As people move into their later 20s and 30s, the need for some sort of financial oversight and management often becomes apparent. Questions regarding 401k diversification, the size of a mortgage that one can sensibly obtain, Roth versus Traditional IRA, and how to start saving money for a newborn come up. Along with this, one's work often becomes more demanding, and there is less time to spend on one's investments.

Keep in mind that everyone has the ability to create a low cost, diversified portfolio on his or her own. If a person rebalances, keeps good diversification, takes tax losses when possible, and watches the internal fees of the vehicles used, that person most certainly does not need investment management. Asset classes can be confusing (see the below chart, courtesy of Blackrock), but they are certainly not impossible to understand.

The question one needs to ask one's self is "Can I do this on my own and WILL I do this on my own?" If the answer to either question is no, then one needs to consider an investment manager.

Managers will cost between 1/2% and 1% on average. That means that all things being equal, your returns, when using a manager will be between 1/2% and 1% less than if you did everything on your own, when you should do it, and in the way that makes the most sense. Often, the fee a low cost investment manager charges will be more than made up for by the diligence that manager gives to the portfolio. Again, if a person can do this on her own and WILL do it on her own, she should skip hiring a manager and save herself the fee.

Once the decision has been made to hire an investment manager, the next step is finding an investment manager. Watch for our next article, "How to Find an Investment Advisor Who Works For You."