Investing with SMI FAQ
I'M A BIT OVERWHELMED BY ALL THIS INFORMATION. WHERE DO I START?
If you're a new visitor to SMI, we recommend you begin in our Visitors Center, which will give you a broad overview of who we are, what we do, and how you can benefit. If you're interested in learning more about the specific strategies SMI offers our subscribers, you can follow these links to our SMI Investing Strategies page and our Performance History page. You might also be interested to see what ministry and financial experts have to say about SMI. And of course, you're welcome to browse recent issues of the Sound Mind Investing newsletter, where you'll find a number of unlocked articles.
If you're a new web member, we suggest going through our Getting Started section. These steps will help you identify where you fit within SMI's investing framework, and get you on track with your own personalized investment plan in no time.
WHAT ARE THE FOUR LEVELS I KEEP SEEING REFERENCES TO?
SMI wants to help you set biblically appropriate priorities as you proceed through the seasons of life. The Four Levels are the way we approach that, and are at the heart of each issue's content. They will show you where to focus your efforts initially. Most people have a long-term goal of building a diversified investment portfolio and having financial security at retirement; however, you may need to establish short-term goals (such as getting debt-free and building a contingency fund) to provide you with the necessary foundation. The table below explains what to expect in each of the monthly Four Levels articles.
The SMI website contains a tremendous amount of content targeted to readers at each of these Four Levels, so regardless of where you fit in, there's plenty here to benefit you.
HOW DO I PUT TOGETHER A PORTFOLIO OF FUNDS?
There are actually a couple of steps we recommend before picking funds to invest in. These steps are clearly explained in our Getting Started section. In a nutshell though, when you have met your Level 1 goals, you are ready to put together a portfolio.
HOW DO I CHOOSE BETWEEN THE SMI INVESTING STRATEGIES?
The best way to choose is to ask yourself the simple question, "How often do I want to have to monitor my investments?" SMI's least labor-intensive strategy is called Just-the-Basics, requiring just an hour of your time once per year. On the other end of the spectrum, SMI's Upgrading strategy requires you to monitor your mutual fund holdings once per month. A hybrid approach called Enhanced Just-the-Basics (available to SMI Web Members) is also an option, requiring attention just once per quarter (four times per year total). The tradeoff is in expected return, where Upgrading seeks to beat the market, while Just-the-Basics merely attempts to replicate the market's return.
Just-the-Basics uses four index funds to track the returns of the entire market. Because you are settling for whatever the market returns each year, not much maintenance is required.
Upgrading uses actively-managed mutual funds in each of five risk categories to construct a diversified portfolio. Recommended funds in each risk category are re-evaluated every month, and each monthly issue of SMI tells you when a particular fund is to be sold and replaced with a new selection. While we typically don't replace a recommended fund very quickly, you do need to keep up with this strategy every month, as each issue may require you to sell one (or more) of your current holdings. The benefit of this extra work is that we seek to beat the market's rate of return, and over time have been successful in doing so (see our Performance History page for details).
WHERE SHOULD I OPEN MY ACCOUNT?
That depends on which strategy you intend to use. For our Just-the-Basics strategy, go to the best company for indexing: Vanguard. For Upgrading, you may prefer a mutual fund supermarket with more options than Vanguard offers. We typically suggest TD Ameritrade, Firstrade, or Fidelity. See the following article for more information:
Investors with tax-sensitive accounts may be best served at Fidelity, typically considered the best online broker for tax purposes.
CAN I USE SMI'S STRATEGIES IN MY 401(k), 403(b), OR OTHER EMPLOYER RETIREMENT ACCOUNT?
Yes, although the ease of doing so will depend in part on what fund options are available through your retirement plan. Those plans with self-directed brokerage options available are the best - they should allow access to a wide range of mutual funds, meaning you could probably use any of SMI's investment strategies within the account.
For those without a brokerage "window" or option in their plan, it's become quite common for plans to include index funds among their fund options, making Just-the-Basics an option. And depending on which actively-managed funds are available, you may be able to construct most (or all) of a diversified Upgrading portfolio by researching the available funds in SMI's "Fund Performance Rankings" (explained further in the next question).
For our web members, our Personal Portfolio Tracker tool makes it easy to apply our core investment strategy, Fund Upgrading, to your 401(k) or other workplace retirement plan. After entering the funds that are available to you through your workplace plan, the Tracker categorizes them by asset class, calculates their momentum score, shows you which funds to include in your portfolio, and helps you decide each month whether to make any changes.
WHAT ARE THE FUND PERFORMANCE RANKINGS?
One of the most popular features of the SMI newsletter is the Fund Performance Rankings. In it, SMI ranks more than 1,400 funds according to their risk categories and SMI's "performance momentum" scores. While print subscribers receive this quarterly, it is updated and available on the SMI website every month for web members.
The Fund Performance Rankings have several uses. You can use them to evaluate any funds that you already own to see how they compare with others in their risk category, including SMI's recommended funds. The performance rankings are particularly valuable for evaluating the options in a 401(k) or other retirement plan where fund choices are limited.[back to top]
SOME OF YOUR RECOMMENDED FUNDS HAVE MINIMUM INVESTMENT AMOUNTS THAT ARE WAY TOO HIGH FOR ME. WHAT DO I DO?
Many funds have high minimum investment requirements when you open an account directly with the fund. However, when buying through Schwab or Fidelity, the minimum purchase is usually set at $2,500 (Scottrade and TD Ameritrade often offer even lower minimums). Before recommending a fund, SMI contacts our recommended brokerages to verify that the fund is open to new investors and that the minimum is acceptable. However, because fund minimums can change after we go to press, we recommend that you telephone your brokerage company and have a sales representative check them for you.
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