WTOP Interview: Think Like An Investment Advisor To Be A Better Investor

Interview Transcript:

SHAWN: It's 5:11 here on WTOP. As you’ve no doubt noticed, pensions are becoming a thing of the past and these fewer companies offer them, so do those guaranteed income streams so they away in retirement as well. Now, you not only need to become a better saver, but a better investor to make sure you’ve got enough cash in your older years.

HILLARY: Do we really understand what we're invested in or what to know when making investment decisions, maybe not? So let’s get some investing basics with Nina Mitchell; senior wealth advisor and partner at Her Wealth'' from Bridgewater Wealth in Bethesda. Great to see you Nina!

NINA: Nice to be here.

HILLARY: So, why do we need to pay more attention? Well, I guess that’s a stupid question isn't it? Why do we need to pay more attention, tell us why it’s important?

NINA: It's important for listeners to know that, whether they work with investment advisor or they're saving for their retirement; the 401(k), that US investor, you need to know what you're invested in how your investments are performing, so you can make sure that you're meeting your goals.

SHAWN: So what are some of the criteria that investors should consider when deciding what to invest their money in?

NINA: First of all, there are many types of investments, but for today let’s focus more on mutual funds; ''active and passive''. And two factors that seem to be getting a lot of attention are ''returns and fees''. And we know that low-cost index funds which track a broad index; they’re a very important part of the portfolio, but also active funds which are also important even though they have a higher fee. And for example; active managers who have deep research capabilities, they can go into more niche markets like the emerging market, the emerging regions such as Asia. And so, they can accomplish that well with the passive fund. And there’s actually a great performance metric called ''alpha''. And alpha just measures and manages excess return above its benchmark. So quite simply, an alpha 4 just means that the manager did 4% better than its benchmark. So, knowing this alpha is really important if you can invest with an active manager, otherwise go with the low-cost index fund.

HILLARY: Some of us really don’t even know where our money is, so where can we find information about mutual funds that we may have in our retirement accounts?

NINA: Well, you can go directly to the mutual funds' website or you can use the tools of your custodian. And there’s something called a MorningStar report which is really helpful and this report, it just got a lot of information and you can see where your top holdings are, you can see performance, risk measurements, fees and also how long the portfolio managers has been running the portfolio which is really important to know. A lot of us, you know we're always thinking about performance, just kind of going back to performance and we might pick the fund that would had the highest return last year. But it’s really important to look at long-term consistent returns. You don’t want to just pick some of the funds that was a superstar of last year, you really want look at funds that had a more convincing long-term track record; ''skill versus luck''.

SHAWN: Alright, very good, Nina thanks so much.

NINA: Thanks.

SHAWN: Nina Mitchell; Bridgewater Wealth in Bethesda, read more at WTOP.com search Her Wealth.