While a bank deposit guarantees you the greatest safety for your money, it does not guarantee that your savings will appreciate in any significant value over the years, keeping pace with inflation. For that, you need to invest your money in various financial instruments. And hiring an investment firm to manage your wealth is the best way to invest in various stocks, debt instrument etc. without getting yourself entangled in the complex world of trading. Below, we look at five things you must keep in mind when choosing an investment firm.
Understand Your Risk Preference
You should have a clear idea as to what you are looking for in an investment firm. Are you looking for a firm that prioritizes the safety of investments and generates modest returns? Or are you searching for a firm that will focus on higher profits even though at the cost of greater risk? Be sure to have a detailed idea about such questions. Only then will you be able to categorize investment firms, check their investment style, and select one that matches with your required profile. As the renowned investor Arthur Penn says, “Know your risk preference before risking your money”
Check The Credentials
The next thing to check is the credentials of the investment firm. Do they have the necessary licenses to work as a wealth management firm? You also need to look at the history of the firm, the performance of its investment accounts over the years, the number of satisfied clients, and so on. Excellent investment firms like Arthur Penn Pennant Park will gladly provide you such information. However, the shady ones will try to hide their work history and portfolio performance from you. Never entrust your money to such firms no matter how fanciful their promises of ‘huge returns’ seem to be.
Find The Expertise
You must also check whether the investment firm has a specialized focus on any specific markets. Some firms may focus exclusively on stocks, while others might only deal with debt instruments. And if you have a preference as to which market your money should be invested in, then picking a firm which already has excellent expertise in that specific market will be to your advantage.
An important factor to consider is the fee charged by the investment firm. Usually, an investment firm will charge its clients a retainer and a certain percentage of the profits they make on your investment. For example, the firm might charge you 1% of total investment amount, say $100,000, as a yearly retainer together with 15% of profits as their fee. Make sure you include such costs into your profitability calculations.
Meet The Account Handler
Finally, consider visiting the person who will be handling your account. Ask them about their qualifications, their certifications, and their investment methodology. Check their investment accounts to see whether they have been consistent in generating profits or have been extremely haphazard in this area.