The investment world can be tricky to navigate, and most people simply don’t have the time, knowledge or experience to invest successfully. An Independent Financial Adviser (IFA) can guide investors to help them avoid difficulties they might encounter.
Instead of just picking products, these advisers look at your unique circumstances and help you make decisions that are right for your particular needs, while helping you to steer clear of the potential pitfalls of investing by yourself.
Here are a number of mistakes investors typically make:
No investment plan
As with any big life decisions, it’s important to have a plan. If you don’t have a goal, you won’t know what you’re working towards. Having something to work towards is important to know what road you need to take to get there. An IFA will help you with this plan, along with plotting out a map how to reach it.
Choosing the wrong investment product
The number of funds and investment products are overwhelming. To make things more complicated, every product has a different tax structure and the funds all have different goals. An adviser can help you make a selection to suit your particular needs.
Forgetting about inflation
As time goes by, the value of money decreases. You can buy much less with R100 in 2014 than you could in 1990. That’s called inflation, and it applies to investments too. An adviser can help you keep the value of your investment by investing in products and funds with high enough returns to compensate for inflation over the period of your investment.
Cashing out your retirement savings when switching jobs
Spending their retirement savings when changing jobs or getting retrenched is a common mistake people make, because it’s very tempting to use the large amount of money. It’s very important that you don’t touch this money and preserve it, else you will not have enough money to live on by the time you want to retire. An IFA will give you to keep your hands off this money.
Concentrating on only one market or asset class
It’s important not to have all your investment eggs in one basket. An adviser will help you diversify your investment by spreading it over a number of different products or funds that will lower your risk and help your savings grow.
Letting emotions get in the way
When it comes to investing, letting your emotions guide you is never a good idea. Investors who act on emotions are known to have bad timing with the market, and they also tend to destroy the value of their investments by switching funds too often. An adviser can help you avoid this hazard.
Things to keep in mind when choosing an IFA:
Choosing an adviser is not a choice that should be taken lightly, because they will be advising you on very important decisions in your life.
To find an IFA, you can ask for a recommendation from someone you trust, get in touch with the Financial Planning Institute of Southern Africa (FPI) or look at companies who provide details of IFAs on their websites.
There are a couple of things you need to consider:
It’s important to know that your chosen adviser is honest, has your best interest at heart and values your business.
Qualifications and credentials
The law requires all financial advisers to be licensed by the Financial Services Board (FSB)
It’s important for an IFA to be independent, because it means they’re not incentivised to advise on certain products over others.
Before you choose an IFA, make sure you know their fee structure, and know what you are going to be charged for. It’s important that the adviser explains his fees and how they work to you upfront.
Investing can be scary, because markets fluctuate and it’s easy to fear that you will lose all your money. An adviser will hold your hand through this and help calm your nerves. They’re the voice of reason that will keep you from making rash decisions. An adviser will also ensure that a disciplined savings and investment process is in place and maintained, giving your investment valuable time in the market.
This article was part of a content marketing campaign for a major financial services provider.