Investment Companies & Advisors

The term investment company covers a lot of ground these days. It may be used to describe anything from a single individual's financial advisory company to a corporation as large as Schwab, where you can either choose investments yourself or enlist the help of an investment advisor. Since we've already covered financial advisors, we'll stick to companies that provide investment only services here.

Types of Investment Companies

Different investment companies provide different ranges of service. There are discount brokers you can use to buy and sell through, full service companies with investment advisors who will take your money and invest it for you, and companies that provide both services and everything in between. Most investment companies in the US offer mutual funds, while others offer closed-end funds, exchange-traded funds (EFTs), or unit investment trusts (UITs).

Uses

If you've developed your own financial plan, understand the value of diversification, and feel you can choose a diversified portfolio of investments yourself, you may be perfectly suited to use a simple discount broker without the assistance of an investment advisor. If you don't have the time or interest to learn how to properly diversify your assets, or which assets to choose, then you should either talk to an investment advisor or choose a company that will allow you to pick various portfolios of diversified assets based on the levels of risk and aggression you're comfortable with.

At FinancialCalculator.org, we highly recommend AssetBuilder as an investment company. AssetBuilder allows you to choose from 9 "Model Portfolios", each with a great level of diversification. In addition, their fees are extremely low and their portfolios are regularly rebalanced to maintain your risk levels, automatically buying low and selling high.

Choosing an Investment Company or Advisor

If you've decided you'd like to enlist the help of an investment advisor or company, you should consider the same three components as with a financial advisor: philosophy, fees, and history.

• Your investment advisor should have a long term outlook with diversification as a core principle, not trying to time the market.


• While opinions vary, fee-only compensation is likely to align you and your advisor's interests and keep your costs to a minimum.


• And, you should check your advisor's annualized returns as far back as possible, and compare them to alternative options.