October 4, 2024

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Understanding the Role of Banks in Your Investment Strategy

Understanding the Role of Banks in Your Investment Strategy
JohnnyGreig / iStock/Getty Images

JohnnyGreig / iStock/Getty Images

Investing can be a challenging concept for beginners. Just about everyone knows that the goal is to buy assets for lower prices than you sell them for or to invest in assets like certificates of deposit (CDs) that provide a relatively low but safe profit. But deciding what assets to invest in, how to manage risk and other issues can be difficult.

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The good news is that you’re not alone. In fact, your bank may be able to help. Most banks offer services that can improve your investment outcomes, such as financial tools, investment advisory services and low-risk investment vehicles.

Also see five tips from self-made millionaires to simplify your investment portfolio.

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Financial Tools

If you’re planning on investing, your local bank is one of the first places you should turn to for information and guidance. Your local bank likely provides a laundry list of financial tools that can help improve your investment outcomes.

For example, digital budgeting tools help you track your spending. When you realize how you’re spending, saving and budgeting your money, you can cut out frivolous purchases, leaving more money available for investments.

Some banks also offer a complete financial overview. This tool gives you a clear picture of where you have your liquid money and investments, your asset allocation, your net worth, and more. This can improve your investment outcomes in a few ways.

First, it helps you stay on top of your asset allocation and ensure that your portfolio maintains a solid balance between risk and return. There’s also the psychological value in being able to see your net worth. After all, if you make wise investment decisions, your net worth will rise. As you watch this, it could be the encouragement you need to achieve your long-term investment goals.

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Investment Advisory Services

Your local bank may be able to help if you’d like to work with a professional rather than making your own investment decisions. Investment advisory services are typically offered through robo-advisors or human advisors.

  • Robo-advisors: With robo-advisory services, you typically make your investment, set your risk management parameters and let the artificial intelligence behind the robo-advisor make investments for you.

  • Human advisors: If you would rather work directly with a financial advisor, your local bank may be able to help. However, this may be available only to customers with large investment portfolios.

How Investment Advisory Services Can Help Improve Your Outcomes

You may find it difficult to decide what assets to invest in and what asset allocation strategy you’ll follow. That can be one of the most difficult parts of investing, but investment advisory services can help.

Whether you choose to use a robo-advisor or a human advisor, the goal is the same — to properly manage your money so you experience growth in the market. To do so, advisors will ask questions to learn more about your complete financial picture, goals and risk tolerance. Once they have this information, they’ll typically manage your investments for you, allowing you to take a hands-off approach to the stock market.

Low-Risk Investments

Your bank can also help by offering low-risk investment vehicles for the safe-haven side of your portfolio. This is the portion that you’ll invest into assets that are a strong store of value to limit the impact of market volatility on your savings. Here are some low-risk investment vehicles you may find at your local bank.

  • CDs: These fixed-return investment vehicles are particularly valuable in today’s high interest rate environment. When you open a CD, you agree to keep your money in the account until the term expires. In exchange, the financial institution offers a fixed rate of return until the account matures. Those returns are usually higher than what you would earn through a traditional savings account.

  • Money market accounts: This is a type of savings account that comes with some checking account features. A money market account is usually interest bearing, but it maintains a high level of liquidity — meaning you can pull out some of the funds relatively quickly without penalty. That makes it a compelling option as markets evolve.

  • High-yield savings accounts: Some financial institutions offer high-yield savings accounts. Though high-yield savings accounts typically come with variable interest rates, they are significantly higher than traditional savings rates, making these accounts a valuable option for the cash portion of your investment portfolio.

How Low-Risk Investments Can Improve Your Outcomes

Everyone wants to make as much money as possible when they invest. But it’s also important to maintain a comfortable balance between risk and reward.

Though you may build most of your safety net with assets like bonds, gold and other precious metals, many investors also maintain a cash allocation in their portfolios. That’s where assets like CDs, money market accounts and high-yield savings accounts come in. These accounts offer exposure to cash but typically come with stronger returns than traditional savings accounts.

How To Access Investment Help From Your Local Bank

How do you access the services banks provide to help you to free up money for investment and to invest it wisely? Follow the steps below.

  1. Get in touch with your bank: Head to the bank you use or call to speak with your banker. Ask about the different investing-related tools available to get a better understanding of what’s offered and what you may qualify for.

  2. Consider other financial institutions: You likely have several financial institutions around you, and different banks often offer different services. So reach out to the various banks in your area to learn about the investing help they may be able to provide.

  3. Decide what you need: Once you’ve learned about the investment resources the banks near you make available, think about what tools will have the most profound impact on your portfolio.

  4. Gain access: If the tools you need are available at your current bank, simply contact your bank to access them. However, you may need to open an account somewhere else to access the most comprehensive resources.

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This article originally appeared on GOBankingRates.com: Understanding the Role of Banks in Your Investment Strategy

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