July 11, 2017

WTOP Interview: Do You Know What You Are Invested In And Why?

LISTEN NOW! What questions should you be asking about your investments to know if they are right for you?
Dawn Doebler, CPA, CFP®, CDFA®

Interview Transcript:

SHAWN: About 55 million American households own mutual funds as part of retirement and investment accounts. With so many of us involved in this, should we be asking questions about what we're invested in and why?

HILLARY: Joining us, Dawn Doebler; Senior Wealth Advisor at Bridgewater Wealth in Bethesda and Cofounder of Her Wealth. Good to see you Dawn.

DAWN: Yes, thanks for having me.

HILLARY: So many of us don’t take the time to really understand what we are investing in, particularly in retirement accounts. So, what questions should be asking and what information should we be seeking out?

DAWN: Shawn said it’s an important topic because many people do hold a lot of their wealth in mutual funds, usually in their company retirement accounts. So, whether you’re managing your account on your own or you might have an advisor who’s helping you pick some funds, we do think there are some very important questions for you to be asking and things for you to consider. Of course, you want to look at the performance of the funds, but it’s not only about performance; that’s just one dimension of your total return. You do want to look at things like:

  1. ‍Risk
  2. Tax efficiency
  3. Timing
  4. Expenses

So, some questions you should ask; does this fund diversify what I already hold? Some people will buy five mutual funds and think that they're diversified. But if each of those funds owns Apple as their top holding, they really aren’t diversified, so you really want to look under the hood and understand what the funds are investing in. And then when it comes to taxes, that’s a big part and a contributor to your return. So, you want to ask, is this fund better put in a retirement account or is it okay to have it in a taxable account?

SHAWN: So, in theory, if you're working with a financial advisor or a broker, that person would know a lot more. So, what questions should you be asking an advisor or a broker if you're working with one?

DAWN: That’s right Shawn, but what they believe is that people should know what they are invested in and why they are invested. So even if you have an advisor, you should be asking questions and understanding what you're invested in. So, some questions to ask, we have a lot in the article, but three big questions:

  1. What fees and commissions is the advisor going to earn if you purchase the fund? That way you know whether there’s any bias in the recommendation that they're making.
  2. Are they using an institutional share class? That will save you money and expenses, so you want to understand if that’s available to you through this particular advisor.
  3. And another question, how do they analyze when to buy the fund, when to sell the fund and what things might happen, what events could occur that would cause them to sell the fund? And again, we have several questions in the article, so we suggest you print that out and take it to your next meeting if you have an advisor.

HILLARY: And what resources can folks access to get some of the facts about these funds?

DAWN: One of the nice things Hillary is that, we have so much available to us on the Internet, but it can be confusing and it can be hard to find the information you’re looking for. So, there’s one particular item, it’s called ''the fund fact sheet''. And the mutual funds are required to provide certain information and it is required to be understandable by investors. So, we suggest that you get those funds fact sheets, ask your advisor or you can go online; you can go to MorningStar or Yahoo finance if you are managing your account on your own. But the fund fact sheet is full of information and very helpful for answering a lot of the questions you should be asking.

SHAWN: Alright Dawn, lots of good stuff there. Thanks much. Dawn Doebler is senior wealth advisor at Bridgewater wealth in Bethesda. You can read more WTOP.com search Her Wealth.

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Dawn Doebler, CPA, CFP®, CDFA®

Dawn’s experience spans more that 25 years providing wealth management, financial planning and corporate finance solutions for clients. As an MBA, CPA, Certified Financial Planner (CFP®), and a Certified Divorce Financial Analyst (CDFA®), she is uniquely qualified to understand the challenges and financial needs of clients from executives to entrepreneurs, as well as single breadwinner parents. Dawn is a weekly contributor to WTOP radio.