(NC)-When it comes to growing your net worth, one
of the vehicles capable of moving you along the road
to wealth is your investments. A roadmap, in the form
of a good financial plan, and 'directions' from a
knowledgeable financial adviser, can come in handy,
too.
"Once someone has decided to invest, there are
many options," explains Anita Prescott, a Winnipeg-based
certified financial planner (CFP) and financial adviser
with CIBC Imperial Service. "One of the earliest
and most significant decisions an investor has to
make is how active a role they wish to play in investing."
Prescott returns to the road to explain some of the
options:
Self-directed investor: You manage your own portfolio,
decide what, when, how, and why on your own. This
type of investing can be compared to driving your
own car. The vehicle is entirely controlled by you.
You determine the destination, the origin, the route,
and manage all of the driving duties such as stopping,
starting and steering. To work this way you must have
the knowledge and information you require as well
as the time commitment to manage your portfolio.
Adviser-assisted investor: You work with your financial
adviser to develop a plan and asset allocation and
to select the assets to implement your plan. This
can be done using a wide range of investments such
as mutual funds. Together you decide when and what
to buy but you benefit from the expertise of the professionals
responsible for 'managing' the mutual funds. You also
have to monitor your portfolio to track its progress
and re-balance as required. Compare this approach
to taking a train or airplane. You can choose when
to get on and when to get off, but you can't control
the route or the driving itself.
Professional management: You work with your adviser
to build your investment plan and determine your asset
allocation. When it's time to put your plan into action,
you rely on a professional manager to pick the investments,
monitor your portfolio and rebalance as required.
This is like taking a chauffeur-driven car. You choose
where to get on and off and you can also pick the
route, but the actual driving and day-to-day maintenance
is done by someone else.
While you can expect some detours and alternate routes
on your own road to wealth, it can be wise to begin
your journey equipped with a good map and directions
from an objective and knowledgeable adviser who has
successfully helped others get to their destination
as well. In many cases, investor needs can best be
met using a combination of the above options.
