Getting help to manage $300,000

There are plenty of tools available to get by on your own - but paying a pro is okay too.

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By Walter Updegrave, Money Magazine senior editor

Walter Updegrave is a senior editor with Money Magazine and is the author of "How to Retire Rich in a Totally Changed World: Why You're Not in Kansas Anymore" (Three Rivers Press 2005).

NEW YORK (Money) -- Question: I have about $300,000 to invest. I'm now trying to decide whether I should get professional help and pay a fee of 1% or go to an investment adviser to manage this money. Or, maybe I should or invest it myself using tools and guidance available online. What do you think? -- Shane, Collegeville, Pennsylvania

Answer: The real issue here is what do you think?

Do you believe you're up to setting a long-term asset allocation strategy and creating a diversified mix of stocks and bonds? Are you comfortable choosing from among the thousands of mutual funds, ETFs and other options out there to find ones that charge reasonable fees and that will make worthwhile investments?

And, more important, would you still feel confident handling your own investments if, rather than recovering soon, the markets take another dive from here?

You're right that there are plenty of resources online that can help you create a portfolio and choose individual investments. The site alone, for example, offers a good grounding in investment basics, with advice on asset allocation and investing in stocks, bonds and mutual funds.

After you've got the basics covered, you can move on to the specifics. By going to our Asset Allocator tool, you can get advice on how to divvy up your portfolio among different types of stocks and bonds.

Once you've done that, you can go to our Fund Screener to search for mutual funds. Or to make things even easier, you can check out our Money 70 for a pre-screened list of mutual funds that have reasonable fees, solid performance records and a history of treating their shareholders decently.

I believe that by using these and other tools any reasonably intelligent person can manage his or her own investments quite well, thank you. You don't need to be a rocket scientist to invest sensibly.

That said, I also know plenty of reasonably intelligent people who seem incapable of investing sensibly. Some just don't have the right mindset. They're too scattered to approach investing systematically or more focused on making a big score in the short-term than forging a sensible strategy that will pay off over the long run.

But only you can decide which camp you fall into.

If you decide that you need help, you've got plenty of other choices.

One is to hire a financial planner who can help with overall planning and also create and monitor a diversified portfolio.

Or you might turn to an independent money manager who can build a private managed account. Ideally, such accounts are tailored to your specific needs (although in many cases it's debatable just how customized they are).

And many mutual fund and investment firms, including biggies like Fidelity, Schwab and Vanguard, offer managed portfolios of mutual funds. Some fund companies use only their own funds, although others may include offerings from other fund families.

If you get professional help...

There are a few issues you'll want to consider if you decide to go with professional help.

First, make sure that you're hiring someone who will follow an actual investment strategy that's right for your financial situation. To me, that means you should first have a conversation with the planner, money manager or fund rep about your goals -- retirement planning, saving for children's college, achieving overall financial security -- and about how much risk you're willing to take. Without such a conversation, it's hard to imagine how you'll end up with an appropriate portfolio.

You'll also want to know exactly how much you're paying. If the manager is charging 1% a year, does that include the cost of trading for a stock portfolio or the underlying fund management fees in a portfolio of mutual funds or ETFs? Get the fee schedule in writing.

And, given the recent high-profile scandals involving Bernie Madoff and Allen Stanford, you'll want to be sure you're dealing with a trustworthy firm, not some mountebank or con artist.

Granted, the SEC's record in the Madoff case doesn't exactly inspire confidence, but it still makes sense to check with state, federal and industry regulators before signing on with an adviser.

Exercising little common sense doesn't hurt either, such as insisting on statements from an independent third-party custodian and questioning returns that seem unrealistic.

So what if, after considering the factors I've laid out here, you're still not sure whether you want to fly solo or be a passenger in a professionally managed portfolio?

Well, here's one option you might consider: Set aside a small portion of your three hundred grand to manage yourself, and then have an adviser oversee the rest.

If it turns out you're not very good at managing your own dough, you can always hand over whatever is left to your adviser knowing that at least you haven't put all your money at risk.

If, on the other hand, you gain confidence and feel surer about your ability to oversee your own investments, you can always say bye-bye to the adviser and take charge on your own.

Got a question for the expert? We want to hear from you. Post your video or typed question to Walter Updegrave's iReport page and your question could be answered in the next Ask the Expert column or video. For the Comment Policy, click here.  To top of page

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