If I just plan to make some low-risk investments like investing in a good mutual fund, do I need any help from a financial advisor? – Reuben
The answer to this question depends on your knowledge of such investments. Can you pick outperforming mutual funds? You want to make sure that you put the available funds to work in the most efficient way to attain your financial goals.
First, let’s look at the issue of choosing the investment. You say you want to invest in a good and low-cost mutual fund, which makes perfect sense. However, those two criteria open so much room for interpretation. There are hundreds of funds that meet the good and low-cost criteria.
There’s a need to narrow it down. For instance, you can use tools like Morningstar’s Mutual Fund Screener to home in on funds with solid, long-term performance and below-average annual expenses. Better still, you can limit your investment to index funds, which typically have low costs and track the performance of a market index.
Even if you decide to go the index funds route, you still have a lot to choose from – as most funds focus on specific sectors of the market. There are large stocks, small caps, growth, value, index funds, short-term bonds, long-term bonds, etc.
To cut through the clutter, you can focus on index funds like a total US stock market index fund, total US bond market index fund, and for international exposure, a total international bond index fund or a total international stock index fund. These funds give you a broad swath of the market rather than a small slice of it.
After deciding on the funds, you still have to decide how much to allocate to each fund, so you’ll end up with a balanced portfolio that provides a decent return without subjecting you to too much risk.
Again, you can easily navigate this all by yourself, as there are several ways to determine how to spread your funds around. For instance, you can use a risk tolerance-asset tool to get recommendations on the mix of stocks and bonds suitable based on how long you want the money invested. Alternatively, you can invest in a target-date fund, which provides a diversified portfolio of bonds and stocks in a single fund.
All of this points to the fact that you can’t just identify low-cost funds or create a diversified portfolio that allows you to achieve your goals without putting in the work.
Before now, the focus used to be on investing. But things have changed. There’s a need to address other issues like how much you need to save and have a viable plan to help you achieve your goals.
There’s, however, no one-fit-all approach to this. All that matters is that you’re able to resolve your individual concerns. Retirement calculators come in handy in gauging how much you need to save or withdraw.
It’s also essential to determine whether you’re comfortable taking on these financial issues and making these decisions without any help. If you feel confident, then go for it. Just be honest with yourself.
If you decide that you don’t have adequate knowledge or the time to research and make these decisions, it makes sense to ask for help. Opt for a financial advisor that can provide more insight to enable you to make decisions and take on issues like portfolio building, retirement planning, investment, and more.
It’s also essential to ensure the amount you pay is reasonable and, more importantly, you should deal with someone competent and trustworthy.
