Questions & Answers about Retiring Strategy

Please not we are not financial advisors, consult a professional investment advisor before making any decisions. Our site is for general investment information only. When browsing on RetiringStrategy.com, you acknowledge that you use the information we provide at your own risk. Please, always do you own analysis and consult a professional before investing.

Does RetiringStrategy.com have any affiliations with mutual fund organizations or brokerage firms?

One of the prominent features of this site is impartiality. Having said that, you should know RetiringStrategy can get compensated by mutual fund organizations or brokerage firms.

Do you ever suggest mutual funds that have sales loads?

We do not. Why would you pay the usual front-end loads ranging from 4.50% up to 5.75%? There are 100% no-load funds that give you better performance without sales charges. If you’re not sure how 100% no-load funds compare to load funds, then you need to study their advantages. Go to the advantage of no-load mutual funds to do so.

Investors need to know that most of the primary full-service financial institutions have made announcements about providing no-load funds with no 12b-1 annual distribution fees or charging commissions.

This might sound like great news, but is it really? Such firms compensate planners, advisors, and salesmen by charging members as much as 2.0% of the assets, and they will do this annually.

Such charges often get listed as what is called “asset-based” fees. If you look across a long-term horizon in regards to the time involved, and if you assume a total expense ratio that is either average or even less than average, it can actually be better to pay the 5.75% of a front-end load instead of paying 1.5% of your annual assets.

Having said that, the optimal plan to be cost-effective is just avoiding both asset-based fees and loads completely. If you’re not familiar with asset-based fees, then you might want to read our guide Asset-Based Fees: are they worth it?.

Is there much variety in the suggestions from RetiringStrategy.com about both general strategies and specific recommendations for mutual funds?

Yes. For instance, imagine a scenario where two different individuals both choose “total portfolio” and also have similar choices for their total return objectives, long-term horizon, investment stage, and portfolio amount, but they only differ in terms of risk tolerance. One is conservative, while the other is aggressive.

The 100% no-load fund suggestions and recommendations for fund categories that each of these investors would get are going to be quite distinct, even when risk tolerance is the only real distinguishing factor between them.

How is risk tolerance applied in your recommendations and strategies?

RetiringStrategy.com handles risk tolerance mostly as an adjustment to fund categories. This starts with the preliminary allocation of assets based on the questionnaire criteria.

After that, various fund categories and their corresponding allocation percentages are ascertained for what correlates with the desired tolerance for risk along with other criteria and objectives in the questionnaire.

The final result is a meticulous asset allocation involving fund categories filled with suggestions for highly-rated no-load mutual funds. This particular method permits more customization compared to creating an investment plan with more traditional asset allocations. The more you know about risk in a mutual fund strategy, the better you can understand all of this.

Does asset allocation really matter in a portfolio?

Totally! Quite a few industry experts think that proper asset allocation actually matters more for portfolio performance than the specific mutual funds you choose. The properly detailed allocation of assets in the right fund categories is crucial to the success of a mutual fund portfolio.

It creates proper diversification while also preventing the issues that happen with choosing funds without care. Anything you learn about common mistakes with mutual fund investing can help you avoid them on your own.

Can I match income-focused return objectives with aggressive risk tolerance?

Yes, you can. Your preferred level of risk tolerance helps you customize a strategy with the right mutual fund categories. For instance, an income-oriented objective with aggressive risk tolerance might have more total return potential, but also more volatility, than conservative or moderate objectives also focused on income.

The differences would be in the fund categories involved with your asset allocations.

Are there any special considerations if I’m in retirement?

Investors who are in the retirement phase face some fundamental changes, and the biggest of them is shifting from accumulating assets to withdrawing them.

Investors have to reassess their income needs, emergency funds, and tolerance for risk in order to figure out withdrawal rates likely to last their lifetime. For an in-depth article on this subject, go to handling portfolio changes when in retirement.

When I pick a dollar amount to list, should that represent what I’m able to invest right now or what I’m able to invest over a longer period of time?

