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Investment Management Firms - How to Select Between Investment Management Firms

firm’s comparing strategies considered

Over the past few years, the turbulent stock market has caused many people to lose a large percentage of their capital and retirement savings. Because of this, it is more apparent than ever that there is strong need to hire an investment advisor to help you plan out your investment strategy. When trying to choose between all of the investment management firms, it is important that you consider various factors when trying to decide which firm would be the best for you.

The first factor that could be considered when comparing investment management firms is the firm’s experience. While the stock market historically has averaged 8% returns to investors, there have been many different economic booms and busts that have seen investment portfolios inflate and then decline significantly. Because of this, it is important that you choose an investment management firm that is experienced in dealing with all different investment cycles. These firms will be better equipped to help you maximize your return during good economic cycles and avoid losing a lot of money during poor economic cycles.

The second factor that could be considered when comparing investment management firms is the firm’s historical performance. All investment management firms are required to maintain records of their investment performance for their investors. You should review these statements to determine which investment management firm has consistently had the best financial performance record. You should not only look at the recent history, but the history over the past 10 to 20 years. Looking at a longer range of dates will give you a better idea as to whether the firm had one sporadic and lucky year, or whether they consistently provide good value to their clients.

The third factor that could be considered when comparing investment management firms is the firm’s investment strategy. All firms and investment advisors offer different investment strategies to their clients. The strategies range from very risky, but high growth investments, to investment portfolios designed for slow, but consistent, growth. When looking at a firm’s strategies you should consider what strategy best meets you needs and lifestyle. If you are young and risk tolerant, then you should choose a firm that offers the best growth strategies. If you are nearing retirement, then you should select a firm that has a strategy designed to for a low risk investor.

The fourth factor that could be considered when comparing investment management firms is the firm’s compensation structure. Many investment firms are compensated by taking a percentage of your portfolio that they manage. While this may be common, you would be better suited to find a company that is paid a percentage of your net return. This way, both you and the investment advisor would be enticed to see your portfolio maximize its return.

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