3) Should I Hire an Investment Advisor/Firm? If so, Who Should I Hire?

If you do not have the interest, time, and commitment to manage your investments, (it can be difficult and time consuming to do it well) my advice is to hire a competent Investment Advisor/Firm. As is the case with most professions, you will need to find an Investment Advisor/Firm you’re comfortable working with.

When interviewing an Investment Advisor/Firm, an important question is investment performance. All good firms underperform from time-to-time unless they are the “Bernie Maddoffs” of the world. Benie Maddoff went to jail for making client returns always positive and stealing client funds.  Short-term underperformance should not be a concern if long-term performance is good.

If the firm manages individual accounts only and not funds, ask to see the performance of accounts that are managed as they would manage your account based upon your goals and objectives.  

Ask how taxes are managed especially if your savings/investments are in a taxable account not an IRA/401-K. Lots of buying and selling (turnover) can generate taxes and lower after-tax returns. High pre-tax returns can end up lower once you subtract taxes.

It is important to understand exactly how the Investment Advisor/Firm will manage your money.  Are they “value investors” who try to find undervalued-bargain priced companies?  Are they “growth investors” who try to find companies with rapidly growing earnings that will propel stock prices higher? Are they a hybrid, “growth at a reasonable price “GARP.”

Do they use ETFs or other funds, or do they pick individual stocks and fixed income securities? You must understand their strategy and methodology.

Ask about fees. Fees do matter (more on fees later).  The higher the fees, the greater impact on your returns.  Fees for Index fund ETFs are the lowest.

As is the case when hiring any type of professional, check references.  Ask around. Do a bit of leg work. Reputations are important. Remember during turbulent times your Advisor may spend as much time or more managing your emotions and fears as he or she spends managing your investments.