If you're perfectly capable of running your own retirement savings, selecting the right mix of low-cost investments, rebalancing at the right time, and not buying and selling out of fear or greed, then good for you.
But many people may need help to avoid common investment mistakes. That's no problem for those with big portfolios. Until recently, though, it was tough for people with a few hundred thousand dollars or less to find reasonably priced assistance.
Now, a new service called Rebalance IRA, aims to help these smaller retirement investors.
Rebalance IRA representatives will talk with you about your goals, invest your money in a low-cost collection of index fund-like exchange-traded funds that don't try to make big bets on individual stocks, and rebalance the investments when necessary. In exchange, you agree to hand over half of 1 percent of your assets each year, with a minimum annual fee of $500.
The company's single-minded focus on retirement savings makes sense given how much money is at stake and how badly many people mess things up when they do it on their own.
There is more money in IRAs than in any other type of retirement vehicle, according to estimates from the Investment Company Institute. And figures show that individuals investing on their own earn significantly less than money invested by professionals.
To start with, large numbers of people make extreme bets. At Vanguard, 10 percent of retirement plan participants invested only in stocks in 2011, while 8 percent had no stocks at all. Then, there are the emotional challenges. To stick with the mix of investments you've selected, you need to sell things that have done well and buy investments that have lagged recently. That's hard to do.
Then there's the grab bag of other feelings. The bad experience with a broker you may have had in the past. The fear that may have caused you to bail out in early 2009 or the greed that has you pouring money into stocks today, now that they're looking up again. This can be intensely hazardous to your long-term financial health.
Mitch Tuchman, the man behind Rebalance IRA, started a service for do-it-yourself index investors called MarketRiders in 2008.
A former software entrepreneur, Tuchman had a midlife conversion to passive investing and not trying to beat the market, and he wanted to help others invest in the same way. "We thought we could build such great software that we could turn everyone into a do-it-yourselfer," he said. "And people said they didn't have time or they didn't care to do it themselves."
MarketRiders charges subscribers $150 a year for instructions on how to adjust their portfolios and when, and it will continue to exist. But Tuchman eventually realized that his sideline was where the real mass-market opportunity lay.
So why would you let this guy handle your money?
Tuchman and his co-founder, Scott Puritz, rounded up an investment advisory board that includes Burton G. Malkiel, the emeritus Princeton economics professor who wrote A Random Walk Down Wall Street; Charles D. Ellis, author of Winning the Loser's Game and a former Vanguard board member; and Jay Vivian, who once ran IBM's retirement plans.
The group has created a collection of investment portfolios, most of which have a slight tilt toward small stocks, which tend to outperform the overall stock market over time. Many of the portfolios are also currently spiced up with indexed investments in high-dividend stocks and emerging market bonds.
Besides the annual fee based on assets, there's a $250 fee to get started, and you must move your IRA accounts to Schwab or Fidelity if they're not already there.
Potential customers start at rebalance-ira.com and then talk to a Rebalance IRA staff member. Tuchman is looking to hire a few more, including MBA types with some finance in their background who may have been home with children the last few years and want to get back into the workforce. Customers will be able to speak with them via video conference and talk to the same person each time.
Neither these workers nor Rebalance IRA earns any fees from the companies that provide the investments. All of Rebalance IRA's revenue will come from its customers, and as a registered investment adviser, Rebalance IRA is legally bound to act in those customers' best interest.
There are other, cheaper ways to find someone to put your money in a portfolio like those at Rebalance IRA and run the money for you (though Tuchman insists that his service will offer more human contact). A company called Wealthfront, which has also put Malkiel to work, will do something similar for about 0.25 percent annually.
Investors at Betterment, which slashed its prices last year, now pay about 0.30 percent on average, and the company has taken in nearly $100 million since it cut its fees. People with more than $100,000 invested there pay only 0.15 percent annually and can get advice from the founder himself, Jon Stein.