Q&A With a Financial Advisor
For first-time investors, it can be daunting to think about setting up an investment portfolio. The first step is deciding if and what kind of investing might be right for you and your long-term goals. Perhaps you hope to set aside support for your family or prepare for future retirement. Regardless, there are many professionals available to walk you through your options, evaluate risk tolerance, and develop a plan. To give you a head start, we chatted with local financial advisor Evan Russell of Raymond James Round Table Advisors who walks us through the basics.
Q. What are the differences between saving and investing?
A. Savings accounts are usually set up at a bank, and investment accounts are usually set up at investment firms. Although, some firms act as “one-stop shops” for both accounts to be opened at the same place. The first difference between saving and investing is the level of risk. Unless an exogenous event occurs, you should feel confident knowing that your savings account will not decrease in value. As for the investment account, the values of your investments could fluctuate up and down depending on many factors. The second difference is what the money is put into inside of each account. A savings account usually consists of money market funds and certificates of deposits (CDs). An investment account can hold anything a savings account can hold along with stocks, bonds, mutual funds, insurance products, and much more.
Q. What is the best stage of life to begin investing?
A. The best day to start investing was yesterday, but the next best day is today. If you feel like you are late to investing, then you are not alone. According to a recent study, roughly 40% of older Americans rely solely on Social Security for retirement income, which can be difficult to live on in today’s economy. The best ways to diversify your retirement income are by contributing to 401(k)s with work or to open up an individual retirement account (IRA) at a financial institution. Remember, having an account is just the first step. Electing the right investments inside of the account can be just as important as funding it.
Q. How much (and how long) do I need to invest to reach my financial goals?
A. To determine how much and how long you need to invest, here is a general framework you can follow:
1. Set Your Goal
2. Choose Investment Type
3. Estimate Risk/Reward
4. Calculate Contributions
5. Elect Timeframe
Q. Is investing an effective way to have a steady passive income?
A. Investing can be a great way to have a steady stream of passive income. Real estate, bond funds, and annuity products are the three most common. Each can provide different levels of passive income, but also come with disadvantages when compared to the other. For example, access to your money (liquidity) is a big disadvantage for real estate and annuity products. However, they can usually provide more income than a bond fund can.
Q. What kinds of fees can I expect when making investments?
A. You might pay trading fees, fund fees, advisor fees, account fees, etc. There are also underlying costs that may not show up. For example, opportunity costs, liquidity costs, taxes, and inflation can reduce efficiency of a portfolio that many professionals make up for to cover their fees. It is best to always understand what you are paying for and if it is right for you.
Evan Russell
Financial Advisor, Round Table Advisors, RJFS
Raymond James and its advisors do not offer tax or legal advice. Securities offered through Raymond James Financial Services, Inc. member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Round Table Advisors is not a registered broker/ dealer and is independent of Raymond James Financial Services.
Meet the Author
Tory Irmeger, BA, English
Tory Irmeger graduated from Lee University with a Bachelor of Arts degree in English with an emphasis on creative writing. While at Lee, Tory served as head of copy for the school’s biannual publication Vindagua. Since joining CMC Publications as editor, Tory has led ideation, conceptualization, and development of numerous health, wellness, and lifestyle articles published in print and online for HealthScope, CityScope, and Choose Chattanooga magazines – premier publications serving S.E. Tennessee and North Georgia.
