The TD Ameritrade Retirement Calculator, IRA Selection Tool, and Portfolio X-Ray are among the tools self-directed investors can use to help with long-term investment planning
Investors needing additional help might consider a financial advisor or automated (“robo”) investment guidance
Did you take a shop class when you were in school—maybe you made a shelf or a lamp? That experience might have been your first taste of whether you’re a do-it-yourself type or an off-the-shelf type. And maybe that helped you decide whether your first furniture would come with 200 pieces and an instruction booklet, or in one piece from a delivery truck.
You might draw a similar parallel to your financial life. When building a long-term investment portfolio, many investors choose to do it themselves, using all the latest tools to help not only with the building but also with the monitoring and potential reshuffling. Other investors prefer to get help from a financial pro. And then there’s the hybrid approach, which combines self-directed investing and investment guidance on an as-needed basis.
Not sure which one best describes you? Read on. The good news: no matter which type of investor you are, and wherever you are in your long-term investment journey, the power tools (and resources) are at your disposal, ready to help you figure out goals, asset allocations, and portfolio management techniques.
Tools and Resources for the Do-It-Yourselfer
Retirement Calculator. Many investors start the process of planning a long-term portfolio by using a retirement calculator to help them refine specific goals. Dara Luber, senior manager, retirement at TD Ameritrade, recommended the TD Ameritrade Retirement Calculator as a tool that can help. “To get started, locate the Retirement Calculator on the TD Ameritrade website, launch the tool, and follow the instructions every step of the way,” Luber said.
To get a better grasp on your overall portfolio, you might consider gathering all your long-term assets. This means collecting statements for bank accounts, brokerage accounts, and retirement accounts.
“It can be beneficial to consolidate accounts to make management easier,” Luber pointed out. For example, you may have an old 401(k) from a previous employer, an IRA at the bank, and your current retirement plan from work. You can leave these accounts where they are, possibly consolidate them into your existing retirement plan, or move them all into a single account like a rollover IRA.
IRA Selection Tool. Eligibility for either a traditional or Roth IRA can vary depending on several factors, including your age and income level and to what extent you participate in an employer-sponsored plan. With the IRA Selection Tool, you’re a few short questions away from learning which plan might make the most sense for you.
Portfolio X-Ray. Most financial pros recommend diversifying your portfolio—seeking an allocation of traditional assets such as stocks and fixed income (“bonds”), and perhaps alternative assets such as commodities or real estate. So, for example, you might choose 60% stocks, 30% bonds, and 10% alternatives. And within your target asset class allocations, you might want additional diversification, such as international, or you might want to overweight or underweight certain sectors. It all depends on your goals, risk tolerance and investment time horizon.
To help you pinpoint your allocation, consider using the Portfolio X-Ray tool on the TD Ameritrade website. See figure 1 below.
FIGURE 1: HOW DO YOU LIKE YOUR PIE? The Portfolio X-Ray tool, available on the TD Ameritrade website under the Research & Ideas tab > Mutual Funds > X-Ray can help you determine your current asset allocations and how they align to your chosen benchmark. Want to add in positions from any non-TD Ameritrade accounts, or insert simulated holdings to see how they would impact your portfolio mix? Select Change holdings. The X-Ray tool shows your asset allocation (shown above) as well as your holdings by geographic region and stock sectors, plus other stock and bond data. Image source: tdameritrade.com. For illustrative purposes only.
Once you’ve defined your goals, collected your assets, determined your asset allocation, and diversified your portfolio, you’ve done a lot of the heavy lifting. The next step is managing your portfolio, which involves periodic reviews and potential rebalancing to keep your investments aligned with your goals and risk tolerance.
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Guidance Solutions for Today’s Investor
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After all, your best strategy should start with you.
Building and maintaining a self-directed portfolio works great for many investors, but others who don’t have the time, energy, or acumen to manage all of their own investments might prefer the offerings of a professional money manager. When using a pro, you can still choose your own level of participation. “At a minimum, you’ll likely want to set your own investing goals and risk tolerance levels,” said Keith Denerstein, director of investment products and guidance at TD Ameritrade.
When seeking financial guidance, two common routes are financial advisors and managed portfolio solutions—which might include a bit of automated investing (aka “robo investing”).
Financial Professional. Denerstein pointed out that an investor might choose to work with an advisor on a strategy toward pursuing certain goals, but executing the strategy within a portfolio might be the responsibility of the advisor. “A financial professional can provide convenience by saving an investor the time required to stay in touch with the market and research trades,” he added. An advisor might also help you navigate certain life events or changes to your financial outlook.
Interested in connecting with a financial advisor? The TD Ameritrade AdvisorDirect® referral program may be a good starting point. The service can introduce you to an independent Registered Investment Advisor (RIA).
Managed Portfolios. Sometimes a guidance solution includes a blend of automated investing and human support. For example, managed portfolios available through TD Ameritrade Investment Management, LLC, let you choose the level of guidance that’s right for you—from the fully automated, low-cost, low-minimum-investment Essential Portfolios to the higher-touch Selective Portfolios and Personalized Portfolios offerings.
Bottom Line on Building a Long-Term Investment Portfolio
Long-term investing starts with setting goals, and not just any goals but SMART investment goals. Know what you want to get out of your investments and try to be precise. Next, make sure you allocate your assets according to your risk tolerance and time horizon.
There are numerous resources and tools to help you set goals, determine asset allocation, and manage your portfolio. Finally, risk management and a long-term perspective can help you stay on track. If you choose to do things on your own, make sure you utilize all the tools today’s platforms offer. And should you need a hand, know that access to financial professionals is right at your fingertips.