Jorgen Vik: Your investments shouldn't be all for one, one for all
All-in-one investment funds can vmake for convenient investing.
Up to a point.
All-in-one funds have become popular with retirement plans. For example, if offered, one could put all contributions in a retirement account in a 2040 — fund where the year, 2040, is an estimate for when the investor intends to retire.
Such a broadly diversified fund would gradually hold less stocks and more bonds as 2040 approaches.
Setting aside which stock-bond balance may be best, it is fair to say that such funds are a quick way to broadly diversify one’s retirement investments.
However, a larger problem may arise when 2040 is here and the person retires and wishes to draw periodically from the fund.
Let’s say that this fund, in 16 years, holds half in stocks and half in bonds.
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If you at that point draw regularly from this fund to spend, you will be selling whatever investments are in the fund each time you draw.
So, in this case, you’d be selling half stocks and half bonds.
Sometimes, stocks in particular drop significantly.
In such an event a draw would mean you’d be selling stocks low.
That is when you wish you had a separate stock fund and a separate, more stable fixed income fund.
Then, when your stock fund dropped a lot, you could leave it alone and sell from your fixed income fund and give your stock fund a chance to recover before you touch it.
If you are drawing from an all-in-one investment fund, I suggest you consider separating the investment into separate funds.
If you don’t know how to do this or how much to put in different type investments, you may want to consider asking a financial advisor for help.
Good luck.
Jorgen Vik is a certified financial planner and partner with SKV Group LLC. Investment products and services are offered through Wells Fargo Advisors Financial Network. SKV Group is a separate entity from WFAFN.