Investing Basics: Do I Need An Advisor?

Investment advice comes in many forms, with many purposes. Some of it is about budgeting, insurance and spending, some about actual investing for retirement.

But take a step back. Does everyone need a financial advisor? Surely there are millions more people out there trying to save and invest than there are advisors to serve them?

That’s true, and it’s okay. Not everyone needs or even wants an investment advisor. Here’s how to know if you need an advisor for your retirement portfolio.

Question No. 1: Are you comfortable with your basic understanding of money?

A lot of people know the ins and outs of savings and checking accounts, how interest rates affect home and vehicle loans, how to check their credit scores and file taxes.

Is that you? If yes, then you probably can handle the fundamentals of investing money for retirement. It’s important, for instance, to be able to read investment fund literature and grasp why one investment is higher or lower risk than another.

If you can manage these basic concepts, chances are you can manage your own retirement investing without having to pay for help.

Question No. 2: Are you financially literate, or at least a quick study?

Investing is not a game that holds still. No, you don’t need to starting watching cable money shows or read tons of newsletters (actually, you shouldn’t). Rather, you have be able to keep up on broad changes in how investing works.

A few decades ago, index funds didn’t exist. Same with exchange-traded funds (ETFs). Their impact on low-cost, long-term investing has been profound, and that trend continues.

Likewise, the benchmark interest rate is very low, still, and looks likely to stay low for a while longer. That affects investments across the board. You’ll need to be able to follow along and understand the impacts of such trends as they unfold over the years.

Question No. 3: Can you recognize when deeper advice might be worthwhile?

Everyone needs help sometime. Using software to create a portfolio is a great starting point for seeing the ideals of risk-adjusted investing put into practice.

Yet you might run into a situation where professional direction would be useful. Hiring an hourly fiduciary planner to advise you on taxes and insurance, for instance. If you can recognize the limits of your own abilities in the financial arena, then getting started on your own is less of a risk.

Nobody can do everything. But using good tools can get you a large part of the way toward a solid, responsible retirement investing plan. Whether you need an advisor or not is a question you can answer for yourself, assuming the basics are in place.