The long-game drill: How investing may fit into your financial plan.
Endurance is the one thing you cannot fake. You can talk your way through a lot in life, but nobody has ever bluffed their way through mile twenty. It gets built slowly, over a long enough stretch that the work stops feeling like work.
Investing runs on similar logic, with one difference worth stating plainly at the top: investing involves risk, including the possible loss of principal. Returns are not guaranteed, and investments can lose value. That is not just a disclaimer, it’s the defining feature of how investing differs from saving, and understanding it is the first drill, not the last.
Investing also is not a replacement for emergency savings. If your reserve is not built yet, that is the work in front of you. This drill is about what may come after.
Long-term goals tend to look like:
Retirement
Long-term wealth building
Education planning
A future lifestyle goal
Financial independence
What these have in common is distance. They sit far enough out that money set aside for them is not money you expect to touch soon. No single product is appropriate for every goal, and the right approach depends on the goal itself.
The Securities and Exchange Commission describes your time horizon as the number of months, years, or decades you plan to invest to reach a goal, and notes that investors with a longer time horizon may feel comfortable taking on riskier or more volatile investments, while those with a shorter horizon may prefer less volatile ones. (Asset allocation, Investor.gov)
The word doing the work there is “may.” A longer horizon can give an investment more time to recover from a decline. It does not remove the possibility of the decline, guarantee a recovery, or make any outcome certain.
The SEC defines risk tolerance as your ability and willingness to lose some or all of your original investment in exchange for potentially greater returns. Two words there, and they are not the same test:
Ability is structural—whether a loss would actually damage your finances
Willingness is emotional—whether you could watch a decline without abandoning the plan
Someone can have high ability and low willingness, or the reverse. The honest question is not how you feel about risk in the abstract. It is what you would actually do if you opened the app and the balance was meaningfully lower than what you put in.
If the honest answer is that you would sell, that is worth knowing before you begin, not during.
They serve different jobs:
Savings is often used for accessible cash and nearer-term goals; investing is often considered for longer-term goals
Savings generally earns interest; investment values can rise or fall
Deposit accounts may be FDIC insured within applicable limits; securities are not FDIC insured
Savings may offer greater liquidity; investing may carry market and investment risk
Neither one is the better tool. They are different tools, and using one for the other's job is where most trouble starts.
Broadly, there are three routes: self-directed investing, where you choose and manage everything yourself; professionally managed portfolios, where allocation and ongoing management are handled for you; and some combination of the two.
This is a preference question, not a sophistication question. Plenty of financially capable people choose managed portfolios because they would rather spend their attention elsewhere, and that is a legitimate reason.
The typical process:
Answer questions about your goals, preferences, and financial stage
Consider an asset allocation appropriate to those answers
Choose a manager and model, where applicable
Monitor the portfolio digitally
Review and adjust as your circumstances change
We publish investing insights and a set of free calculators, including an APY calculator for comparing what a deposit account would earn over the same period, on its planning hub.
Comparing the two side by side is a reasonable exercise before deciding which job a given dollar should do.
Here is the part most introductory investing content skips, and it is the single most useful thing to understand at the start: fees are the only number in investing you can know in advance. Returns are uncertain. Costs are not.
Managed investing typically involves a few layers—a management or model fee charged as a percentage of your assets, the expense ratios of the underlying funds, and in some cases a minimum annual account fee. That last one deserves particular attention if you are starting small, because a flat minimum behaves very differently on a small balance than a percentage does.
The move: convert every fee into a dollar figure against the balance you plan to hold, not against a hypothetical larger one. A fee expressed as a fraction of a percent sounds negligible. A flat annual minimum on a starter balance may not be. Neither is wrong, but you should know which one applies to you before you open the account, and any provider worth using will tell you plainly.
Ask the same of us.
A professionally managed approach through Axos.
Axos Managed Portfolios offer a professionally managed investing experience with digital access, portfolio models across ETFs, mutual funds, and stocks, investment managers who adjust holdings in response to changing markets, and automatic rebalancing to keep a portfolio aligned with its selected allocation.
On costs and minimums, plainly: account minimums vary by the model you select, starting at $100 for mutual fund models and rising for ETF, thematic, and third-party manager models. Accounts are also subject to a minimum annual account fee, billed quarterly, in addition to the asset-based model fee.
On a small starting balance, that minimum fee represents a meaningful percentage of the account. That may still be a reasonable trade for professional management, and it may not—it depends on how much you plan to invest and over what period. The full fee schedule and account minimums are set out in the Axos Invest Form ADV Part 2A and the Managed Portfolios Client Fee Schedule.
Learn more about Axos Managed Portfolios