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Is Investment Management

For most people who invest through 401k accounts at work, investment management takes the form of mutual funds. Behind any active mutual fund there is a lead investment manager and, often, a team of support managers. They pick the stocks or bonds that make up the fund. Balancing risk Since the combination of funds is crucial, many 401k plans try to offer their members a “set it and forget it” option for investment management, often in the form of target-date funds or pre-cut portfolios. In the latter, the measure of stock vs. bond funds is designed to match your age and ability to accept risk. The idea is to completely automate the investment management process. Each underlying investment fund has its own fees, in order to pay the managers doing the trading. Target-date funds have costs, too. Fund fees cost you real money, and that affects your performance dramatically over time. Pension plan ideal The ideal investment management plan would combine very low costs with an appropriate portfolio mix for the age and time horizon of each investor. Increasingly, the major brokerages offer exchange-traded funds (ETFs) with minimal fees and, often, no commission charges. If you don’t have access to a pension manager but do have the ability to pick your own investments, then the challenge is building that mix of investment types yourself while keeping costs low.

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