Dollar-Cost Averaging

Dollar-cost averaging (DCA) is an investment technique that implies the regular buying of shares in an investment asset at a certain amount regardless of share prices. This approach assist in lowering of effect of volatility in the market since the average cost of acquiring the investment is spread over the time.

 

Tax-Efficient Investing

Tax efficient investing is the approach that allows you to reduce the amount of tax which you are likely to pay on your investment income. Taxes have the potential to cut down your net profit and so it’s wise to seek professional help when planning for your investments.

Tax-Advantaged Accounts
Investing through tax sheltered accounts such as IRA, 401K or Health care saving accounts is one of the best ways of avoiding taxes on your investments. Deposits to these accounts are usually tax-sheltered or tax-exempt, depending to the type of account used to invest, therefore the investments can grow without the hindrance of taxation.

Capital Gains and Dividends

Knowledge of how capital gains (the profit arising from the sale of an investment) and dividends are treated in as far as tax is concerned is important. Capital gains that arise from sales in assets held for more than a year are generally taxed at lower rates than the intra-year gains, hence, wise investors hold their investments for more than a year.

Tax-Loss Harvesting

The technique of using a sale of an investment to offset gains from another investment for tax purpose is called tax loss harvesting. It also decreases your overall bill on taxes, as you can use the profits for other investment activities.

Asset Location

Dividing tax-loss investments, including bonds or high-yield dividend stocks, into tax-sheltered accounts, while placing tax-efficient investments, like growth stocks, in taxable accounts can improve your portfolio’s tax-adjusted returns.

Tools and Resources for Effective Investment Management

As it has been stated, at the present moment there is a big variety of tools and sources which could help to manage investments effectively in the world. Whether you are a standalone investor or you have to rely on financial advisors, the choice of tools can be the decisive factor. This part of the information gives brief descriptions of what is available for use, which are investment management tools, financial consultants, and online services such as robo-advisors.

Financial Advisors and Their Role

However, having so many tools at one’s disposal is still useful to work with human financial advisor. They provide professional skills, recommendations, and an organized and coordinated perception of your assets.

What Does a Financial Advisor Do?
A financial advisor is a financial planner who assists you in the creation of a detailed investment plan. They understand your present financial position, determine your needs and wants in the short and long run, and design an investment portfolio that they believe will suit your personality. They also can help with such issues as tax planning, estate planning, retirement planning, and insurance.

Why Work with a Financial Advisor?

• Personalized Investment Strategy: A financial consultant applies specific recommendations based on the client’s specific portfolio type, needs, and risk tolerance levels.
• Expertise: This makes it easier for a financial advisor to maneuver around the financial markets and avoid some common pitfall that may be fatal to your investment.
• Behavioral Coaching: Another benefit of hiring a financial advisor – probably one of the most important functions – is an advisor’s ability to guide your behavior during a period of drawdown.
• Holistic Financial Planning: Financial planners provide an integrated strategy to organizing your financial life, making certain your investment plan fits into one complex plan.

Advisors can receive their moneys in various ways, that is via fee-only, commission, or fee-based compensation model. You should choose an advisor with favorable fees and services for the kind of investments that you want.

When to Hire a Financial Advisor
While you can certainly manage your investments on your own, working with a financial advisor may be necessary if:

You have multiple sources of income and/or require estate planning inputs.

You have to develop a plan for retirement or investment plan that is tax effective.

You do not want general recommendations and want to feel confident in the professional advice given to you.