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Where is Your Money Invested?

Jun 1, 2022 | Research

When you make the decision to invest for retirement, education, or to secure your financial future, the first step is often to meet with a financial advisor. At that meeting, you may talk about your risk tolerance, goals, and projected returns. Often, you commit to an investment strategy and leave the meeting feeling like you’re on the right track.

But later, you realize that you have no idea which investments you hold. While you may have visions of being the next Warren Buffett, playing the stock market like a violin and betting on the next Apple or Facebook, often, the reality is you’ve bought into a mutual fund made up of hundreds or even thousands of investments. It’s also possible that you’ve invested in structured products promising easy (but opaque) access to derivatives. At the end you realize it’s difficult to answer a fundamental question: where is your money invested?

Does it matter where your money is invested?

You could argue that the investments you hold don’t matter that much. As long as your money is making money, who cares, right?

But in our experience, many investors want to know their money is supporting a good business, a good sector, a good idea, or a good cause. They want to be active and conscious investors, making personalized investments.

Why is it so hard to know where your money is invested?

Put simply, investments aren’t always straightforward, and some investing products are very complicated. Mutual funds, Unit Investment Trusts [UITs], and structured products can be comprised of stocks, bonds, or a multitude of alternative investments. With such a wide variety of underlying holdings in these types of investments, it can be difficult to determine which companies or assets you are actually buying when you invest.

Understanding the Underlying Holdings in Mutual Funds

Consider your average mutual fund. It is comprised of hundreds or even thousands of investments and getting to the bottom of what’s included is far from straightforward. For starters, a search of Yahoo Finance can point you to the top holdings in a given mutual fund. For more detailed information, you can check the website of the fund manager. If that doesn’t provide enough information, look to the fund’s prospectus. This document is often very lengthy, but it will outline the details of the fund. Uncovering the individual holdings in a mutual fund can be a difficult and time-consuming process, and that’s one reason why many investors seek the advice of an experienced financial professional.

Understanding the Underlying Holdings in Structured Products

Some investment vehicles make it even more complex to determine their makeup. Consider structured products, which were designed to offer customized access to hard-to-reach asset classes. Simply defining them requires a page-long explanation, so you can only imagine how hard it is for the average investor to understand the underlying investments. For this reason, many of the investors in these products have no idea where their money is actually invested.

Understanding the Underlying Holdings in UITs

Unit investment trusts (or UITs) pose a similar problem: They offer individuals the opportunity to invest in a diversified portfolio with a low initial investment requirement – which sounds appealing. However, that portfolio is often very difficult to unpack, making it cumbersome to understand the fund’s underlying holdings. As with structured products, investors in UITs may find it difficult to understand where their money is invested.

As a rule of thumb, the worse a product is for the investor, the more difficult it is to understand. So, steer clear of the complexities while exploring your options.

How do I make sure my money is invested the way that I want?

The first step in ensuring that your money is invested according to your preferences is to find an experienced wealth manager, who is a fiduciary, that can build a custom portfolio. You may think that this type of financial management is only for the ultra-rich, but with Investing Gameplan™ from DreamWork Financial Group, You Don’t Have to be Wealthy to Have Wealth Management®.

Investing Gameplan™ is a unique investing program that allows all investors to access customized portfolios comprised of low-cost ETFs and individual stocks. Our fiduciary advisors partner with clients to create a personalized portfolio that agrees with their risk tolerance, goals, and investing preferences.

Transparency is Key in Investing

When it comes to your investments, you should know where your money goes. That is true for both the underlying investments in your portfolio and the fees you pay to your advisor. With our intuitive online portal, you always know where your money is invested. In addition, our compensation structure is straightforward and clearly communicated to all our clients.

At other firms, you often find hidden fees and commissions that can reduce your investment returns. However, as a Fee-Only RIA, the advisors at DreamWork never make money from sales commissions. Instead, we are paid a percentage of assets under management. This eliminates the conflict of interest inherent with commission-based fee structures and ensures that we make more money when you make more money.

Get Started with Investing Gameplan™ By DreamWork Financial Group

If you want clarity on your investments, Investing Gameplan™ from DreamWork Financial Group could be right for you. This innovative wealth management program allows all investors, regardless of their account balance, to access custom portfolios and fiduciary advice. That’s why we say, You Don’t Have to Be Wealthy to Have Wealth Management®. To get started, contact us today.