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Here's Where People Invest If They Don't Know How to Invest

Ok let's be honest, this asset allocation stuff can be crazy confusing. In order to alleviate the confusion and money off you, asset managers offer funds that do your asset allocation for you. They're called multi-asset funds.

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Ok let's be honest, this asset allocation stuff can be crazy confusing. In order to alleviate the confusion and make money off you, asset managers offer funds that do your asset allocation for you. They're called Multi-Asset funds.
Multi-Asset funds have been in the news over the last few weeks, mostly because, nobody knows where to put there money. Your bond funds are down about 3 percent or so for the year most likely, your U.S. stock funds are still up over 10 percent, but international stock funds have been hit, as has gold and other commodities in general.
Here's what Multi-Asset do:
Say you have $1,000 dollars.
You invest $1,000 in a Multi-Asset fund.
The manager of that fund decides which asset classes to invest in for you.
The fund manager rebalances the portfolio and makes sure the fund is
diversified across a handful of asset classes so you don't have to worry about it.
Sounds dreamy...
But there are two glaring risks:
1) It is not easy to be the jack of all trades, i.e. switch from investing in bonds to investing in stocks. It is hard to time the market right and many (most) portfolio managers are not that.
2) The asset allocation of the fund is not tied to your own personal risk tolerance and risk tolerance for your age (also talked about in the asset allocation video).
3) Some of these funds charge high sales fees.
Check out the video, we talk about these risks and a few more.

This post is part of a regular series of money explainers for non-finance people. Follow along and join in the conversation at good.is/makinsense.

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Your gold fund investments are down about 20 percent year-to-date.
Goldman expects another 20 percent decline through 2014. They've been right so far on their gold call, but wrong on other things (see the video below).
The pros (hedge funds, I guess) have been cutting back their gold exposures since September 2011.
Gold is meant to be a diversifier, not a core holding. It functions as a hedge in your portfolio for two reasons:
1) If you believe the value of the U.S. dollar is declining, you buy gold. Gold holds its value better than the dollar (currency) if the dollar is declining. You can buy more with gold than a dollar.
2) If you believe the economy is going to implode. For the same reason as point #1, people buy gold as a safe haven. Save Haven is this weeks WTF Wall Street Word, stay tuned.
Here are a few other things you need to know if you own gold.
And remember when Trump took a few gold bars for payment instead of $176,000 a few years ago? Me neither.
Here's the video:

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Here are two things everyone's been talking about this week, and what they mean to you.
1. Where in the world is Edward Snowden?\n
The News: \n
The National Security Agency, NSA, has been collecting U.S. photo data since just after the September 11th terrorist attacks.
Ex Booz Allen analyst Edward Snowden leaked this to The Guardian last week from Hong Kong. He turned over a 41 slide PowerPoint presentation, but only four or five slides were published because the information is so classified (aka nobody knows how to use PowerPoint on their Mac).
Now the ACLU is suing the government claiming the government can’t force companies like Verizon to hand over private phone usage data. It violates the Fourth Amendment that guards us from “unreasonable” searches.
Snowden is now somewhere in Hong Kong, hiding, (even though he says he’s not hiding). Nobody can find him, bet he’s real good at sardines.
MakinSense of The News: What It Means to You\n
The government isn’t using your tax dollars to collect the content of your calls. They’re collecting meta-data.
Meta-data is the “call record data” that goes with your phone calls. They use this to look for red flags.
Call record data that shows calls from your home to al Qaeda at 1 a.m. would be a red flag. Call record data that shows calls from your home to Papa John’s at 1 a.m. would not be a red flag.
So yes, the phone company stores your phone calls. But the NSA is really only interested in pooling any call record data that looks suspicious. You’re not that important, calm down.
Talking Point:\n
According to a CBS poll, 30 percent of Americans think Snowden’s leak has hurt U.S. national security. And…..
Sixty percent say it will have no impact or strengthen national security (very similar options, but mostly very different, but never mind).
No mention of the remaining 10 percent (but the U.S. ranks 25th out of 34 countries in math).
Debits on the left, credits on the right. Write that down.
2. The U.S. is still the prettiest girl in the ugly girl contest\n
The News:\n
Stocks and bonds are going down.
Usually when one goes down, the other goes up because stocks are usually considered risky and bonds are considered safe. But not right now, so hold on to your yoga pants.
The biggest news is that the U.S. stock market is responding (negatively) to recent news out of Japan.
All you need to know is: Japan isn’t going to be doing as much going forward to stimulate their economy (similar to the U.S., eventually) and that has been bad for stocks everywhere. Interest rates are rising in both the U.S. and Japan. Hold on to your yoga pants.
MakinSense of the News: What It Means to You\n
Now would be the time to ask your financial advisor how much non-U.S. stock market exposure you have. If they tell you to hold on and you hear papers moving around in the background as you’re asking, that’s bad.
So this would be in regional specific funds, like Japan. You know my thoughts on those for most people... here’s my video, in case you missed it.
Talking Point:\n
CNBC referred to the U.S. stock market as the prettiest girl in the ugly girl contest. Meaning, hang out with ugly people and you’ll look pretty (but you’re still ugly so don’t get too excited).
This post is part of a regular series of money explainers for non-finance people. Follow along and join in the conversation at good.is/makinsense.\n
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