Investments – Putting it All Together

We’ve talked about why you should invest, where you can invest to make the most of tax advantages, and what you can invest in. Now we’re wrapping up our Investment Basics series by putting it all together. The total of all of your investments, across all of your investment accounts is called your “portfolio.” It’s important to understand that you need to consider everything you’re invested in together. A common problem is to have investments spread out across several accounts (different 401(k)s after a job change, for example) and never get a clear picture of your total portfolio – BrightDime’s allocation tools can help you look at your total portfolio in one place.

The mix of investments in your portfolio is called your “asset allocation” – it just means the specifics of what you’re invested in. It can be broad and high level (60% stocks, 40% bonds) or more specific down to specific investments (5% Apple stock, 3% S&P 500 Index Fund, etc).

Your asset allocation is specific to you; your risk tolerance and risk capacity (how much risk you can handle when the market goes up and down) and your investing goals (how soon you plan on using the money, for example.)

There are lots of ways to get help with investing (with asset allocation especially). An active manager is the most expensive and hands-on. They’ll meet with you and put together an investment plan specific to you. A less expensive option that’s become more popular recently is a “robo-advisor”- Betterment and Wealthfront are two of the best known. They’ll walk you through a survey to determine which of their automated portfolios best fits you. That portfolio is then managed automatically by their software, which keeps costs down. A third option that’s popular in retirement accounts specifically is target date funds. You choose a fund with a target retirement date that matches your own and the allocation is adjusted automatically over time to reduce risk as you approach retirement, and therefore your need for the invested money.

This only scratches the surface of investment management options – you can chat with a BrightDime coach if you’ve got specific questions about how investing works!