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Daniel Goldie, co-author of "The Investment Answer, Learn to Manage Your Money & Protect Your Financial Future," says the right key decisions can help stack investment odds in your favor.

Should people invest on their own or seek help from a professional?

As individuals, we face a number of challenges when it comes to investing, not the least of which is our emotions, which often encourage us to buy and sell at the wrong times. We want to buy after markets have risen and confidence feels high, and we feel the urge to sell after things have gone down and pessimism abounds. Although buying high and selling low is not a recipe for success, this is a key source of poor performance. That said, there are some good investment vehicles available for do-it-yourselfers, and I applaud those who can do it well. However, most of us should be realistic and realize that it takes knowledge, time and discipline, applied over a long time, to be successful. That's why I think most individuals should seek help from a pro. Your entire financial future is at stake — and you've only got one chance to get it right.

How should investments be allocated among stocks, bonds and cash?

This decision is the most important one we make. It will determine the majority of our portfolio's subsequent risk and return. We should carefully consider how much risk is appropriate for us, given our financial situation. Those with a higher risk profile can put more money in stocks. Those who need to be more conservative should put less. A good financial adviser can be a big help here. He or she can model historical returns and give you a good idea of how much risk there is in different portfolio options.

Which asset classes within these categories should be included in portfolios?

An asset class is a broad group of similar investment securities that share common risk and return characteristics. Here are some asset classes that investors should consider:

Fixed income • Cash equivalents, high-quality, short-term bonds (government, corporate or municipal).

Equities (stocks) • U.S. large companies, U.S. small companies, value stocks (large and small), international large companies and small companies, international value companies (large and small), emerging-market companies (large, small and value), real estate stocks (U.S. and international).

A well-diversified portfolio could have as many as 10 to 15 asset classes.

Should investments be managed actively or followed with a more passive alternative?

Investors should try to capture as much of the global capital market's rate of return as possible. This return is there for the taking, but most investors fall short and receive much lower returns. This is largely because of active management's high costs, and investors putting money in or pulling it out of the market at the wrong times. Active managers aim to beat the market through a variety of techniques that involve trying to exploit market pricing errors. This activity runs up costs, such as management fees, trading costs and taxes. A more sensible approach is passive investing, which tries to deliver market-like returns through the use of broadly diversified index funds, exchange traded funds or similar vehicles. Most investors don't realize that they can build a complete global, multi-asset portfolio. You can get exposure to all of the asset classes mentioned above with passively managed funds, and with much lower costs than actively managed funds.

Dawn House

Twitter@DawnHouseTrib Daniel Goldie, author

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