Alice Finn
IF YOU CAN”T ANSWER THESE SEVEN QUESTIONS about your investments – then your financial future could be at risk!
1. Who is the custodian of my assets?
Had Madoff’s victims asked this question, red flags would have gone off before they became victims.
2. What is my portfolio’s asset allocation?
The categories of investments you are invested in are usually much more important to your investment returns than trying to pick individual stocks. Your asset allocation will determine most of your investment returns.
3. Is my financial advisor “fee-only?”
“Fee-only” advisors only get paid by the fees you pay to them. This minimizes conflicts of interest since they are not trying to sell products on which they earn a commission. Fee-only advisors must act as your “fiduciary,” meaning that legally, they must always put your interests first. In contrast, brokerage firms only abide by the “suitability” standard, which is a much lower standard. Most brokers have financial incentives to sell their firm’s products, which can have high fees imbedded in them.
4. What are all the fees and expenses I am paying for my investing?
Most people have no idea about all of the fees they are paying. Fees are hidden in many ways. And fees add up, cutting into your long-term returns. For example, over a long period of time, just an additional 2% in fees can cut your net worth in half.
5. Is my portfolio being “actively” managed?
One way individual investors incur a lot of fees is by investing through managers who are “actively” managing the portfolio, trying to beat a benchmarks. More than 65% of active managers underperform their appropriate benchmark, so usually investors are better off investing in low-cost “index” funds.
6. What is an appropriate benchmark for my investment returns?
Often managers will compare themselves to the wrong benchmark to make their returns appear to ”beat” the benchmark. It is important to know what the appropriate benchmark is so that you can accurately judge whether your portfolio is performing well compared to an index fund that also matches that benchmark.
7. What are the tax consequences of how my money is being managed?
All that really matters to you is what you get to keep after fees and taxes. Great returns don’t matter if half of the money is paid away in fees and taxes. Fees and taxes are something you can control, so pay attention to these costs and make sure your portfolio is being managed efficiently from a fee and tax perspective.
If you would like to further your investment education by attending an intimate, woman-to-woman investment discussion – feel free to join us at one of our Introductory PowerHouses, held in the warmth of women’s homes. Just contact info@powerhouseassets.com to get started.
PowerHouse Assets is a mission-driven firm whose goal is to give women investment self-confidence. We provide smart investment management that ultra-wealthy families have used for decades. We also educate women through a supportive community via our PowerHouse gatherings, giving them the confidence they need to achieve long-term financial success. What is different about PowerHouse investment education is how the information is presented to women: speaking with them, not at them. And also where it is presented: at intimate PowerHouse gatherings, held in the comfort of a friend’s home. In these two-hour gatherings, we clearly and simply teach the Five Essentials © 2012 of investing, giving women a solid grounding in the key investment fundamentals used on Wall Street.