In today’s internet world, where you can easily find a wealth of stock tips, analysis, and information, it may be Financial planningCredit: http://www.freedigitalphotos.net/images/view_photog.php?photogid=721tempting to think that the job of the financial adviser or money manager is outdated. Why waste so much money on paying professionals when you can make a financial plan yourself? After all, the wealth of information out there means that all you have to do is research, and then you are good to go. Or are you? Studies show that individual investors tend to lose more money than those who employ the services of a financial planner.

Here are four reasons why you may want to spend money on a financial professional:

Market Fluctuations

Markets often fluctuate in times of financial uncertainty. Sure, if you time your trades properly, you can reap great rewards by buying stocks on a downturn and then selling them during a price surge. However, if you're not intimately familiar with the markets, the opposite can happen. You may risk huge losses by buying into stocks that then plummet and then selling them before they recover. A professional money manager can help you avoid these pitfalls, though he certainly cannot guarantee any profits.

Tax Risks

Different investments have different tax liabilities and laws. An investment profit that isn't handled properly can be diminished due to poor tax planning, and the tax codes involving these investments are often complicated and confusing. A professional analyst knows the ins and outs of the tax laws relating to investments and helps you navigate. Likewise, a professional helps you write off your losses properly so you don't have to pay as much tax as you would otherwise.

Emotional Investment

Financial decisions also carry tremendous emotional weight, due to the stakes involved. People understandably get angry or panicked when their investments start losing value and this often results in irrational decisions. A professional money manager has the experience to deal with these situations without falling into emotional traps. He remains logical and in control when making investment decisions or recommendations, and this emotional neutrality is vital in helping to prevent careless trades.

 

Time Commitment

Another reason it is better to leave your portfolio to a professional is time. While you likely have many other responsibilities and stresses to worry about on a daily basis, a professional analyst's main focus each day is the health of your investments and those of his other clients. Managing your money should be a full-time job and you probably don't have the time needed to devote to the task.

Indeed, you may find that the money that you “waste” on a good manager could be the best investment that you’ll ever make.

 

Disclaimer: This article is for educational purposes and is not a substitute for investment advice that takes into account each individual’s special position and needs. Past performance is no guarantee of future returns.