Personalized Investing Portfolios: Unlock the Greatest Potential
Being able to tweak investment portfolios to align with values and goals is gaining popularity among more investors of all wealth levels, and Millennials are leading the way.
Last year, I wrote about direct indexing, a lesser-known investment approach that started outpacing both ETFs and mutual funds in investor adoption. One of the hallmarks of this approach, that traditional ETFs or mutual fund structures don’t offer, is personalization.
Our current financial environment is fraught with recession fears and inflation concerns. Today’s investors, at all experience levels, are seeking investment strategies that not only combat the volatility of the markets, but also address their personal and financial values. Consumers are looking for personalization in most aspects of their lives. A 2021 McKinsey study found that consumers don’t just want personalization, but they demand it more than ever, especially following COVID-19 and the surge in digital behaviors beyond 2020.
Advisors Expect More Clients to Want Personalization in Portfolios
Registered investment advisers (RIAs) recognize that investment personalization is only becoming more important. More than half of the RIAs surveyed in Schwab’s 2022 Independent Advisor Outlook study anticipate clients to expect more personalization of investment portfolios, a trend that will be led by Millennial investors.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Access to a more personalized portfolio has been historically designated to ultra high-net-worth investors, due to high account minimums required and archaic technology. Today’s digital advancements in financial services have brought these types of offerings to investors across the wealth spectrum, allowing them to align their portfolios with their values and financial goals.
Personalization can mean a number of things – building a portfolio around existing investments, following a particular investment philosophy or aligning investments with one’s values.
Environmental, social and governance (ESG) investing methods in particular have made headlines in recent years, often getting a bad rap as many companies have been accused of misleading their ESG accomplishments. According to a report from US SIF Foundation, investors held $17.1 trillion in assets chosen according to ESG principles in 2020, up from $12 trillion just two years earlier. ESG standards are intended to help investors screen potential investments through a socially conscious lens.
Similarly, issues-based investing puts a finer point on the concept of ESG investing, allowing investors to overweight companies that align with specific issues and divest from those that don’t. In the process, the investor has more control over their holdings and can personalize their portfolio to match their specific views. Issues-based investing is generally enabled with a direct index or thematic ETFs.
More Personalization Options Are Available
Thematic investments in general have seen increased adoption, particularly in exchange-traded funds (ETFs). Along with greater adoption, there has been a meaningful increase in the options available. Today, an investor can find workaday options like sector and industry funds or more esoteric choices, like funds focused on K-Pop (Korean pop music) or companies that appeal to Gen Z.
While not without risks, personalizing one’s investment might also lead to better outcomes. One of the biggest drags on investor returns is poor investing behavior – things like selling as a reaction after the market has already dropped or waiting to invest cash. The drag on returns from poor investment behavior and other factors can be 1.7% or more. A custom-built portfolio reflecting an investor’s situation and views can help one stick with their investment strategy when markets get rocky.
All this is to say that with personalization options now available to investors no matter their financial threshold, why not make your investments work for you and your personal situation? Talk to a financial adviser about some ways to tweak your financial plan in a way that is aligned with your values and goals.
-
'Donroe Doctrine' Pumps Dow 594 Points: Stock Market TodayThe S&P 500 rallied but failed to turn the "Santa Claus Rally" indicator positive for 2026.
-
The Wealth Equation: Balancing Money and StressSponsored Don’t let assets be a liability that strains your family.
-
Is Your Emergency Fund Running Low? Here's How to Bulk It UpIf you're struggling right now, you're not alone. Here's how you can identify financial issues, implement a budget and prioritize rebuilding your emergency fund.
-
Is Your Emergency Fund Running Low? Here's How to Bulk It Back Up
If you're struggling right now, you're not alone. Here's how you can identify financial issues, implement a budget and prioritize rebuilding your emergency fund.
-
An Expert Guide to How All-Assets Planning Offers a Better RetirementAn "all-asset" strategy would integrate housing wealth and annuities with traditional investments to generate more income and liquid savings for retirees.
-
7 Tax Blunders to Avoid in Your First Year of Retirement, From a Seasoned Financial PlannerA business-as-usual approach to taxes in the first year of retirement can lead to silly trip-ups that erode your nest egg. Here are seven common goofs to avoid.
-
How to Plan for Social Security in 2026's Changing Landscape, From a Financial ProfessionalNot understanding how the upcoming changes in 2026 might affect you could put your financial security in retirement at risk. This is what you need to know.
-
6 Overlooked Areas That Can Make or Break Your Retirement, From a Retirement AdviserIf you're heading into retirement with scattered and uncertain plans, distilling them into these six areas can ensure you thrive in later life.
-
I'm a Wealth Adviser: These Are the 7 Risks Your Retirement Plan Should AddressYour retirement needs to be able to withstand several major threats, including inflation, longevity, long-term care costs, market swings and more.
-
High-Net-Worth Retirees: Don't Overlook These Benefits of Social SecurityWealthy retirees often overlook Social Security. But timed properly, it can drive tax efficiency, keep Medicare costs in check and strengthen your legacy.
-
Do You Have an Insurance Coverage Gap for Your Valuables? You May Be Surprised to Learn You DoStandard homeowners insurance usually has strict limits on high-value items, so you should formally "schedule" these valuable possessions with your insurer.
