Frequently Asked Questions

Q. Are lifestyle or “target” funds another option for becoming a Smart Investor?

A. They can be an excellent option, but only if the underlying funds are low cost index funds (like the Target Retirement Funds offered by Vanguard) and not hyperactively managed funds. Smart Investors need to be sure that the asset allocation in these funds is appropriate for them and recognize that their investment objectives and tolerance for risk may change but the asset allocation in these funds may not change at the same time.

Q. I am ready to become a Smart Investor. Should I cash out my hyperactively funds all at once or over time?

A. Cashing out hyperactively managed funds may trigger adverse tax consequences. You need to consult with your tax advisor before doing so. Once that issue is resolved, you are probably better off moving from hyperactively managed funds into index funds sooner rather than later. The longer you hold on to hyperactively managed funds, the longer you will be paying the excessive costs charged by those funds. Your hyperactively managed funds may, or may not outperform Smart Investing over the short term, but it is extremely unlikely that it will do so over the long term.

Q. I have never invested, but want to start now and become a Smart Investor. Should I do so all at once or slowly over time?

A. For the same reasons set forth above, you should become a Smart Investor sooner, rather than later. Your focus should be on your asset allocation and not on the timing of your entry into the markets.