It has been established that most actively managed mutual funds lag behind their indexes over time. Although most low-cost index funds, on a risk-adjusted basis, will outperform actively managed funds, this is where the help of a financial advisor comes into play.

Investment advisors provide value to their clients by identifying mutual funds that are doing well on an absolute basis relative to their index or on a risk-adjusted basis. These advisors have the tools and the dialogue with mutual fund managers. They get to know the decision makers in charge of the mutual fund, the analysts, their expenses and how they do business. Once you have the specialty nailed down, you’re better positioned than the average investor.

One of the most popularly sited benefits of an index fund is their low expense ratio. However, one of the downsides is that they are joined at the hip to an index fund, which can raise your transaction cost. Our financial advisory team recommends a healthy balance of index and actively managed funds. Putting clients into some index funds and some actively managed funds allows them to get the best of both worlds. For someone putting all their “eggs” into exclusively managed funds, we would advise against that.

Want more information? Access the article where Anthony Diaz, CFA and vice president of investments, provides insight on index funds and actively managed funds. Also, feel free to contact our financial advisory team, we’re here to help!

January is right around the corner and it’s essential that you start planning ahead (financially) whether that’s on your own or with the help of a financial advisor. The tumultuous events in the financial economy over the last 18 months have demonstrated more than ever the value of having a conservative approach to your fiscal responsibility. Instead of getting your head stuck in the sand, see below for three tips on how to successfully make changes in your financial life as of next year.

1. Get Your Emergency Savings Account Ramped Up. Ensure you have 6 months of living expenses saved up in a liquid savings instrument (e.g. checking account, CD, or interest-bearing savings account).

2. Focus on Debt Reduction. Reduce your highest interest debt as much as possible. Start with your highest interest-bearing liability, usually that’s your credit cards.

3. Do a Top Down Re-evaluation of Your Investment Portfolio. Consider each individual holding (e.g. stocks, bonds, mutual funds) and reduce your exposure among the more exotic, alternative riskier investments.

Just like your grandmother used to say, “It’s important to have savings, don’t take on too much debt, and be careful of what you invest in!”

The Faster Times quoted Anthony Diaz, CFA, financial advisor and vice president of investments at IFC Advisory for his insight and expertise on financial planning in the upcoming year. Feel free to check out How to Get What You Want in 2010 and let us know what you think!