How to Evaluate Investments and Find a Financial Advisor

Your decisions about investing have a huge impact on your financial future. These decisions impact the growth of your investment portfolio over time. Because so much is on the line, investment decisions can be stressful. Use these tips to evaluate investments and select a financial advisor.

Your comfort level

To evaluate whether or not an investment is appropriate for you, think about your financial goals and preferences. Once you answer these questions for yourself, you can evaluate potential investments.

• Risk tolerance: How much risk are you comfortable taking? If your investment portfolio went up or down 20% in one year, is that something you could live with? Rutgers provides a great risk tolerance quiz that you can take online.
• Time horizon: How long can your funds be invested? If you’re saving for a home, for example, your time horizon might be just a few years. Investing for retirement may be a 20 to 30-year period.
• Income needed for retirement: How much income do your investments need to generate, so that you can retire? If you need $70,000 in annual income, how much will you need to invest to generate that amount of cash flow?

These topics are a great starting point to plan your investing.

Finding good investments

Once you identify your goals and objectives, you can start to look for suitable investments. Here are some criteria you should consider:

• Grow in sales and earnings: A well-managed company should be able to grow their sales and earnings (profits) each year. This is the number one factor for most investors. If a company can grow, it will become more valuable. Stock investors will then see an increase in the value of their shares.
• Cash management: No business can operate without sufficient cash flow. Look for companies that are able to generate cash flow from monthly operations. A good business should not have to borrow money or issue additional stock to meet their monthly cash needs.
• Management team stability: A great business normally has a stable, experienced management team. Find companies with senior management teams that have been together for many years. This means that the team works well together, which also leads to business growth.

Selecting a financial advisor

Most investors eventually hire a financial advisor. They want an outside professional to monitor their investments and make recommendations. Forbes offers some tips on finding a good financial advisor:

• Analysis tools: You need an advisor who has access to all of the current market analysis tools. The Cane Bay Partners Collaboration page explains that the analysis of big data is becoming a popular tool for financial research. Make sure that your advisor has access to these resources.
• Track record: Securities regulators require many types of money managers to publish their investing track record. If your financial advisor is registered with the Securities and Exchange Commission (SEC), he or she is required to provide a track record. See how the track record compares to other investment professionals.
• The process of analysis: Smart financial advisors have a process they use for evaluating investments. The Cane Bay Partners Facebook page provides a link to the partner’s website. That site explains a process of financial analysis. A financial advisor can analyze investments, monitor the results and identify improvements. Having a process can lead to better analysis.

Use these tips to assess your investment goals and to evaluate investments. You can use these ideas to find a successful financial advisor- and pay reasonable fees. These steps can help you invest successfully over the long term.