Why You Need to Know More Than Your Financial Advisor | Daily ...

In 2012 we witnessed the flop of Facebook?s highly-anticipated IPO. We saw a costly software glitch at Knight Capital reveal cracks in markets that have been increasingly overrun with high frequency trading algorithms. And we watched as the brokerage firm Peregrine Financial collapse after revelations that the CEO had embezzled customer money for years.

At the same time, 2012 was a year that ended with the Wilshire 5000, touted as the broadest measure of U.S. stocks, up more than 16%.

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With such mixed market messages, there seems no better time to make doing your own investing homework a New Year's resolution. A key piece of advice from Amanda Steinberg, founder and CEO of Daily Worth, is to know more than your financial advisor.

?It?s your money,? Steinberg stresses in an interview with The Daily Ticker. ?I was talking to a woman recently who had inherited a million dollars from her deceased husband. Her portfolio had lost 20 - 30% and she had no idea why.?

This is an example of just the type of scenario Steinberg argues all individual investors should avoid.

?It?s perfectly fine to have a financial advisor, but remember, they work for you,? Steinberg adds.

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Her tips include:

• Understand the the fees you?re being charged. Steinberg says advisors are going to be picking funds where they are likely charging 1% of your assets relative to those funds. But, she adds, it?s important to know that certain ETFs and mutual funds might have additional fees on top of that. Demand transparency, figure out how much you?re paying in fees, and make sure it feels worth it.

• Take 5% of your portfolio and manage this money yourself. Steinberg advises buying a combination of index funds and securities, and understanding those as a baseline relative to what your financial advisor is doing for you.

• Ask your advisor how your portfolio is performing relative to the S&P (^GSPC).

For folks who are looking to start investing but aren?t in the market for a financial advisor, Steinberg says at the very least you should understand what an IRA (individual retirement account) is. And if you can?t save the suggested amount of money every month, Steinberg says that shouldn't stop you from opening an account and starting to transfer money in for the tax benefits.

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Source: http://finance.yahoo.com/blogs/daily-ticker/why-know-more-financial-advisor-133215945.html

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