If you’re just getting into the investment world, you might be wondering how to start. It’s common knowledge that getting a head start, saving, and diversifying your investments around is the way to go if you want to build some serious wealth for stuff like buying a house, retiring in style, or that dream vacation.
But let’s be real — the world of investing is a bit of a jungle. There are so many options, financial services, and companies to choose from that it can make your head spin. Plus, those wild swings in the stock market don’t exactly boost your confidence.
One of the biggest decisions you’ll face as a newbie investor is whether to let a pro handle your money with a managed account or take the do-it-yourself (DIY) route. Each approach has its perks and downsides, depending on what you’re looking for. Read on to learn more about both options.
What are managed accounts?
Managed accounts are any investment accounts that are primarily overseen by a professional manager such as a financial advisor or robo advisors. With the investor’s input, the adviser/ robo-advisor will help to construct an appropriate asset allocation based on the investor’s goals, needs, risk tolerance, and age. They will also identify the proper investments and maintain these portfolios over time by managing risk, rebalancing and more.
PRO TIP! MoneyLion offers fully managed portfolios that do not require management fees or minimums.
What are self-directed accounts?
Self-directed accounts let you dive into the nitty gritty of investing. You can buy and sell individual stocks, bonds, and other investments all on your own, usually online. No hand-holding here — you’re calling the shots. But remember, with great power comes great responsibility. If you’re rocking a self-directed account, you must know your stuff, do your research, and be aware of the risks.
How to manage your investments
As you decide how to handle your investments, there are a few key questions to ask yourself.
First, what’s your investment know-how? If you’re just starting, you’ll have to make some basic choices, like how much of your stash should go into stocks, bonds, or other investments. If you roll with a self-directed account, you’ve got the freedom to fine-tune this mix to your liking. But, here’s the kicker — it also means you need to be savvy about investing.
Now, managed investment accounts offer a helpful alternative. They’re overseen by professionals who spread your investments across various stocks or assets. This approach diversifies your portfolio, reducing the risk tied to any single company’s performance. It’s a smart move if you prefer a more hands-off approach or lack extensive investment experience.
How much investment background do you already have?
When you’re starting, you’ve got to make some straightforward choices. Like, how much of your investment pile should go into stocks, bonds, or other types of investments?
If you go for a self-directed account, you’ve got more wiggle room to fine tune this mix to your liking. But that also means you need to have a good handle on investing smarts.
If you’re just dipping your toes into the investing pool, managed accounts could be a good pick. They’ll help you figure out the right mix from the start.
How complex are your financial goals?
The more complex your goals and objectives, including spending needs, big upcoming purchases, tax requirements, and so on, the more likely it is you can benefit from proper guidance, advice, and other financial services. Even if you have relatively straightforward needs, having help to determine the right portfolio based on your risk tolerance and return objectives can be helpful. In some cases, using a managed account could be a set-it-and-forget-it approach that keeps you on track through different market environments, reducing the urge to make dramatic portfolio adjustments at the wrong times.
PROP TIP! Supercharge your budgeting goals by activating Round Ups to automatically invest your spare change into a Managed Investment account.
How much time do you want to spend on investment activities?
While active accounts and trading platforms may provide research and analytical tools to help you make investment decisions, you will ultimately be responsible for managing your portfolio. This naturally requires a great deal of time and effort, not to mention the willingness and interest in tackling complexity. This is why managed accounts could be a great solution if you don’t have the time.
Managed accounts with a pro by your side
Starting your investing journey doesn’t have to feel like climbing a mountain. If you’re at the early stages of investing, managed accounts can be your best pals in getting started and grasping the basics. Some managed investment accounts have a professional by your side to oversee the account.
The magic of managed accounts lies in having portfolios fully managed by industry experts.They will use your risk tolerance and investment preference to build the best portfolios tailored to your financial goals within your budget.
FAQ
How do I choose the right managed account provider for me?
To select the ideal managed account provider, consider factors such as the expertise of the money manager or asset manager, the range of investment services offered, and their track record in making sound investment decisions. Ensure their services align with your financial goals and investment portfolio.
What are the costs associated with a managed account?
Managed accounts typically involve management fees paid to the money manager or asset manager for investment decisions. You may also encounter account fees, transaction costs, advisory fees for investment advice, and custodian fees for asset storage.
Can I still have control over my investments in a managed account?
Yes, you can maintain a degree of control over your investments in a managed account. While a professional money manager or financial adviser assists with investment decisions, you can provide input and specify your preferences for your investment portfolio.
