Investing Doesn't Have to be Complicated
Transforming yourself into a savvy investor is all about understanding your own needs and goals, teaching yourself to speak a bit of the market’s language, and—when needed—not hesitating to ask for guidance from a seasoned and knowledgeable advisor.
The following primer can help.
Stocks, Bonds, Cash
Stocks—which carry the most risk, but also offer the higher potential for growth—represent ownership in a company. Bonds are debt issued by companies and governmental agencies. Cash is often represented by money market funds or similar accounts. You can invest in these areas via mutual funds and ETFs as well.
Developing a solid, realistic understanding of risk and potential return will be key as you determine how much of each type of investment to hold in your portfolio.
Index funds are mutual funds or ETFs (exchange traded funds) that mimic the performance of a specific stock market index—the S&P 500, for example. Index funds passively track a given index closely and are usually low cost. Mutual funds are pools of investments—stocks, bonds, etc.—that allow modest investors to build a wider portfolio than would be possible investing in individual stocks alone. ETFs resemble mutual funds, but are traded on the stock exchange like stocks.
Professionally managed accounts can be based on a target date—say, when you plan to retire—or on risk tolerance levels—e.g. conservative, moderate or aggressive.
Review and adjust
To ensure your portfolio is always calibrated to both current market conditions and your evolving goals it is important to review your asset allocation at least annually and adjust your holdings as necessary.
Timing the market and performance chasing
A sophisticated approach to investing doesn’t have to be overly complicated. If a given technique to investing requires intricate machinations or delicate prognostications—say, attempting to accurately time stock market fluctuations or chasing performance—chances are you’d be better off simply picking a diversified collection of stocks, bonds and cash and adjusting the mix periodically.
The right mix for me
What’s your ideal investing strategy? The answer will depend on your unique circumstances and resources, setting an asset allocation and time commitment that is right for you.
Should each account be viewed separately?
View all investments across all of your accounts—from your 401(k) and IRA to taxable investments to any spouse accounts—as elements of a complete, holistic portfolio. Many personal finance software programs and personal finance sites offer easy-to-use tools to help with this.
Can professional advice help?
Now that you've got the portfolio building basics down, it's worth remembering that a qualified investment professional can often provide an enlightening fresh perspective on your strategy as well as priceless advice on the latest financial products and market regulations.
Where can I find a qualified financial professional?
Contact your Fifth Third Advisor or stop in at your local Fifth Third branch location to get started.