originally published in the Daily Herald, 2/6/22
With the new year ahead, and our economy facing inflation and multiple interest rate increases, you may be wondering how well your investments will perform this year.
If you use an adviser or looking for an adviser, here are five questions you should ask.
1. HOW WILL INFLATION IMPACT MY PORTFOLIO?
With inflation running higher than normal, you may want to find out how much inflation protection you have in your portfolio. If you have bonds in your portfolio, you may want to consider inflation protected bonds or stock funds that include stocks that can tolerate higher inflation.
2. HOW WILL AN INTEREST-RATE INCREASE IMPACT MY PORTFOLIO?
With the Federal Reserve looking at 3 to 4 interest rate increases this year, this will impact both stocks and bonds. Bond funds perform opposite to interest rate increases, and you may see a negative return in your bond fund as interest rates increase. This can be especially difficult for conservative investors as bonds are often used to reduce risk in portfolios. Ask your adviser how sensitive to interest rates your bond and stock funds are and see if a change in fund is recommended.
3. AM I CORRECTLY INVESTED FOR MY AGE AND RISK TOLERANCE?
This is important because as we get closer to reaching retirement, you may want to reduce the amount of market volatility you have in your portfolio. For example, if you have $100,000 and are 100% invested in the S&P 500 Index, and the market declines 20%, your portfolio will drop 20% or $20,000. If you don’t have an adviser and want to see how much risk is in your portfolio, let me know and I can send you a link to a free risk assessment tool.
4. WHAT FEE AM I PAYING AND HOW IS IT CHARGED?
As you review your portfolio, I encourage you to understand the fees that you are paying. There can be two levels of fees; one charged by the adviser, and the other by the recordkeeper or platform. If you are evaluating a new adviser, this is a great question to ask as you will find that this varies among advisers.
If you are not in the market to change advisers, it is smart to ask if there is a better fee structure available to you. Some advisers have a variety of solutions and may offer lower rates if your balance has increased beyond a certain size.
Also ask, are you a fiduciary adviser? A fiduciary is someone who is bound by securities regulations or laws to act in your best interests.
5. WHAT SERVICES ARE YOU RECEIVING?
Some advisers offer investment management and financial planning. However, some clients only take advantage of the investment management services. If, as a part of your fee, financial planning services are offered, you may want to take advantage of working on a plan to meet your goals. This might be to develop a plan to buy a new home, college, travel or other life events. You are never too young to have a plan to dream about a retirement plan. Ask your adviser to prepare one based on your dream.
If you have questions along the way, please feel free to reach out. I am happy to be of help. We work with households just beginning their financial journey as well as those further along the way.
Source: https://www.dailyherald.com/business/20220206/five-questions-to-ask-your-investment-adviser-in-2022