3 Options to Invest Outside of your 401K

Uncategorized Mar 08, 2017

Are you considering investing outside of your employer’s 401K? Or maybe you don’t have a 401K as an option in the first place?

Here are three options to consider when deciding which route is best for you.   

1. Build It Yourself.
If you are looking for the lowest cost way to invest, this is it. This option is great for advanced investors who require little to zero handholding during the construction and execution process. For those ready to build a portfolio on their own, consider opening a brokerage account directly at a low cost fund company such as Vanguard or a low fee brokerage house such as Charles Schwab.

Look for Index Funds and ETF’s to avoid fees associated with Actively Managed Mutual Funds. Under this option, fees are typically lowest. When researching funds, check out their fee structure to see what funds best meet your cost, risk, diversification a objectives.   

2. Use an Online Robo-Advisor

An online robo-advisor can be a great option for those in the beginning stages of building wealth. A robo-advisor is a low cost portfolio builder that lives entirely online. There are no customer service representatives or phone lines to call, however, after answering a detailed questionnaire online, the robo-advisor is able to build a portfolio that matches your risk tolerance, time horizon and asset allocation. Fee’s associated with online robo-advisors run around 0.25% of total assets under management, which is a highly competitive rate given industry standards.

Consider wealthfront.com, betterment.com or Wealth Simple as options.


3. Pay a Professional

The third and final option is to pay a professional. This is the most costly route, however,  it is an option to consider for those with complex financial situations. When choosing an investment professional, there are many prudent questions to ask.


1. What are your qualifications?

2. What are your fees?

3. Will I primarily work with your or your assistant?

4. How often will we meet?

5. What should I expect from this process?

This is a very important decision to make, so if you don’t feel right about a person, don’t hire them. Take your time to interview and choose the best person who can help you  achieve your financial goals.  At best, choose a CERTIFIED FINANCIAL PLANNERTM who charges reasonable fees (industry standards are 1% of assets under management in advisory fees), who will work directly with you, and who plans to meet at least twice a year in person and is open to communication on a regular basis.

In addition, ask about their process for building financial plans, what other fees they may get paid (for offering other financial or insurance products), and whether they have fiduciary responsibility.  A fiduciary duty is the highest standard of care at either equity or law. A fiduciary is legally obligated: such that there must be no conflict of duty between fiduciary and principal, and the fiduciary must not profit from his position as a fiduciary (unless the principal consents).

Even when placing your money under management with a professional, you are responsible for your financial outcomes. That means you need to stay involved. Choosing to work with a planner doesn’t mean, “set it and forget it.” It means choosing a partner to help educate you, keep you up to date, and help you make informed decisions about investing based on your purpose, your life by design, and the wealth goals you set.