One of the first steps of investing is deciding whether you need to use an investment company. There are numerous investment companies available, including banking and insurance institutions, that offer investment services. But that doesn’t mean they are all perfect for your investment journey. Settling for an institution can sometimes be the fine line between losing all your money or creating wealth.
Narrowing down to the best investment company can be challenging, especially when you are a beginner. A wrong choice can cost you not just the management costs but your investing capital.
Key Points to Consider When Choosing an Investment Company
As we start this investing journey, here are tips on how to choose a great investment company:
Do Background Checks
Whether you’re looking for a small investment company that offers more personalised services or a renowned investment firm, it’s good to compare investment firms on each side of this spectrum.
You can have a checklist where you compare the philosophy, history, credentials, investment portfolios, and firms’ financial position. When considering the financial position of the firms, go through their financial statements to determine the liquidity. If possible, read any reviews from previous or current clients if they are available.
Check the Costs
Every investment company you come across will have fees for managing your investment portfolio. The fees vary between companies. However, most firms will also set varying fees based on whether your portfolio’s management is active or passive.
Passive management focuses more on tracking a benchmark, which leads to fewer buy and sell transactions. Active management focuses on beating a benchmark, leading to more buy and sell transactions.
Whichever management strategy you’re going for, considering the management fees and any other additional fees is important for your investment. Small costs soon add up, and by the end of the investing year, you can end up spending more money on fees.
Related read: Debunking Investment Myths That Are Holding You Back
Consider the Services and Products Offered
When deciding between different investment firms, compare the services and products each firm offers. Whatever firm you settle for, it needs to provide an array of investment products that align with your investment goals.
Some investment firms will only have stocks, bonds, or a mix of both in their portfolios. Other firms will diversify with real assets and commodities. What are your investment time horizon and risk tolerance level?
Does the investment firm you’re interested in have investment products that cater to these? Matching your investment needs with what an investing firm offers ensures you’ve got an easy time managing your investments.
The Devil is in the Detail
This is an old idiom that still applies to all situations, especially when dealing with your money. Every investment firm you approach will want you to pick them, but that doesn’t mean you’ve to fall for their marketing taglines. Leaf through any paperwork you are provided with, and if possible, consult someone else for any terms you don’t understand.
If you choose to work with an investment firm and their services don’t suit you, you can always move your money to a better firm.
How convenient is it for you to access your portfolio or to trade?
Some banks are doubling as investment firms, making it easy for you to move funds between your current or savings account to your investment account.
Are you looking to invest using a strategy where you always have to call the broker or do everything from your mobile phone? If you are looking for a face-to-face consultation, a traditional brick-and-mortar investment company will work.
If not, you can use an app where some apps can assess your risk tolerance and even do the trading for you. For an investing app, it’s important to consider its ease of use, speed, and data of the available stocks.
Minimum Investment Amount
Most investment firms will require a minimum deposit to start investing. These amounts could be as low as $100 or high, like $1M. The investment company you settle for needs to be within your budget or willing to work with your budget. Before approaching any investment company regarding your finance and investing goals, try checking the initial deposit for the specific investment product.