You can pick either method for determining your overall amount of investment. List your available lump sum if you have one. If you’re able to estimate how much you could invest over the next several years, then list your estimated amount in total. You can also combine the two methods.

You should note that there are automatic monthly plans available for every mutual fund we recommend. Those details are covered in every fund application that you get.

What’s the best number of funds that I should own?

There isn’t an ideal number that applies to everyone. That’s because everyone’s own scenarios are unique. Generally speaking, how much money you have in your portfolio should determine how many funds. More funds can increase diversification when portfolio assets go up.

Having said that, a portfolio that is diversified effectively won’t have any funds duplicating one another because of overlapping or similar objectives. How many funds you should own is a great question to study further.

Even more crucial than the number of funds you own is the caliber of your overall investment plan, and the next question covers that in more detail.

What factors are essential to the success of a mutual fund portfolio?

Your investment strategy needs to be well-defined. A clear focus is paramount. A premiere plan will have two facets to it:

1. A proper allocation strategy that represents your risk investment stage, the size of your portfolio, the return objectives you have stated, your time horizon, and your tolerance for risk
2. Mutual funds that are highly ranked and rated and suit your chosen strategy well

Other essential factors include discipline and compounding. For instance, if you happen to be accumulating assets, then you should compound capital gain distributions and income by reinvesting them automatically.

When you compound over any stretch of time, you’re going to increase your assets faster than if you didn’t reinvest your distributions.

Lastly, discipline lets you stick to your investment plan by letting compounding and time both work in your favor. It’s crucial that you periodically rebalance your portfolio as a component of your enduring investment discipline.

Should I stick to my chosen investment plan even when market conditions aren’t favorable?

Absolutely, assuming you haven’t changed your objectives. Having said that, when there are substantial changes to your stage of investment, risk tolerance, return objectives, or specific time horizon, then your current strategy for asset allocation needs to reflect your updated preferences and objectives.

For instance, should you choose to alter your tolerance for risk from an aggressive level to a moderate one, then your strategy for asset allocation will obviously be different. In fact, a lot of your fund categories may change, even when your only real objective change was risk tolerance.

Your top priority should always be effective investment planning. On at least an annual basis, you should assess your comprehensive investment plan to ascertain:

1. If substantial changes have happened in the aforementioned objectives
2. If substantial investment additions are going to occur that might dictate additional portfolio diversification

If I’m not satisfied with the actual performance, should I consider changing funds?

It honestly depends on whether or not serious changes have happened in regards to your target objectives, whether the designated time horizon is enough to judge fund performance fairly, or whether or not the particular funds are a good fit for your chosen strategy. There are guidelines available for when you should change funds or not.

Is it better to deal directly with any mutual fund organizations? Or should I acquire my no-load funds through a discount broker?

It is totally your choice. There are investors who like how convenient it is to get a single consolidated statement for every one of their funds from a discount broker. Quite a few of them provide one-stop shopping and convenience with no 12b-1 fees or sales fees for their no-load funds.

Do note how this differs from any full-service brokerages that charge a yearly “asset-based” advisor fee for their no-load funds.

On the other hand, they don’t represent every mutual fund family. If you would like to get no-load funds that aren’t represented, then a broker is usually going to charge fees for every fund transaction.

These fees usually range from 0.4% up to 0.7%, and they’re subject to minimum charges ranging from $30 to $50 for each fund transaction.

Take note of how transaction fees on many no-load funds might be imposed by the brokers should you choose to sell those funds in the first six months after. Every major fund family has a brokerage service, and they will give freedom from transaction fees for most of their funds.

A handful provide low, flat fees of just $35 for each fund transaction. No matter what kind of broker you wind up using, always insist on getting full disclosure for all fees and restrictions on transactions.

Alternatively, lots of investors design spreadsheets of their own for asset allocation charging and consolidating their portfolio statements. Lots of online websites and mobile application now provide reliable own portfolio tracking, and it can be as advanced or basic as you want.