What is the way to get money managed without hiring a personal financial advisor? I do not think I need any personalized approach, I'd rather have a target retirement date and I would like to get money reinvested and managed for me so I don't need to buy my own stocks and bonds. Where shall I invest? Mutual funds? Index Funds? Can I just invest in some established diversified fund and not to think about it and only reinvest more savings as I go? I know my 401k offers me target date funds, are there also funds that are liquid and have low expense ratio?
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1Index funds are very common because they are simple. ETFs are index funds (or other funds) that you can buy on a broker like stocks and bonds but you are actually buying a fund. Mutual funds are index funds (or other funds) that you buy on the fund's website– user253751Feb 24 at 20:28
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2You really don't need liquid funds in a retirement account unless you are already retired or retiring soon.– JohnFx ♦Feb 24 at 21:06
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no, that's the problem, I have 35 years till that day. I don't need liquidity but I do need performance where I don't need to do investing myself.– MedanFeb 24 at 21:11
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What does the "are liquid" in "are liquid and have low expense ratio" mean if not a desire to hold a certain amount in cash or cash-like instruments?– Justin CaveFeb 24 at 21:46
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@JustinCave perhaps I misused the term. I don't invest in something like real estate or long term bonds. Basically if I want to sell something I can do that within a few months.– MedanFeb 25 at 2:22
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3 Answers
There are many "target date funds" which adjust their mixture (in investment, reinvestment, and automatic rebalancing) based on how far you are from the date at which you have said you need the money, essentially replicating the usual basic advice about shifting types of investments as you age. The ones based on low-cost index funds mixtures usually don't cost much more than the underlying index funds.
That's hard to beat for "set it and forget it" investing.
If you're in the US, the obvious way to improve upon that for retirement savings is to put the target date funds inside your 401k or IRA, so you get the tax advantages too. A 401k, if your employer offers one, can be set up to have contributions deducted from your paycheck automatically, which makes that side of it painless too. And many employers match some amount of 401k savings, to encourage folks to take advantage of these programs; if your does, that is Free Money and you should be funding the 401k at least enough to claim every matching dollar you can get.
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yes, I do have 401k but I have more cash at the moment which I need to invest independently from 401k.– MedanFeb 25 at 2:24
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You can get target date funds outside 401k's. That still seems to be exactly what you have said you want. Or you can pay an advisor, once, to recommend a mixture and thereafter maintain that balance yourself. Or you may have free advice available from your 401k plan.– keshlamFeb 25 at 2:37
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Or, of course, you can pay an advisor once to get a suggested mix of low-cost-index-fund categories, and then manage it yourself. Which is what I'm doing. Under normal circumstances I only rebalanced about once a year; over the past few years I've been rebalancing when a category gets at least a full percentage point higher or lower in the mix than it should be, maybe every two months or so.– keshlamFeb 25 at 2:42
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he suggests the mixture but then in a year I need another mixture? I have a generic case which most people are. I don't have any preference really except say invest in US company and please generate market or above market return. I am sure there are thousands of professionals create such portfolios daily. Would not mutual fund be an example of such portfolio and I simply put money in one of those mutual funds bypassing a human specifically talking to me?– MedanFeb 25 at 2:46
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1The difference between what a target fund does and what I do is that they're a bit more automatic, they take a bit more money for the service, and theur biggest feature -- automatically adjusting risk/return as you approach the target date -- no longer really applies as I'm near or past the dates I was using. And this just happens to be how I got started, and I'm comfortable with it. And I honestly don't care whether I beat them or not; a difference that makes no practical difference is no difference.– keshlamFeb 25 at 4:44
This has pretty much already been answered by Warren Buffett's bet with managed funds.
Typically a managed fund takes 1-3% of the total value of the fund in fees every year, sometimes as much as 5%. They take this fee whether the fund was up or down for that year. Many funds have a hard enough time beating "the market" on their own but when you add those fees on top, it becomes nearly impossible. So much so that it has almost never actually happened.
So with that knowledge an S&P500 index fund (an ETF) seems like the smart bet although there are many credible concerns about this strategy, including from the inventor of index funds Jack Bogle. Like any investment: if too many people do it, it no longer works. Many would argue we are already in that scenario and the popularity of passive index fund investing has created a bubble as they don't care about the underlying businesses and simply invest in all businesses across the index. In my opinion we are still in a bubble but if/when it bursts the mutual funds will be hit just as hard anyway so for my money S&P 500 index funds still make more sense than mutual funds.
An equity-income mutual fund would be for long-term growth, plus dividend income, but current stock market declines are expected. Possibly balance the growth fund with a Treasury Bill fund because further yield-curve inversion is not expected. Or if expecting further yield-curve inversion then balance with a Treasury Note fund.
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That seems to be more complexity than @Medan wants, judging by their comments on my answer.– keshlamFeb 25 at 3:18
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In any case, in the current market be at least 50% in short-term or intermediate-term government bonds. And so balance with a second fund.– S SpringFeb 25 at 5:00
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I don't agree with that recommendation. But people disagreeing is what drives the market...– keshlamFeb 25 at 12:20
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Consider the B-H net earnings, not including tax benefit, and their Treasury Bill holdings helped hold their loss to 10% for the 2022 year. Maybe the OP should just invest in B-H ?– S SpringFeb 26 at 21:39
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"Everything should be as possible but not simpler", and for me betting all the marbles on BH would be Simpler Than Possible. But to each their own,and since the querant's two questions are on very different approaches I can't begin to guess what will fit their needs.– keshlamFeb 26 at 21:42