It’s the ultimate battle between “do-it-yourself” and “do-it-for-me.” Which side do you fall on?
“For an investor who has the time and knowledge base, a self-directed 401 is the option that offers the lowest fees and the most flexibility,” says Michael Fischer, Director, Wealth Advisor at Round Table Wealth Management in New York City. “You can invest directly in the funds or asset classes you’d like and build your portfolio to suit your own needs.”
Of course, the downside to such a large range of options is that you’re getting into the investment management business, if only for your own account. That can mean learning more than you’ve ever learned in the past. This may save you cost in terms of dollars, but it adds cost in terms of time. But the rewards of this investment of time and energy can produce a level of satisfaction not possible if you were to just pick from the standard 401 menu. “An investor with the time and skill can personalize their asset allocation in a way that expresses their own risk preferences and market views instead of accepting theinvestment manager’s approach,” says Bill Ryan, Partner at NEPC, Head of Defined Contribution Solutions in Chicago.
“Self-directed accounts require the investor to make their own decision about what to buy and sell,” says Stivers. “Self-directed accounts rely on the investor to monitor the account and make necessary changes as they get closer to retirement.”
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