You've just inherited a large sum of money. Now what do you do with it? It'd be easy to just spend it on a new toy you've had your eye on. Investing it wisely can make that inheritance go a long way.
"I think people move quickly when they get money quickly," says Brianne Babel, Financial Advisor for Edward Jones. Instead she advises customers take their time and don't rush into making a decision when choosing an investment option. "It's a blessing that could set them financially if they make the right choices."
What choices do you have? Both Babel and Al Bowles, Financial Consultant from Wachovia Securities say it's important for them to get to know the clients they work with in order to determine what they feel is the best route to go.
Both Babel and Bowles agree before choosing an investment option is to pay off debts for example credit card debts. "So then the money you have (and invest) is yours," Bowles says.
When getting acquainted with customers, Bowles says it's important for him to know the experience the person has had with investing. For example has the person invested a lot before and lost stock when the market crashed? Bowles says this will help him get a feel for what the person is comfortable with when investing. Bowles says with first time investors he recommends starting small to get your feet wet or investing through a mutual fund where there's management available.
Bowles and Babel said it's also important fo know how old the customer is and what they're situation is since everyone is different. Are they a 20 something just out of college? A married couple with young children? Or a person in retirement age? Bowles says this will help determine what expenses they will have, for example, are they saving money for a child for college? When a younger individual is investing Babel says she advises them to look at saving money for retirement.
Bowles said it's also important to know the customer's time horizon. How long does the person want to keep the money invested? What are their goals for using the money? "The more you know your customer, the better job you can do recommending," he says. He also says it's important for him to learn more about their risk tolerance. "Some people can't sleep at night if they think their investments might go down," he says.
Once they knows a person better, Bowles and Babel offers clients what they thinks may be some good options like stock or mutual funds, however, this is the customer's money and there's to do with it what they like. Deciding how or what to invest in, they say, is not an overnight decision though.
"I wouldn't put it all in one account, I think it's important to diversify." Bowles recommends at putting the money in a combination of investing units like stocks, bonds, mutual funds, CDs or government bonds.
When investing Bowles says it's important to watch out for someone trying to pressure you into buying an investment and claiming that you need to buy it today or lose the offer. Bowles also advices having a financial advisor available to talk to about your finances or questions you might have. "If you don't understand it, don't do it," he says. Babel says when choosing a financial consult look around to find one you can trust. "Working with someone you trust is huge," she says. "They know you and are going to do what's best for you."