Education/Advice:Understanding Managed Accounts
Mutual funds and managed accounts offer similar benefits:
professionally managed portfolios with exposure to stocks, bonds and/or other
Traditionally, a managed account was a special investment pool set
aside for wealthier investors, to be invested with their specific needs in
mind. Today, a growing number of retirement plans offer
participants the chance to take the same investment approach—one that allows
for more customization and likely will involve the plan’s financial adviser in
How Are They Like Mutual Funds?
The first thing to know about a managed account is that,
like a mutual fund, it is a pool of money. The managed account option in your
retirement plan could allocate your money to a pool of funds that are either
part of your retirement plan menu or not a part—meaning you would be unable to
access them individually within your retirement plan—or even to a pool of
How Are They Different?
Managed accounts are not subject to the same rules as mutual
funds. So, while you can expect to get information about the investments in the
managed account, it may look different from a mutual fund prospectus; it may
resemble the high-level information you receive about the individual investment
options available in your retirement plan, such as fund name, fees and returns.
Of course, if you invest in mutual funds within the managed account structure,
you may also receive a prospectus for the relevant funds.
Managed accounts tend to be more personalized than mutual
funds, so considerations such as your individual tolerance for investment risk
would, as noted above, be considered. Oh, and if you care about such things,
you will not find your managed account price in the paper, though you will
probably be able to learn your daily account values via your retirement plan
provider’s website or call center, just as you can with mutual funds.
However, perhaps the most important advantage of putting
your funds in a managed account over taking the traditional route—picking the
mutual funds yourself, then trying to determine how much to invest in each—is
that a managed account enlists the services of a professional to do that for
you. That professional will keep an eye on those investment choices while you
turn your attention to other things.
Which Is Better?
It depends. Mutual funds are certainly handy, widespread and
widely known, many with a long investment track record—and it is rare to find a
retirement plan that does not include them on the investment menu. Managed
accounts can be more flexible, and customized to your individual situation,
while remaining competitively priced.