THE FIRST STEP IT’S NOT AN EASY OR A QUICK PROCESS, to become wealthy.
Actually, it takes a lot of discipline and hard work. However, recent history has shown us that becoming wealthy can indeed happen overnight.
Over the past few years, we’ve seen many people strike it rich through the stock market. Internet stocks, IPOs, and stock options it seemed that everywhere we looked there was someone else, and usually a young someone else, who had just suddenly become worth millions of dollars.
Every week or so there was another initial public offering of a company whose stock price would soar into the range of hundreds of dollars. People were quitting their jobs to become day traders, all in the name of money and riches.
But counting on the stock market to make you a lot of money very quickly is not only risky, it’s also highly unlikely, especially now.
Plus, if you had known then what you know now (i.e., when to buy and sell Yahoo! or Microsoft), would you have done what it takes to become rich off the stock market? Probably not. Buying low and selling high go against human nature. Just ask the man who bought Yahoo! at more than $150 per share and watched the share price
plummet to around $12 per share. The meteoric rise of the stock market in the 1990s was an abnormality. Will the stock market continue
to go up? Sure, historically speaking over the long term it will. (See Figure 1.1) But the markets will continue to rise and fall all the time.
Will it skyrocket the way it did in the 90s? No one can say. Investors today are smarter, younger, and have more time to wait to make the returns they want. For those who are trying to make their first or their umpteenth million, today’s market serves as a lesson of hurry up and wait.
This is a road that the average investor just shouldn’t travel alone. Here’s the first secret that many wealthy people know: Hire a financial advisor to do some of the worrying for you.
WHAT IS A FINANCIAL ADVISOR, AND DO YOU NEED ONE?
“A financial advisor? I don’t need one. My cousin Tony is a whiz with investments and finances.” If this is something you find yourself saying, stop. Unless your cousin Tony has taken classes and passed comprehensive exams, like the CFPTM boards, and works as a financial advisor, chances are you don’t want to trust your retirement to him.
Cousin Tony is probably not going to be able to help you decide if you need to invest in a traditional IRA or a Roth IRA. Nor will he be able to advise you on what the possible benefits of investing in an annuity would be for you. The best answers to these questions, and others like them, come in the form of a financial advisor.
A financial advisor is there to keep you educated and invested for the long term when the market goes down, as well as when decisions are to be made.
Put simply, he can be your best friend. Financial advisors, or planners, work with clients to find the best fit between the client and different investment vehicles. Some advisors are affiliated with national firms, while others work as independents.
The last time you paid your car insurance, did your insurance agent offer you the chance to purchase a Roth IRA through him?
The historical growth of stocks Through good times and bad, the stock market has moved upward, although there have been peaks and valleys along the way.
Hypothetical value of $1 invest at year-end 1925 has grown to $2587 by year-end 2000; assumes reinvestment of income and no transaction costs or taxes.
This is for illustrative purposes only and not indicative of any investment. Past performance is no guarantee of future results.
Source: S&P 500, which is an unmanaged index group of securities and considered to be representative of the stock market in general, and American Express Funds.
More and more insurance agencies, banks, and even Certified Public Accountants are getting into the investment business. Many of these people only promote and sell certain products.
You may like the Oppenheimer Global Growth and Income Fund, but that doesn’t mean that you should invest in every Oppenheimer fund.
There are, perhaps, other mutual fund companies that would better fit your needs. Every investor’s portfolio benefits from having choices available. Financial advisors have many different investment vehicles at their fingertips that help their clients achieve their goals.
Advisors focus on these goals and needs to decide which investment is best, rather than applying a cafeteria plan to each client.
At some point in time, everyone will need the help and expertise that only a financial advisor can provide.
They offer a well-balanced approach to your finances. Let’s face it, you may be too emotionally involved with your money to manage it properly. You have worked hard for you money and don’t want to lose it. A financial advisor is
the third party to your financial situation. Just like you wouldn’t perform surgery on a family member, why should you perform surgery on your money?
Recognizing the need for a financial advisor is the first step to taking control of your finances and increasing your wealth. Selecting the proper advisor is a harder task.
This is a very important challenge. You need to find the right advisor for your situation. Receiving referrals from friends or family members is a good place to start. If they are willing to share the name of their advisor, that means that they trust him.
However, if you are uncomfortable asking or don’t know anyone who uses an advisor, then you will be starting from scratch.
There are a few things to keep in mind when selecting your advisor. First, don’t be afraid to interview your potential advisor or shop around.
Most planners offer a free initial consultation. This will give you the chance to sit down with advisors and ask questions. Second, make sure you feel comfortable with your advisor.
During your initial meeting, gauge how you feel. Did the staff make you feel welcome? Do you feel comfortable discussing the most intimate details of your financial situation with this advisor?
Do you think you can trust this person? If you answer “no” to any of these questions, then you should probably continue to look for an advisor.
Third, make sure that any potential advisor is qualified. Nowadays, almost everyone can call themselves financial advisors. But those same people could be delivering pizzas during the evenings.
To make sure advisors are thoroughly knowledgeable, look for designations following their names: i.e., Joe Smith, CFPTM, ChFC, CLU. These designations mean that they have passed rigorous examinations.
