Essential Advice All Financial Planners Suggest You Follow

Advice All Financial Planners Suggest

One of the best decisions you will ever make is to hire a financial planner. These individuals will work with you to chart your financial course, helping you save for retirement, a new house, a dream vacation, or whatever else you desire. 

The beauty of working with these professionals is that they will tailor their approach to your specific needs. But any financial planner worth their salt won’t stray too far from some of the central tenets of good investing.

Let’s talk about why financial planners are so useful and what you should know to make the most of their services.

Why Work With a Financial Planner?

Everyone in your life will likely have different ideas on how to help you. But you should always work with a professional. These individuals have to go through an extensive training and certification process — which includes taking countless CFP practice exams — designed to ensure they understand the world of personal finance and investing like the experts they claim to be.

But what’s nice about working with a financial planner, as compared to wealth or investment advisor/manager, is that they take a more holistic approach to your finances. They aren’t only concerned with growing your wealth (though this is important). 

Instead, they are more interested in helping you achieve your specific financial goals. But while their approach to helping you might differ from that of other financial professionals, the core concepts behind their advice remain the same. Know them, and commit to them, and your work with a financial planner will be that much more fruitful. 

Here are three things all financial planners will tell you, and that you should embrace as the foundation of your financial life:

Related: How Entrepreneurs Can Diversify Their Investment Portfolios in Today’s Economy

Diversify Your Portfolio

financial plan - diversify your portfolio

One of the keys to increasing your wealth is to diversify the sources from which you earn money. There are a couple of reasons for this. One is that it simply allows you to take advantage of more investment opportunities; if you only ever invest in real estate, what else are you missing out on?

Equally as importantly, diversification also protects you from risk. If you put all of your money in one area, say real estate, and then there is a crash in housing prices, your portfolio takes a hit and it might be some time before it can recover. 

However, if you invest in several different areas, when one is down it’s likely the other is going to be okay if not up. This reduces the shock from losses incurred in one area and makes it easier for your portfolio to consistently grow over time.

Related: Unlock Financial Potential: Explore Alternative Investments for Diversified Portfolios

Anchor Your Investments with High Performing Products

Risk is an inherent part of investing. Safer investments tend to produce lower returns, whereas the big money is available to those who are willing to take chances. However, this does not mean that you need to be rash to make cash. Instead, it’s all about finding a balance. 

A good portfolio should be built upon low-risk, high-performing products, such as mutual funds or real estate products, either property or a diversified real estate portfolio such as Fundrise.

Creating this foundation makes riskier investments less risky. Yes, it’s still possible for you to incur losses. But when you have a solid base from which to work, you can absorb these losses much more easily, freeing you up to pursue bolder opportunities that are the only way to make serious money.

In the end, your specific approach needs to be tailored to your own personal tolerance to risk. But no matter how open you are to it, you must have something in the background to protect you and your financial future.

Learn to Embrace a Long-Term Approach

Lastly, financial planning and investment is a long-term game. Fortunes are not built overnight, and there are going to be moments of loss. Therefore, the more quickly you become comfortable with seeing the big picture, the easier life is going to be for you. 

This is because what happens on one given day does not reflect the overall trend. Markets go through cycles, and while downtimes can be scary, they don’t last forever. Those who panic and make bold moves to try and cut their losses often end up doing worse in the long run. 

Of course, taking this approach does require some practice, for it’s never easy logging into your accounts to see they’ve dropped 20 percent over the past month. But if you learn to trust the process, and your financial planner, you won’t overreact to these situations and will be doing your portfolio a major favor.

Secure Your Financial Future

If you can make these three things a part of your approach to investing, it will become much easier for your financial planner to help you achieve your goals. You’ll already be in the right headspace, with an understanding of what you want and how to get there. Then, all that’s left is to make a plan to secure your financial future and stick with it through thick and thin.