When you invest in most mutual funds in a taxable account, you depend on an expert to manage the fund portfolio—leaving you with no control and with tax consequences that you share with thousands of investors. When, instead, you create your own portfolio at a brokerage, you get control and greater ability to save on taxes, but success depends on your own expertise. Neither way is ideal. Now brokerages are offering an increasingly popular alternative that features advantages of both approaches, and they are making it available to investors with as little as $25,000, compared with previous minimums as high as $1 million.

The alternative? A “separately managed account” (SMA). With SMAs, you choose the kind of portfolio you want, including what kinds of sectors, stocks and bonds you favor. Based on those preferences, an SMA specialist chooses investments—typically a few dozen. The SMA team then manages the portfolio, deciding when to buy and sell investments and trying to minimize your tax bite by balancing gains and losses.

Keep in mind that fees tend to be higher than for mutual funds, and because they are customized, SMAs don’t have track records.

Examples of SMAs: Fidelity has six basic SMAs with a range of options. The lowest minimum is $50,000, and annual fees range from 0.2% to 1.7% depending on the strategy and the size of your investment. TD Ameritrade and E*Trade require a minimum of $25,000. Charles Schwab offers 110 strategies, ranging from foreign small-caps to “socially responsible” stocks, with a minimum for stock accounts of $100,000 and annual fees up to 1.35%…for bond accounts, $250,000 with fees up to 0.65%. In comparison, actively managed stock fund fees average 0.7% and bond funds, 0.54%.

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