When you construct a home, you don’t just show up to an empty lot with a toolbox in hand and start building without a blueprint. Instead, you envision the house for months, determine what you want out of every square foot, and outline a detailed plan to put everything together, either by yourself or with the help of a contractor.

Building your investment portfolio is similar. Rather than jump into the market blindly with no forethought (or someone to help), you begin by defining your investment goals, your timeline, and the level of risk you’re willing to take on. Then you use those parameters to build an individualized, smart strategy.

But before you begin, you need to decide what method of investing is right for you. Do you want to DIY? Would you rather pay for a service that makes the trades for you and that allocates the holdings in your portfolio for you? Or are you looking to invest without paying any fees? All your options have perks and drawbacks — and you should pick which is right for you based on all of your other investment goals.

For the Investor Who Wants Assistance

If you’re new to investing and still learning the ropes or you’re experienced in the market but don’t have the time to keep up with your investments, a Managed Portfolio could be the way to go. That’s because your holdings will be constantly monitored and re-balanced by a robo advisor — an investment option that provides digital financial advice by combining human expertise with automated, algorithm-driven management to build a diversified portfolio. In a nutshell, it means less work (and worry) for you.

At Ally Invest, we offer you a Managed Portfolio with a built in cash buffer. That means, in addition to the range of ETF investments professionally selected for you, 30% of your portfolio remains in cash. Since the cash grows at the same rate as Ally Bank’s high-yield Online Savings Account, you accrue interest, plus the returns on your invested capital.

The Cash-Enhanced Managed Portfolio has several benefits — first being it’s totally free of advisory fees. You can start investing with as little as $100 and since you’ll pay $0 in advisory fees, you have more money to invest.

The second perk? Your peace of mind. If you prefer a more conservative investment strategy, the cash component remains protected from market volatility. So even if your holdings experience the effects of a market downturn, your cash will continue to earn interest. For novice (or nervous) investors, this gives you the confidence to enter the market while avoiding emotional investing as you watch your wealth grow.

But what if you’re ready to take on a more aggressive investment strategy? Once you are more comfortable with investing and want to ramp up your returns, you can say goodbye to the cash buffer and put more (or all) of your portfolio holdings into the market.

Our Managed Portfolios without a cash buffer incur a small annual management fee, but with more money invested in the market, you may be able to receive more significant returns that offset any fees you pay.

For the DIY Investor

If you prefer a more hands-on investment strategy, you can control just how much or how little you pay in fees by doing it yourself. Our Self-Directed Trading accounts have no account minimum and allow you to trade thousands of commission-free stocks and ETFs, as well as bonds, mutual funds, options, or other securities (which may incur trading or commission fees).

Keep in mind, self-directed trading may take some experience — whether it’s first-hand through past investment experiences, or second-hand through research into investment strategies and market history. If you’re just stepping into the realm of investing, you may want to take time to familiarize yourself with different investment options, how to build a diverse portfolio, and trading strategies before opening a Self-Directed Trading account.

 

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How to Decide Between Managed and Self-Directed

One of the most important factors when creating any investment strategy is your time horizon, or how long you expect to keep your money invested in the market. Typically, the longer you plan to invest, the more risk you can take on, since your investments have time to recover if the market faces a temporary downturn.

If you’re okay with taking on more risk, a premium, paid method of investing, like our Managed Portfolios, can help you amplify returns and might be the type of approach that works best for you. Or, you could opt for a Self-Directed Trading account so you can be more hands-on with regards to just how much risk you take on. Plus, you can choose for yourself between investments that may incur trading fees and commission-free securities.

Often times, investors with shorter time horizons prefer a more conservative investment strategy. That way, the potential to lose capital is more limited. Our free automated investment offering — a Managed Portfolio with a cash buffer — can keep your money more secure and save you money in advisory fees.

But time isn’t the only factor. Even if you’re investing for retirement that’s 30 years down the road, you might still prefer a less risky strategy. Investment jitters are normal, whether you’re new to investing or not, and they can cause investors to lose out on returns.

Nerves keep some from investing as much as they could, and cause others to act on their emotions and make rash investment decisions (like buying high and selling low). By adding a 30% cash component to your Managed Portfolio, you can feel more comfortable investing more since you know a portion of your portfolio is secured in cash.

Did we mention the cash portion of your portfolio earns a high yield, matching the savings rate of an Ally Online Savings Account? That means no matter what’s going on in the market, you can be sure you’re earning interest on your cash.

And, because your Managed Portfolio is automatically re-balanced during market volatility, you can take a “set it and forget it” mindset.

If you feel comfortable taking on more risk, you can always opt out of or lessen the cash buffer in your Managed Portfolio. Or try your hand at buying and selling yourself through our Self-Directed Trading platform. That way, you can make your own choices on how much to hold in cash and how much to put into the market to take advantage of potentially higher returns.

Entering the world of investing is an exciting opportunity to take control of your wealth and grow your finances. To start, you should look toward the future at what you want to accomplish and draw out the framework to get there. By answering questions like “What are my goals?,” “What is my timeline?,” and “Is paying fees worth the possibility of higher returns?,” you can begin investing and building a portfolio that’s best for you.

Learn more about how to invest the way you want.