Thoma says investors with less than $25,000 should not invest in stocks, but in mutual funds to stay diversified. As portfolios grow, active strategies can be incorporated. "I don't advise to buy individual stocks until the portfolio is more than $100,000," he says. "You need 15 to 25 stocks to be well-diversified."
Finding a financial adviser. Companies like Charles Schwab have in-house advisers, but there are also many smaller firms that offer financial-planning services. The National Association of Personal Financial Advisors (NAPFA) has an online tool at napfa.org that can locate advisers in a specific area.
Fees for personal advisory services vary. NAPFA only promotes fee-only advisers, that, according to the group, are "compensated solely by the client, with neither the advisor nor any related party receiving compensation that is contingent on the purchase or sale of a financial product." This means the fee of the adviser is directly tied to the performance of the investor's portfolio.
Investors also should look for advisers who have widely acknowledged accreditations. Some of the most common are Personal Financial Specialist (PFS), Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC), and Chartered Retirement Planning Counselor (CRPC).
Kirchenbauer says it is imperative to interview advisers to determine whether they clearly understand individual needs. "Having someone who understands your unique needs, goals, and dreams and who will be able to put together an overall financial planning and investment strategy that supports all of that is critical," she says.