No two people are exactly alike. There are differences and nuances that can dictate changes in even the smallest of things. This is why every financial adviser Perth learns to figure out what sort of investment strategy each of his clients is comfortable with.
While each individual will have details and nuances all their own, there are broad categories that people can fall into.
Areas of Differentiation
One area of differentiation lies in how aggressive they are in their management. This pertains to their belief that the expert can create greater returns than normal.
More aggressive or active investors will carefully select holdings and assets. They tend to have a full-time staff available, and greater returns are the key. However, others prefer to take a more controlled outlook. This lowers expenses but also has more profits in the long-term.
Another area of consideration is whether the investor is interested in growth, or in value.
If they’re looking for growth, they want higher rates and high return on equity. Profit margins have to be high, dividend yields low. They want something that makes a lot of money, which is tied to the perception that it is growing quickly.
In contrast, the value is more focused on strength and profitability at a good price. Their concerns tend to focus more on low price to earnings ratios and low price to sales ratios, but want a higher yield on dividends. The concern of buy-in cost is paramount.
Another question would be if the investor wants the cap small or large.
The cap in question is the company’s size in the market. Cap speaks of the number of shares a company has out there, multiplied by the price per share. Both sides have their strengths and weaknesses, appealing to different mindsets.
A small cap company has greater flexibility and room to manoeuvre. The share prices are lower, but many believe the returns can be much higher. This is despite more focused business lines and fewer resources.
A large cap company has a lower risk, and often are more dependable. These are older firms and are among the biggest. Growth is slow, but that’s because they’ve stabilized. They’re less likely to crash without warning and have lower returns. They’re also lower risk.
Each time a financial adviser meets a new client, they should pause to evaluate them. They should figure out which side on these three avenues they fall under, and act accordingly.