Implications of "Best Interest" Rule for Annuities
Aaron Levitt
|
With broker-dealers and agents now acting in favor of clients, investors may be...
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The other issue many people have with investing for retirement is understanding how asset allocation works. On the surface, it seems simple: you invest more in riskier high-growth assets, such as stocks, because you’re younger and have more time to recover from down markets. As you get closer to retirement, you slowly shift your focus away from stocks to more conservative investments like bonds.
Of course, understanding how each asset should be split and when to change them can require a bit of legwork and know-how. If you aren’t an investment professional, this process may be intimidating. The financial industry came up with a solution to this problem with target-date mutual funds – a single investment that holds other mutual funds and automatically changes stock/bond allocation according to the target date selected on the fund. It’s designed as a “set it and forget it” investment, but if you invest in one, you might not be getting all the benefits you think you are.
Fees also can be an issue in these types of all-in-one investments. Mutual funds already have an expense ratio, or fee, built in for management of the fund. A target-date fund could hold a collection of mutual funds, each with different fees that you can’t control – not to mention the fee associated with the target-date fund itself. In an already conservative fund, these fees can hurt overall returns. If you earn 6% on your investments but the fees add up to 1%, you’re only taking home 5%.
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Aaron Levitt
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Download our free report
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The other issue many people have with investing for retirement is understanding how asset allocation works. On the surface, it seems simple: you invest more in riskier high-growth assets, such as stocks, because you’re younger and have more time to recover from down markets. As you get closer to retirement, you slowly shift your focus away from stocks to more conservative investments like bonds.
Of course, understanding how each asset should be split and when to change them can require a bit of legwork and know-how. If you aren’t an investment professional, this process may be intimidating. The financial industry came up with a solution to this problem with target-date mutual funds – a single investment that holds other mutual funds and automatically changes stock/bond allocation according to the target date selected on the fund. It’s designed as a “set it and forget it” investment, but if you invest in one, you might not be getting all the benefits you think you are.
Fees also can be an issue in these types of all-in-one investments. Mutual funds already have an expense ratio, or fee, built in for management of the fund. A target-date fund could hold a collection of mutual funds, each with different fees that you can’t control – not to mention the fee associated with the target-date fund itself. In an already conservative fund, these fees can hurt overall returns. If you earn 6% on your investments but the fees add up to 1%, you’re only taking home 5%.
Receive email updates about best performers, news, CE accredited webcasts and more.
Aaron Levitt
|
With broker-dealers and agents now acting in favor of clients, investors may be...
Justin Kuepper
|
Let’s take a look at what sets China apart from other emerging markets,...
News
Iuri Struta
|
Check out the latest edition of mutual fund scorecard.
Find out why $30 trillon is invested in mutual funds.
Download our free report
Find out why $30 trillon is invested in mutual funds.
Download our free report
Find out why $30 trillon is invested in mutual funds.
Mutual Fund Education
Justin Kuepper
|
Let's take a closer look at how ESG investments have outperformed during the...
Mutual Fund Education
Daniel Cross
|
While CITs and mutual funds share many similarities, there are some key differences...
Mutual Fund Education
Sam Bourgi
|
The phrase ‘bear market’ has been thrown around a lot lately, but it...