There are plenty of people who will take your money...

...if you don't understand what they're doing with it.

There are many excellent financial advisors out there, but if you don't know the first thing about investing, you won't know how to separate the good ones from the mediocre ones and the downright unethical ones. At a bare minimum, you should know how to choose a professional who you can trust to act in your best interest.

For example, you should know that Registered Investment Advisors are legally required to put the client's interests first, but brokers are not. You should also understand how your advisor is compensated and how they select recommended assets for their clients.

A problem you could encounter with a broker is excessive trading in your account, since each buy and sell order generates a commission. This practice isn't in your best interest, since it doesn't take your investment goals into account and results in you paying excessive trading fees. Churning can leave you with less money than you started out with.

Another problem with brokers is that they sometimes push investments on clients that are in the brokerage firm's best interest because the firm holds a position in that investment. Brokerage firms can also charge a number of fees that will eat into your investment returns. These fees include inactivity fees, transfer fees, account maintenance fees and minimum equity requirement fees. As if that weren't enough, full-service brokers are expensive. Their commissions are several times what you'll pay to buy and sell stocks on your own through a discount brokerage.

Investment advisors, on the other hand, are not only required to act in your best interest, but they're also more likely to make buy and sell recommendations that are objective because they aren't paid for every transaction you agree to. These advisors also don't have incentives to push you into certain investments, regardless of whether they are your best option.

Read more: http://www.investopedia.com/financial-edge/0712/3-Reasons-Why-You-Need-To-Understand-Investing.aspx#ixzz20FKaKyh9

D2 Capital Management is a Fee-Only Registered Investment Advisor

9951 Atlantic Blvd, Suite 323, Jacksonville FL 32225