Choosing the Right Investment Vehicle

Talk about investments and investment portfolios and most people immediately think of the stock market.

You can’t blame them – it’s the most popularized and old school investment vehicle.

But the reality is there are many ways to build an incredible investment portfolio.

If you’re an investment advisor, there’s a lot resting on your shoulders and it’s up to you to find these options because your clients depend on your knowledge.

These alternative investments come in many different forms and depending on the ones you choose you can ensure that your clients’ return on investments exceeds return from traditional investment vehicles.

Of course the downside is that alternative investments carry more risk although the risk can be lower than risk from investing in the stock market.

 

So how do you start building an investment portfolio?

 

1. Do your research

As with all things in life – knowledge is power, and it’s even more powerful when it comes to building a portfolio.

As a financial advisor your job is to conduct in-depth research before pitching anything to your clients.

The research do is a little different to what you’d be doing when checking up on the stock market investment options.

While stocks come with financial reports, prospectus’ and other readily available data, alternate investments are different - you have to do some digging to find the information you require.

People in charge of these alternative investment options have to be researched closely – you really want to do business with people whose character and track record has been vetted.

This means that your focus will be on getting resumes, employment histories, criminal records, track records and performance ratings. Run a thorough check on the validity of their licenses and other forms of certification and accreditation.

And if possible try to find references and talk to people that have worked with the person or done business with them and ask about their character.

 

2. Tax reporting

As the saying goes, there are only 2 things that are certain in life – death and taxes. Taxes are a reality when it comes to investments.

Your second step as an advisor is to find out what the various offerings of the investment funds are because most of these offerings are usually nestled in between the lines of the tax laws, in order to increase the return on investment.

So your main job is to make sure that there’ll be no issues with the tax return process.

Ask the question: Will this type of investment have all the necessary information for tax and tax forms?  The last thing you need is a client getting investigated by the IRS for tax fraud.

 

3. Understand your client’s financial vision

What does your client want for the future?

What’s their financial vision?

How much risk can they take on?

Just because a client meets the financial requirements on paper doesn’t mean they’re suited for these types of investments.

An investment portfolio is created based on many different characteristics – personality, risk, emotional profiles as well as a client’s wants and needs for the future.

Trust is also a huge factor- the client has to trust that you’re acting in their best interest and has to be open to the investment options you offer, without coercion.

If a client isn’t the right fit for an alternative investment option then the safest offer is still a stock portfolio.

Whatever you do, always remember Warren Buffet’s rules: “Rule number 1: Never lose money. Rule number 2: never forget rule number 1.”

Sponsored guest blog post by Brittany Deatherage at cyberactiveconsulting.com