Alternative:The Internet has some excellent resources to help do-it-yourselfers build up their retirement portfolios. Here are free Web sites to help you answer three key questions…
1. Am I on track to retire? To answer this question, start with a retirement calculator. AARP has one at www.aarp.org/money (go to “Tools” on the left, and choose “Retirement Nest Egg Calculator”). The calculator provides estimate buttons to help you fill in important assumptions, such as future inflation and potential returns on your investments. The results provide a clear analysis, and you can change some of your assumptions. If you use higher investment return assumptions, you won’t need to put away as much money as if you use lower returns, so enter these choices carefully. I suggest trying 3%, 5% and 7% to see how your potential returns can change.
2. How should I allocate my investments? Now that you know how much you need to contribute, how should you allocate your current assets and your future contributions? In these turbulent times, start with a fresh look at your risk tolerance. MSN has a 20-question risk quiz at http://articles.moneycentral.msn.com/help/tools.aspx (choose the “Risk Tolerance Quiz” under “Investing”). The results include a basic recommendation for asset allocation. Go back and change your answers so that you can see how the recommendations change.
Next take a look at an asset-allocation site. Try the SmartMoney One Asset Allocation System, which can be found under “Asset Allocation” at www.smartmoney.com/tools/worksheets. With this allocator, you can enter your current investments, as well as your future assumptions. The results show you how much you need to rebalance each asset allocation in your portfolio. Try it a few times, changing your choices for “volatility tolerance” and “economic outlook,” to see how the recommendations change.
3. What investments should I choose? Now you are ready to implement your changes. If you need information on investment choices, start at www.finra.org. The Financial Industry Regulatory Authority (FINRA) is the largest independent regulatory authority for securities firms in the US (on the Web site, click on “Investors,” then go to “Smart Investing”). It offers unbiased educational information on all areas of investing.
If you are ready to choose your investments, try www.morningstar.com, which offers independent research on stocks, mutual funds, exchange-traded funds and even some hedge funds. Select the “Funds” tab for the latest news on funds. Then on the left, browse “Investing Ideas” and “Fund Ratings” for ideas for your portfolio. For information on individual stocks, go to the “Stocks” tab or enter a specific stock symbol at the top of the screen.
