Investing Money
- Do I need a financial planner?
- How do I select a financial advisor?
- What is Dollar-Cost-Averaging?
- What does diversification mean to me?
- How can I learn more about investing money?
Frequently Asked Questions:
1. Do I need a financial planner?
ANS: Financial planners design strategies to help you meet your financial goals which necessitates the collection of personal financial information: cash flow, budget, net worth, savings, investments, taxes, insurance, retirement and estate arrangements. Having an updated, long-term financial plan can help you choose among investment alternatives, but not everyone who seeks investment advice needs to see a financial planner. Interview candidates, attend no or low cost seminars, check credentials, ask about the type of advice, information or services they offer and the costs involved. As with any purchase, be sure you know what you're paying and what you're getting. Financial advisers provide guidance, but you ultimately make the decisions. It's your money.
Be prepared to pay for the investment advice you receive. Some adviser's work for a fee only, some work on commission and others combine commissions and fees. You want to feel confident that the investment adviser, if his or her income depends on sales, is not offering advice slanted toward the products or services sold by the firm he or she represents - when such advice is not in your best interest. To do this you will want to develop some basic knowledge in personal finance and investment. Then you can better decide whether the financial advice given is the best choice for you. Your local library is a great source for books and periodicals. Enroll in an investment course such as Investing For Your Future- A Cooperative Extension System Basic Investing Home Study Course.
Top of page2. How do I select a financial advisor?
ANS: You'll want to identify competent advisers with the education or certification and experience to provide the services you seek. Advice comes from registered investment advisers, registered representatives or stockbrokers, representatives from financial institutions (banks, credit unions, and savings and loan associations), financial planners, insurance agents, and other professionals such as attorneys and accountants. One adviser may wear several hats.
Registered Investment Advisers (RIA's) are registered with their state and the Securities and Exchange Commission- an independent agency of the U.S. Government. To sell investments they must also be registered representatives licensed through the National Association of Securities Dealers (NASD)- a self-regulatory organization whose operations are overseen by the SEC.
Check telephone directories or scan local newspapers to see what financial services are available in your area. Talk to friends, relatives, professional groups you are involved with, and others whose advice you trust. Consider the wisdom of using a team of advisers whose talents and resources can address your changing financial needs over time.
The following professional designations signify study in specific financial services areas and adherence to a code of ethics established by the self-regulatory membership organization-not by state or federal regulatory agencies:
New Hampshire citizens can learn more about state securities laws and regulations by contacting the Bureau of Securities Regulation. Insurance agents and insurance companies must be licensed by the state in which they do business.. Contact the NH Insurance Dept. for more information on Consumer Services. Uncertified accountants (PA's) are not licensed or regulated, but CPA's must become certified and licensed to practice by the NH Board of Accountancy . For more information on licensed and regulated industries in New Hampshire, consult the New Hampshire Dept. of Justice.
Top of page3. What is dollar cost averaging?
ANS: In general, if you want higher returns, you will have to be willing to accept greater risk. This typically means investing in vehicles that fluctuate in value. Dollar cost averaging is investing a specific dollar amount on a regular basis over an extended period of time. The opposite of dollar cost averaging is investing a lump sum at a single point in time. Because of the nature of growth-oriented investments, it is never clear if the price you're paying for your investment today is high or low. With dollar cost averaging, you will automatically buy more shares when the price is low and fewer shares when the price is high. As a result, you tend to acquire most of the shares at a below-average cost per share. This technique can help soften the impact of fluctuations in the investment market. Learn more about this and other investment basics by enrolling in the Investing For Your Future home study course.
Top of page4. What is diversification?
ANS: Diversification is a technique for managing risk. As a rule, it means "don't put all of your eggs in one basket". As applied to money, it means that not all of your funds are placed in any one type of investment. If done properly, diversification can reduce about 70% of the total risk of investing. Three basic ways to diversify are:
- by choosing securities from a variety of asset classes, e.g. a mix
of stock, bonds, cash and real estate.
- by choosing a variety of securities or funds within one asset class,
e.g. stocks from large, medium, small, and international companies
in different industries.
- by choosing a variety of maturity dates for fixed-income (bond) investments.
Top of page
5. How can I learn more about investing money?
Programs:
- Taking Charge of Your Finances -A four-part workshop series designed for people wanting to achieve financial
goals (retirement, vacation, college education, etc) by gaining financial management
skills that reduce debt and increase savings. The workshop series covers reducing
debt, increasing savings, communicating about finances within your household,
understanding your insurance coverage and setting up and following a spend/savings
plan. Cost is $20/person or $25/couple. For more information or to register,
contact your county Cooperative Extension Office.
- Getting A Grip On Your Money - GRIP is a seven-part newsletter series mailed
to your house on a monthly basis. Newsletter topics cover setting goals,
implementing a financial record keeping system, understanding credit
and insurance, and developing and following a spending/savings plan.
Subscription cost is $8.95. For more information or to subscribe, contact
your county Cooperative Extension Office.
- Making Money Work For You -A five-part workshop series designed for people concerned about their money,
just starting out or struggling to make it paycheck to paycheck and are looking
to manage debt and begin savings. The workshop series covers goal setting, credit,
insurance, stretching resources, spending choices and making a spending and savings
plan. Cost is $12/person. For more information or to register, contact your countyCooperative Extension Office.
- Take the Road to Financial Security - A one hour workshop developed to increase knowledge of issues regarding later life financial security and to help people assess their preparedness for later life financial security then create a plan of action to meet their personal needs and goals. For more information or to register, contact your county Cooperative Extension Office.
Publications:
- Developing A Spending/Savings Plan
- Investing For Your Future
- NH Saves – Build Wealth Not Debt
- Your Valuable Papers
Other Resources:
