Investment Ideas for Busy People
Date: July 25, 2016
One of the most convenient byproducts of the growth of the Internet is easy access to financial information. Data that used to be only in the hands of stockbrokers can now be downloaded from the comfort of your own home with just a click of the mouse. But when it comes to investments, facts and figures are only part of the story. Successfully mastering a portfolio of investments can take an enormous amount of time — time that many of today's busy professionals can't spare. Fortunately, a lack of time shouldn’t prevent you from tapping into the profit potential of today's financial marketplace.
Registered Investment Advisors
An easy way to sidestep the time commitment required to choose your own investments is to pass off the heavy lifting to a professional. Registered investment advisors (RIAs) are independent financial professionals who don't work for firms that create their own financial products, like mutual funds. Being independent removes any conflict of interest between RIAs and their clients. RIAs have a legal fiduciary duty to their clients, meaning they must always act in your best interests. Stockbrokers and non-registered investment advisers do not currently have a similar legal responsibility.
An exchange-traded fund (ETF) is an investment you can buy or sell on the open market. ETFs represent ownership in hundreds or even thousands of other investments that you buy with a single purchase. In this way, ETFs act like mutual funds — with their ownership of numerous securities — but they trade like stocks, at a variable share price on a public exchange.
Exchange-traded funds represent simple one-stop shopping for busy investors. Many ETFs track major market indices, such as the Standard & Poor's 500 Index, a collection of the 500 largest companies in America. Investors who lack the time to research individual stocks can buy ETFs that cover nearly any segment of the market, from energy to banks to international corporations.
Target-Date Investment Funds
If you're searching for a "one-and-done" approach to investing, target-date funds could be the solution. If you have an investment target, such as your retirement date, simply select a target fund that matures in that year. The closer the fund is to maturity, the more conservative the allocation becomes. For example, if your target date is 40 years in the future, the fund may have a relatively aggressive allocation; if the target date is only a few years away, the allocation will likely be much heavier in cash and bonds than stocks.
A bond ladder is a simple strategy that takes emotion and guesswork out of the investment equation — and is a big time-saver to boot. To build a bond ladder, you simply buy bonds that mature — or pay off — in each successive year. As the old bonds come due, the money is reinvested at the end of the ladder. For example, if you have bonds that mature in years the 2016 to 2025, when the 2016 bonds mature, you'll reinvest the proceeds in new 2026 bonds, and so on.
Investing in a bond ladder is a limited time commitment — you buy the original bonds and then replace the proceeds once a year. The strategy has the added advantage of consistent investment regardless of emotions or market conditions.
Separately Managed Accounts
One of the simplest ways to cut time from the investment process is to use a private money manager. Managers allocate your funds across a variety of investments according to your objectives, and your money resides in your own personal investment account. Unlike with ETFs, which represent ownership in a single, communal investment pool, the money you give to a private manager resides in a separately managed account belonging only to you.
With this investment strategy, the only time you'll have to spend on research is when you search for a manager. Once you find one that matches your investment style and needs, you can hand over all of the work to the professionals.
To save time on your investments without ceding total control, use filtering programs that rapidly narrow down your options. Most brokerages or investment houses offer tools that allow you to filter out stocks or mutual funds that don't meet your investment objectives. For example, if you only want stock-based ETFs with excellent performance over the previous five years, you can filter out a list on most financial sites nearly instantaneously. Considering there are tens of thousands of stocks and funds available to invest in, these filters eliminate hours of research. Even busy professionals find the time to choose from a more manageable list of options afforded by filters.
An investment club is a collection of like-minded people that share information about investing. In some clubs, money may be contributed and allocated among investments for the good of the group. While participating in a club requires attendance at meetings and offering input — usually monthly — you benefit from the group's collective knowledge, rather than doing all the work yourself.
Sharing ideas with others helps to take you out of the "bubble" that can blind you to outside information when you are choosing your investments on your own. Working with a club also keeps you in the game rather than handing over all the decisions to an outsider like a private money manager or RIA.
Half of the battle in successful investing is simply ensuring you're in the game. The widespread availability of automatic transfers works by removing the need for action by the investor. Once you've established a link between your bank account and your investment account, you can set up quarterly, monthly, weekly or even daily transfers to keep your investment plan on track.
Regular investing is not only convenient, but also prudent. By automatically scheduling money transfers to your investment account, you remove the emotional component from the investing equation. For example, it is sometimes difficult to buy stock when the market is down sharply; automatic transfers look past this fear toward the long-term goals of your investment plan.