financial advice. Where do I start?

— J.B., Oceanside, N.Y.

Many people have a mental block when it comes to investments. To the neophyte, the investment world often seems ominous and threatening, full of pitfalls for the uninitiated. This need not be the case, for the basics can be understood by even the beginning investor.

Investing means managing your resources so that you can preserve your money’s buying power, generate more money and obtain income. Once you decide to put your money to work by investing it, you will need a procedure for making sense of the multitude of financial options available to you.

You can begin by clarifying your investment goals. Ask yourself the following: Where am I now financially? Where do I want to be in five, 10, 20 years?

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You will have to take a financial inventory to assess where you are now. Ideally, this should be done when you are not under pressure.

Once you have carefully made this inventory, taking into account, for example, your liquid assets, fixed assets and obligations, you should be ready to identify where you want to be at the end of a specific period of time. Keep in mind that your goals will differ at different times in your life. For example, if you were to marry or receive an inheritance, your financial planning would change.

It will be helpful to have a guide and mentor on this journey you are taking. His or her selection of investment vehicles should be done with a great deal of care. If you select an investment broker as your guide, choose someone from a reputable brokerage house, where the research available to you will be of the highest quality.

A good way to begin your search for a broker might be to introduce yourself to the manager of a local brokerage firm. Let the manager recommend one or two brokers for you to interview.

Look for a personal rapport with your potential broker. Beware of a high pressure salesman, someone who is not willing to spend time with you, nor willing to admit a mistake. Ask the prospective broker what you can expect of him and how much time he can give you. He should feel free to call you with recommendations, and you should feel free to come to him with your questions.

Once you have selected this individual with whom you feel comfortable, he/she should help you in evaluating your financial situation and identifying your investment goals. You will also want to explore such issues as: How much risk of volatility can I tolerate? Do I feel more comfortable with stocks, or would I prefer a highly rated municipal bond? Should I look at tax-advantaged investments? Which investments provide income exempt from federal and state taxes?

Together, you and your broker should review the many financial options available to you, such as corporate and municipal bonds, common and preferred stock, listed options, and tax-advantaged investments, to name a few. Your broker will help you to understand the different types of investments and can point out to you which of the diverse financial instruments available would best fulfill your objectives.

If, for instance, current income from investments is of paramount importance to you, you would be interested in regular dividends, an attractive rate of return and safety of principal and liquidity, should you need funds on short notice.

As you work with your investment broker, you should make every effort to become as knowledgeable as possible about financial markets. This will help both you and your broker. Become acquainted with The Wall Street Journal and the financial section of your local newspaper. You may even want to scan periodicals such as Barrons, Forbes and Business Week.

In short, you as an investor should learn all you can, so that you can be a full partner with your carefully chosen financial advisor in planning and executing a flexible, responsive investment strategy that conforms with your investment goals. The more time and attention you are willing to devote to this undertaking, the more you will accomplish. Study and experience, along with timely information and transactions, are the keys. The rewards of successful investing can be great enough to be worth the effort.

This information contained herein has been obtained from sources believed to be reliable, but we cannot guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

Kevin FitzGerald is First Vice President-Investments at PaineWebber. He focuses on the areas of professional money management, asset allocation and retirement planning. He can be reached at 1-800-423-3381.

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