BY MEG GREEN
Q: I have a managed account with Fidelity Investments where I keep a mix of stocks and bonds. I'm charged about 1 percent per year for the privilege of them managing this account. My question is how do I know that I'm getting good value? Would I be better off investing in an index fund or one of the number of funds available from companies such as Vanguard that invest in a mix of equities/bonds with a set end time, such as 2015, 2020 and so on? Do managed funds really give you a better return, or are they primarily for hand holding purposes? How can I compare?
A: When you say Fidelity is managing your funds for 1 percent, I'm curious as to what you're getting for that? How do they manage your stocks and bonds? Do they use their mutual funds in the mix? Do you have a personal advisor? Who makes the decisions for you?
Fidelity is an investment house, and although they are respected in the industry and do a fine job managing billions of dollars, they're an institution, not a personal investment manager.
My philosophy is that as long as you're paying for investment advice, I believe you should have an independent person watching out for you. Someone who's on your side. They need to know (and care) about your wishes, needs and risk tolerance. They should be calling when necessary to make tweaks or switches. If you trusted them, they would be the one to help you compare your particular portfolio to benchmarks that are appropriate, and help make the necessary changes. Would Fidelity or any other money manager fire themselves if they weren't doing a good job? I think not.
To answer your questions about which does better, funds or managed money, I would have to say it absolutely depends on which funds and which money managers. As to hand holding, trust me when I say most good investors need reassurance whether their money is with a manager, target funds, index funds or mutual funds. If there's no one around to help when things get rough, investors tend to sell low and buy high, a curse on the portfolio's ability to succeed.
So, first step would be to contact the person who is in charge of your account and ask all the appropriate questions, such as what are you doing for me for my 1 percent? Are there any other charges, like commissions? Fund fees? Am I diversified? How am I doing?
Find out if there's someone who you feel comfortable with who can help answer your questions and give you guidance. If not, I'd suggest you search for someone else to help manage your money. I do believe going it alone and picking indexes to avoid a fee is treacherous in these rocky times. But you should definitely expect the person or firm you choose to not just pay attention to your investments, but to also pay attention to you. After all, you do come attached.
Meg Green is a certified financial planner. Mail questions to her c/o Sunday Business, The Miami Herald, 1 Herald Plaza, Miami FL 33132, or send an e-mail to ask meg@MiamiHerald.com. Include your full name and city of residence.
From Miami Herald.com
