If that sounds familiar, don’t wait around any longer before you take action. Now is not the time to be procrastinating. Now is the time to make those investment decisions, because it’s a great time to be an investor.
Before you ask, this has nothing to do with investment returns. I’m not predicting the market is going to skyrocket in the coming years. And yes, the market has done well for the better part of the last decade, but that’s not the reason either.
Now is a great time to be an investor due to several other developments, independent of the markets, all of which are very beneficial to investors.
Focus on Financial Planning
In the past, “financial advisor” was more or less synonymous with stockbroker. You had a guy who would manage your money by picking hot stocks and trying to beat the market. There wasn’t much else that went into it.
Today, a growing number of advisors are offering comprehensive financial planning. These advisors will look at all aspects of your financial life, like your saving/spending, retirement goals, insurance coverage, estate plan, even college funding for your kids. They take all this information and come up with a personalized investment plan that makes sense for you.
This plan-based approach is much more prudent that tossing your hard-earned money into investments that you don’t really understand. Unfortunately, we still see a lot of people in this situation without any direction. If that’s you, you’re not alone, but now is a great time to do something about it.
Transparency of Costs
In the past, most people didn’t have a clue what they were paying to invest, and the advisors they worked with weren’t transparent about explaining their costs. Sadly, this still happens too often, but there’s no excuse for it anymore.
Today, good advisors will explain to you, clearly and concisely, what your costs will be. They’ll even show you the dollar amounts you actually paid on your investment statements or online portals. These advisors don’t feel the need tiptoe around costs, because they offer great service that more than justifies what you’ll pay.
The cost of professional investment advice used to be almost taboo. Thankfully that is changing, which of course gives investors more clarity. But it is also helping shed the image that the industry is full of scams and shady characters.
Reduction of Costs
Not only has it become easier to determine your costs, it’s become a lot cheaper to be an investor. The industry has seen a significant amount of fee compression recently, which benefits investors. This is primarily seen in the reduction fund expenses and transaction fees.
When you own a fund, like a mutual fund or ETF, there is an expense paid to whoever is running the fund, usually a small percentage of your assets in it. Historically it was not uncommon to see popular funds charging 1% or higher. Those funds still exist, but we’ve seen a giant rise in the offering of low-cost funds, that charge 0.50% or less. Some are even zero.
It also costs less to buy and sell investments. Heavy trading used to rack up nice profits for companies, but many of those platforms now charge very small transaction fees. You should be able to find trade fees under $10 for stocks and ETFs, and under $50 for mutual funds, and those are moving towards $0 quickly. Depending on the platform and the investment, many trades are already free.
Ease of Access
A long time ago, it was hard to invest at all unless you had a lot of money and “a guy” that could find investments for you. Now, of course, that’s no longer the case. Some investments are practically set up for you, such as your employer’s 401k or other retirement plan. You can also open accounts online and be investing within minutes.
It’s also easier to access advisors. It’s becoming more and more common for advisors to work with anyone, regardless of how much money they have. Whether you’re already wealthy and need help with the complexity, or you’re just trying to get off the ground, there are plenty of advisors for you.
Technology has also made things a lot easier and more accessible. You can see your account values in real-time. You can move money quickly and electronically. You can make changes to your account in an instant.
Most advisors will get even deeper than that. They’ll use technology to run advanced retirement projections on the fly and make sure you’re still on track to reach your goals. They can make complicated investment decisions, like rebalancing and tax loss harvesting, in a matter of minutes, thanks to technology.
If you don’t have access these things, you’re missing out.
In the past, it was difficult and costly to tailor an investment portfolio to your liking. If you wanted to invest in a certain subset of companies, you had to go out and individually buy each company. Now, there are hundreds and thousands of funds that do all of that for you at a low cost.
You can find funds that invest based on company size, sector, or financials. Investments at home or overseas. You can filter out companies that aren’t environmentally friendly. If you feel strongly about a specific commodity, like gold or silver, there’s a fund for it. There are funds that only invest in companies related to “sins” like alcohol, tobacco, marijuana, and gambling. The list goes on and on.
I’m not recommending you buy these funds, of course; just an example of how far we’ve come. Most people should not go out and buy these things on their own, but it’s helped make investing more flexible and more relatable.
The best benefit of all these investment choices comes if you’re working with a professional. An advisor can use all these options to develop an investment philosophy they believe in, and then build you a personal, customized investment plan based on your wants, needs, and goals. You don’t have to rely on “your guy” picking the right stocks anymore.
All these good things are happening for investors, and none of it has to do with investment performance. The markets are going to do whatever they’re going to do. There is no way around that, and no way to predict it. Trying to decide when to take action based on its ebbs and flows is a losing battle.
Instead, focus on what we know for certain: there’s a bunch of other great stuff happening in the world of investing. Rather than trying to make decisions based on uncertainties, take advantage of all these good things we know are happening right now, and go make sure you have a great investment plan.
Because, regardless of what the market is doing, now is a great time to be an investor.