Managing your portfolio | Fidelity Investments (2024)

Building and managing an investment portfolio is no small job. It involves a variety of tasks, all of which are intended to align your investments to your long-term goals and help ensure that you remain on track to meet them. This can include:

• Determining an appropriate asset allocation for your portfolio, based on an assessment of your current financial situation, your tolerance for risk, and the time horizon of your goals.
• Diversifying your investments across multiple asset classes to help provide a buffer against market volatility or unexpected shifts in the broader economic climate.
• Rebalancing your investments on a regular basis, say, every 6 months or so, to bring your portfolio back closer to the target asset allocation in the event that gains or losses in various asset classes cause it to drift.
• Researching and selecting investments to help determine whether they are suitable for your needs and complementary to the other securities in your portfolio.
• Monitoring the stock and bond markets, as well as the global economy, to keep an eye out for potential opportunities or risks that might arise, in order to better prepare your portfolio.
• Harvesting tax losses and locating particular types of securities into the appropriate accounts based on their tax treatment to help keep more of your money in your pocket so you may be able to benefit from long-term, compounding growth.

Do you want to do it yourself?

An independent investor who has a well-thought-out plan in place may be able to handle many of these tasks on their own as they arise. And if you're the type of person who enjoys managing your own finances and feels confident in your investment knowledge and capabilities, you may be happy filling the role of investment manager for your portfolio.

However, not every investor has the time or the inclination to handle all of these tasks, all the time. For some, it may be challenging to keep tabs on everything going on in the markets and in their portfolio while simultaneously juggling a family, a career—a life.

And even if they can find the time, some investors would prefer to spend that time doing something else. Or they may simply desire a second set of eyes to help them make sure everything is in order and on track.

These aren't cut and dried categories. At various times, you might feel like you fit one of these attitudes or even some combination of them. What's important is to find the approach (or approaches) that suit you and your needs and make you feel confident that your portfolio is in good hands—whether those hands belong to you or a professional investment manager.

What are your options?

For do-it-yourselfers, the proposition is simple: Complete control, with a fair amount of responsibility. The various tasks described above would fall on your shoulders, and it would be up to you to ensure they are carried out in a timely, informed manner.

There are, however, other options that can relieve you of some (or most) of these responsibilities, should you prefer it.

"The comparison I like to use is building a house," says Matt Bullard, regional vice president for managed solutions at Fidelity Investments. "You could do it yourself—draw up the blueprints, lay the foundation, and put up the walls, assuming you have time to do it all and the right set of skills. Or you could act as a supervisor, hiring and managing subcontractors that are experts in their individual field, who are taking care of the day-to-day business of housebuilding using your plans as a guide. Or, finally, you could hire a general contractor to take care of everything based on their understanding of your needs and goals. The path you choose depends on how close you want to be to the work and how confident you are in your ability to manage your investments."

Hands on, with some professional help

There are many options for investors who wish to retain some control over core portfolio management responsibilities, such as determining their overall asset allocation, diversification within asset classes, and regular rebalancing. One such option is a separately managed account (SMA).

An SMA is similar to a mutual fund or ETF in that it is a basket of individual securities managed by professional asset managers. One area where it differs is that you own the underlying securities directly and have a say in how the basket is composed. Investors can work with their advisor to choose the SMA that fits their particular needs and objectives.

The professional asset managers oversee the management of this specific account based on an investment objective that you determine (e.g., growth from large-cap stocks or income from municipal bonds). The rest of your portfolio, however, is your responsibility.

For investors who may be wary of managing a large, complex portfolio or are perhaps less confident in their abilities when it comes to investing in a particular asset class, an SMA may be a good addition to their strategy, as it may allow them to address a particular concern without ceding total control of their overall portfolio.

SMAs may also provide tax benefits to an investor, as holding stocks directly can help enable strategic tax management techniques, such as tax-loss harvesting.¹ Owning an SMA in a taxable account can also help investors avoid the surprise capital gains taxes that may come with holding a mutual fund—such taxes are only owed when the individual securities in the SMA are sold for a profit. Furthermore, because the investor owns the securities in an SMA directly, they may have the option to gift those appreciated securities to charity without selling them, allowing them to deduct the fair market value of the gifted security from their taxes without having to pay taxes on the gain.

Full professional management

If you've determined that managing your investments isn't something you enjoy or isn't necessarily how you want to spend your time, it may be worth considering full professional management of your accounts. In this scenario, a professional asset manager would take responsibility for all the important portfolio management tasks for your investments, using their understanding of your goals, concerns, and needs as a guide for their decision-making.

The right approach is the one that works for you

Whether you choose to go it alone, opt for professional management, or decide on some combination of the two, what matters is that you find an approach to investment management that helps give you confidence in your ability to fulfill your long-term investment and lifestyle goals.