![]() When we look at the data on target-date funds, we see a really pleasing pattern where investors tend to make their contributions and then just kind of sit tight. So, if you're investing in the context of a 401(k), certainly you'll typically find one of these target-date lineups on offer, but you could also invest in a target-date fund inside of an IRA. ![]() ![]() They're certainly not all good, but I would say that a good target-date vehicle can be a tremendous aid to people who want to simplify their investment plans. I'm a big believer in all-in-one type funds. What are some of the key investment types the hands-off investor should be considering?īenz: Right. You probably will just let inertia take over and let those contributions continue to flow in, which it turns out is a pretty great way to invest.ĭziubinski: Let's talk a little bit about things at the portfolio level. And the advantage is, in weak markets, you won't have that appetite to pull back. And the good news is, if you're contributing to an IRA or a taxable brokerage account or a health savings account, you'll be able to turn on that automatic feature where you can have your contributions go directly into the account straight out of your bank account. I would say do that with as many accounts that you're able to. We all know to the extent that we've contributed to a 401(k) plan, for example, we know how frictionless it is to make our contributions to keep that money coming in each paycheck. Focus on creating something that's really quite streamlined and that in turn I think will lend itself well to creating a streamlined investment plan if you have that streamlined investment policy.ĭziubinski: For people who are still saving, you suggest that the next step is to automate your contributions, right?īenz: Absolutely. And all of that should be outlined in your investment policy statement. This might be an investment policy statement, for example, where you're spelling out how much you're contributing if you're still in the accumulation phase or what your withdrawal rate is if you're in the withdrawal phase, what your general asset-allocation parameters will be, what you're looking for in your investments, and importantly, you'll also spell out how often you will attend to your plan. What are the steps you should be taking?īenz: The key step, in my view, is to have kind of a vision statement for your plan. I think this becomes particularly important later in life.ĭziubinski: Let's talk a little bit about how to get there, how to get to that hands-off portfolio. I would say to the extent that you can build a portfolio that is streamlined and hands-off, it means that you're less likely to encounter a stumble if for whatever reason you are unable to manage your portfolio well on your own. And then I would also say that even though I know plenty of older adults, plenty of retirees who really like to tinker with their portfolios and like to watch their investments on an ongoing basis, we know that cognitive decline is a fact of life for some older adults. My view is that the less you're looking at your balance, the less you're doing that ongoing tinkering, the less likely it is that you'll fall prey to some of those behavioral traps. ![]() Tell us a little bit about why.īenz: Well, for one thing, we hear about these behavioral biases that investors fall prey to, where perhaps they're excessively confident when the market has been robust as it's been, or in weak markets, they might become excessively loss-averse. Great to be here.ĭziubinski: It does seem like heavy trading is a little bit back in style today, but you've for a long time been an advocate for a more hands-off approach to investing. Thank you for being here today.Ĭhristine Benz: Hi, Susan. ![]() Christine is Morningstar's director of personal finance. Joining me today to discuss the virtues of hands-off investing and to share some ideas for how to build one of those portfolios is Christine Benz. They'd like to build a portfolio that could essentially run itself. While day trading has made a comeback, many investors want just the opposite. Susan Dziubinski: Hi, I'm Susan Dziubinski for Morningstar. ![]()
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