|Many of us like to think we're good money managers, but the truth is, we're just not convinced we should spring for that $185-an-hour financial planner. After all, there was a time in the not too distant past when you could toss money at an Intel and one or two other tech stocks and be fairly confident you'd do well. It was a no-brainer: throw in whatever money you had, and you were pretty much guaranteed a big payoff — if you sold before the bubble burst. |
Let's hope that those of us who got burned have learned the wisdom of the adage about not banking on anything except death and taxes.
But let's say you already have a 401(k) or an IRA, or maybe even both. You know you should be saving even more, but you don't know where to start. You're hesitant, worried that you're damned if you do and damned if you don't. So what do you do if you can't afford a financial planner? Isn't your own self-styled planning better than nothing?
Don't despair. There are many tips out there to help you invest in what experts consider a relatively safe manner. And most of them aren't likely to result in another catastrophe like the tech stock debacle.
To make smart decisions with any extra money, you must invest, Garrett, a former financial planner, says. You should educate yourself about investments as much as possible. There is a ton of information available; the catch, Garrett says, is deciding which investment types are right for you. She recommends starting with websites such as www.kiplinger.com, www.smartmoney.com, and MSN Money Central (www.moneycentral.msn.com) for preliminary research.
Garrett especially likes the tool offered by TIAA-CREF (www.tiaa-cref.org). It helps you determine an effective asset allocation — that is, how your money should be distributed among stocks, bonds, and ready cash, like a money market fund. After you answer 10 or 15 questions on this site, you should get a reasonable idea of what you should own, says Garrett. Another site, the Mutual Fund Education Alliance (www.mfea.com), also offers a wealth of information about mutual funds.
FIRST THINGS FIRST: YOU
My personal fund choice — in addition to a couple of IRAs and 401(k)s — is one that builds capital for the future. This fund even has "capital appreciation" in its title, but you may have other ideas. Paying yourself first is an obvious tool in a financial plan. If you still don't do so, it's never too late to start.
SAVE ANY WAY YOU CAN
If you're not planning to reallocate or rebalance your account from time to time, some companies offer funds that do it for you. Two that come to mind are Fidelity (Freedom Funds) and Vanguard (Life Strategy Funds). These funds automatically rebalance as investors age, becoming more conservative as retirement gets closer.
TAKE ADVANTAGE OF FREE ADVICE
During a recent call with another advisor at the same brokerage, I learned that anyone can get this type of advice; you don't even need a minimum amount in a Schwab IRA. This second advisor said that hedoes nothing more than any wise investor does: before discussing the fund with a caller, he looks at the rating services performance over a number of years to determine whether it seems like a good bet. Even if he's only doing what I'm doing myself, it's comforting to know that someone can lend support to my decisions or suggest funds I hadn't considered previously.
The TIAA-CREF website also offers a wealth of information about saving for retirement, including a presentation titled "The Tax Smart Way to Save For Retirement." Not long ago, Irene Levine, a research scientist with the Research Foundation for Mental Hygiene in New York, felt she needed investments that were less risky, and the TIAA-CREF advisor she approached agreed. Levine, who will soon be approaching retirement, currently has her 403(b) account (a nonprofit plan similar to 401(k)), and has called for help in determining the type of funds she should have in her account's stocks, bonds, or real estate that will best suit her goals
If you really feel you can't afford a financial planner, consider some of the alternative options. Educate yourself, learn what investing style you're comfortable with, and take that first steps toward being your own money manager.
Pat Olsen is a New Jersey writer whose work has appeared in The New York Times, On Wall Street, Business Traveler, and other publications.
Current and past articles from Working Money, The Investors' Magazine, can be found at Working-Money.com.