Customized to your plans, timeline, risk tolerance, and more, managed account services are another tool you can use to help meet your financial goals.
Long gone are the days of one-size-fits-all solutions. Today, you can get personalized recommendations for your shoe colors, your news feeds, your shopping suggestions—and your investments, thanks to options like a managed account service. Not sure how this it works? Here are some insights.
When you think of a retirement account, you probably jump to a 401(k) or an individual retirement account (IRA). With both of those, you typically have several choices to invest your money. A managed account service is a different way for you to invest your money. Unlike the choices you make with a 401(k) and an IRA, a managed account service offers investment personalization.
Here's how it works: Normally in a 401(k) or an IRA, you choose one or more investment options for your savings. Those options may be structured with broad goals or timelines that may match yours. Lots of people also may invest in that option; they probably all chose it for some of the same reasons you did. The takeaway: You’re not the only person investing in that option.
That’s where a managed account service can differ: An investing system, created with inputs from a registered investment advisor and investing strategies, uses your information to develop an investing plan and a portfolio of investment options. It can be more personal and aligns with your risk tolerance, timeline, other savings, and goals. You may be the only person investing in just that way with your managed account service.
Your financial goals are personal, and the reasons you might want to use a managed account service are, too. For example, you may be super focused on meeting a particular financial goal and feel like individual attention is the only way to reach it. A managed account service can allow you to align your portfolio of investments with your unique circumstances.
Your information and goals provide the background for the managed account service to create the portfolio of investments. As the markets change and you provide any more details or updates, the portfolio can change, too, to adapt. The more details you provide about your financial picture and goals—both today and in the future—the more customized the guidance from your managed account service.
Most investment accounts, from 401(k)s to IRAs, have investment fees, and the same is true for a managed account service. Fees will vary, and sometimes are tied to the account’s asset size (though not typically to the number of transactions).
When it’s created, a mutual fund has a stated objective; for example, it may want to “achieve long-term growth.” When you invest, you choose the related investments and hold shares of applicable funds. Each mutual fund is managed to try to reach its goal as closely as it can, but the goal is for the fund, not necessarily for you. You must also choose your own mix of funds, and rebalance and update them over time.
A managed account service, on the other hand, uses your stated objective as its goal, and it builds and manages a portfolio of investment options based on that information. The managed account service also rebalances and makes allocation updates to your portfolio over time.
What's next?
The managed account service option at Principal®, Target My Retirement, may be available with your plan. To review your investment options and services, log in to your account.
