There are those who want to partner with a knowledgeable professional to help monitor and adjust their investing strategy. Then there are the do-it-yourselfers (DIYers), who take the time to monitor and manage investments on their own. An understanding of your needs, as well as your unique goals and circumstances, will help you determine which approach makes the most sense for you.
If the idea of professional management appeals to you, there are a couple of different approaches you may want to consider:
Those looking for a simple solution may elect for a single-fund option. There are typically two types of asset allocation funds: Target Date Funds (based on an anticipated retirement date) and Target Allocation Funds (based on a risk tolerance and time horizon). With Target Date Funds, the investment mix of stocks/bonds automatically becomes more conservative as the target retirement date approaches. Choose the fund that represents your anticipated year of retirement. With Target Allocation Funds, the investment mix varies from conservative to aggressive. Simply select the Target Allocation fund that you feel best meets your risk tolerance, time horizon, and investment goals.
Managed Account—Managed for the investor's personal situation
Those who want more personalized attention, or who are navigating a complex financial situation, may benefit from a managed account service. Here’s how they generally work: based on information about you, a team of investment professionals can create and manage your portfolio, giving you a more personalized investment strategy that's based on your particular situation. It can take into account your workplace savings, comfort with the ups and downs of the markets, financial goals, investment horizon, and other sources of retirement savings for you or you and your planning partner - such as IRAs, pensions, or stock plans.
Financial professionals handle the ongoing monitoring and management of your account. Throughout the year, the team monitors and adjusts your account to help ensure that it continues to meet your needs. Each year, you will receive a personalized update on where you stand. And if your needs or circumstances change, your investment strategy can be revisited to help ensure that the asset allocation remains appropriate. Like all personalized, professional account management, there typically is a fee to get the ongoing help and monitoring which comes with a managed account.
DIY: Do it yourself
DIYers choose their own investments and actively manage them on their own. This approach provides investors with more control over their investments, but is often time intensive. Investors who prefer to handle their money management themselves need to make sure they're actively engaged in managing their accounts, remembering to make the necessary adjustments to their mix of investments as the markets affect their asset allocation and as their personal situation evolves.
But DIY doesn't mean you're all alone. You can benefit from a number of online tools and other services that can help you build a portfolio that suits your circumstances and that can help you make progress toward your long-term goals. First and foremost, DIYers need to make sure they're well versed in financial topics. In order to build an appropriate portfolio, you'll need to understand the major types of investments, and how to put them together in a mix, as well as staying informed about the state of the economy and the markets. You will also need to evaluate investment products and navigate the strategies, costs, and quality of different solutions.
Also, an essential element of DIY is the selection of an appropriate asset mix (one that reflects your risk tolerance, investment horizon, and financial situation) and the discipline to stick with it. Of course, your investment portfolio is built around your life, your goals, and the markets, which will evolve over time - so your portfolio will need to change with them. Major events, such as sending a child to college, receiving company stock, or getting ready to retire, will require a corresponding adjustment to your investment strategy and financial plan.
Make the choice that's right for your needs
There's no one right way to approach investing. You may be a DIY investor or receiving professional help now, but you don't have to stay in one category for life; as your financial life changes, you may want to transition from one approach to another. The key is to understand your own investing needs and goals so you can make choices and have peace of mind and confidence about your financial future.
Regardless of your approach, you can still benefit from a check-in with a financial professional to review your investment strategy and to help make sure you are on track to reach your financial goals.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917