There are plenty of investors who enjoy picking stocks and tweaking their portfolios, but many others don’t have the time, interest, or confidence to manage their own money. And that’s totally OK. In fact, with today's "hands-off" investing options, stepping back from day-to-day decisions can help some investors stay consistent with their long-term strategy.
What is hands-off investing?
When people can delegate portfolio management to financial professionals or digital solutions, such as roboadvisors, that’s hands-off investing.
Over the years, financial firms have developed a wide range of tools and solutions for investors who would rather leave the hard work of investing to someone else. It’s not just about time or convenience: Accounts managed by professionals, aided by advanced technology, can help people stay invested through market ups and downs, with diversified portfolios that adjust in the background over time.
“Delegating investment decisions isn’t about walking away from your goals,” says Jill Maher, vice president of wealth engagement at Fidelity. “It’s about choosing consistency over complexity. Hands-off solutions can give investors who might not have the time, the will, or the skill a better chance to succeed than they might have on their own.”
Is hands-off investing right for you?
Hands-off investment options aren’t just for beginners or investors with small balances. Rather, they could be a smart fit for anyone seeking a disciplined, diversified approach to long-term investing.
“Many investors don't have the time or interest to manage portfolios themselves. For them, a managed or automated solution can be a practical way to stay invested and aligned with their long-term plan,” says Bram Levinson, a senior associate in Fidelity’s Financial Solutions Team, a group of professionals responsible for Fidelity’s financial planning and advice methodology.
So, what does “hands-off” investing look like in practice? Here’s a quick look at some of the choices and the benefits they could offer to investors.
3 ways to access hands-off investing
If you’d rather not build and manage a portfolio yourself, here are 3 basic approaches that let professionals and technology do the work for you.
1. Roboadvisors
One of the most accessible ways to get professional portfolio management is through roboadvisors, digital tools that use technology to build and manage diversified portfolios.
These platforms typically recommend a mix of stocks, bonds, and cash equivalents based on your goals and risk tolerance, then rebalance allocations as market conditions change or if your portfolio begins drifting from its target asset mix. These tools are increasingly popular because they can offer many benefits of money management with lower minimums and fees.
At Fidelity Go®, for example, there’s no fee on balances under $25,000. Above that, clients pay 0.35% annually, which gives them access to financial coaches and digital tools that can help with budgeting, retirement saving, and other goals, as well as tax-smart trading strategies.1
2. Separately managed accounts
Another option is a separately managed account, or SMA. With an SMA, investors have direct ownership of underlying securities in an account managed by a team of professionals. With a mutual fund, by contrast, you own shares of a pooled portfolio.
Some investors favor separately managed accounts because they may offer greater control, transparency, and tax efficiency than mutual funds. The SMA structure can offer flexibility, including the ability to tailor portfolios around preferences or values. They may also deliver more precise tax-aware management.
In addition to traditional SMAs, advances in technology have paved the way for digital platforms that build and oversee managed accounts. Fidelity Managed FidFolios® is one example.
This digital approach builds customizable portfolios of individual stocks managed by professionals, using direct indexing or active management. The service monitors markets, selects investments, and can employ tax-loss harvesting strategies that in some circumstances may help offset taxable gains.
3. Hire a financial professional
For investors who may have more complex financial lives and want more personalized guidance, working with a professional financial professional typically provides the highest level of support.
A dedicated wealth advisor can help build and manage your portfolio while also offering guidance on big-picture financial decisions, such as retirement planning, income-generating strategies, and preparing for major life events.
Fidelity Advisory Services , for example, offers diversified portfolios managed with tax-smart techniques. Clients with at least $50,000 to invest have access to a team of financial planners to develop and adjust a long-term strategy.
2 ways to get self-adjusting portfolios in a single fund
Another path is to invest in mutual funds that, with a single trade, provide access to diversified portfolios of stocks and bonds that self-adjust over time.
1. Target-allocation funds
Target-allocation funds, also known as target-risk or lifestyle funds, maintain a stable mix of stocks, bonds, and short-term investments based on a chosen risk level. The funds are actively managed and rebalanced over time to keep allocations near their target mix, which helps maintain a consistent risk profile. A 60/40 stocks-and-bonds fund, for example, will be rebalanced if market movements push allocations out of alignment, selling what has risen in value and buying more of what has lagged.
Fidelity offers funds with equity exposures ranging from conservative (20%) to aggressive growth (85%). This level of hands-on discipline can be difficult for some individual investors to maintain on their own.
2. Target-date funds
Popular among retirement savers is the target-date fund (TDF). TDFs are more dynamic than allocation funds, as they periodically adjust the mix of stocks and bonds over time to become increasingly conservative as fundholders approach their designated retirement age.
In the early years, these funds typically emphasize growth-oriented investments, such as stocks. Over time, as the target date approaches, they gradually shift to more conservative holdings, typically bonds, to reduce volatility risk and preserve capital as the fundholder approaches retirement.
Benefits of hands-off investing
In many cases, the benefit of hands-off investing has less to do with convenience and more with avoiding mistakes.
- Many managed investment offerings implement automated trading strategies that can help deliver better after-tax returns.
“Managed solutions can add a tax-smart layer, like tax-loss harvesting, managing capital gains, and tax-smart withdrawals, amongst others, that many individual investors may not execute effectively on their own,” says Aliya Padamsee, a director on Fidelity’s Financial Solutions team. “It’s one of the most overlooked benefits of delegating portfolio management.”
- Automated funds and portfolio tools can help people stay invested over time, rather than jumping in and out of the market. These accounts can act as guardrails, keeping investors from making emotional decisions at exactly the wrong time, such as selling during a downturn or chasing the latest hot stock making headlines.
- By consistently rebalancing and sticking to a plan, hands-off approaches can help investors stay out of their own way.
“A big value of automated solutions is a consistent, long-term approach,” says Levinson. “Sometimes it’s better to step back and let a disciplined system guide your decisions.”
How to choose the right “hands-off” investing option
For investors ready to get started with hands-off investing, choosing the right approach begins with being honest about their interests and abilities. Ask yourself: Do I have the time, desire, and confidence required to successfully manage my own investments?
If the answer is ‘No’, that’s not a matter of being lazy. Choosing an automated or a managed approach may be prudent.
Investors can explore a range of investment options offering different levels of support, from do-it-yourself resources to dedicated 1-on-1 guidance from a professional advisor. If you’re not sure how to get started, there are self-assessment tools, such as Fidelity’s managed account selector tool, that weigh how much support they want and how involved investors intend to be with their portfolios over time.
“There’s really no shame in handing the keys to a digital solution or a human advisor,” says Katie Cooper, a director on Fidelity’s Financial Solutions Team. “Even financial advisors sometimes choose to have their own financial advisor. It’s very different when you’re managing your own money.”
That said, “hands-off” doesn’t mean “set it and forget it.” Even if you’re delegating the day-to-day decisions, it’s still important to check in periodically and understand how your money is invested. Life changes, such as a new job, a growing family, or the approach of retirement, can be occasions to revisit your plan.
Of course, plenty of investors say “Yes” to doing it themselves. Investors who genuinely enjoy researching markets, have the time to maintain a disciplined approach, and are comfortable managing their own tax and rebalancing decisions have found self-directed investing a good fit.
The most important step is choosing the approach that aligns with your interests, abilities, and long-term goals—and then sticking with it.