Whether you manage your own money or hire a professional advisor to do so on your behalf, it is important to understand the investment strategy, even if only at a high level. Quite understandably, many Americans are intimidated or confused when facing the vast universe of financial products available to them. While it is not necessary for every individual to have a complex knowledge of asset management to select funds or understand how investments are allocated, familiarity with the fundamentals is a key component to a successful strategy.
Not all investors will need to know the breakdown between U.S. and foreign equity, never mind their concentration in various sectors. But everyone should have a basic idea of how they're invested: how much of your portfolio is in cash? Are you invested in single stocks or tracking a market index? Passive low-cost exchange-traded funds or actively managed mutual funds? None of these questions require an exact answer either; the key is understanding the terms and how they're being applied to your situation.