Do It Yourself (DIY) Investing – Is it right for you?

DIY investing is on the rise. More and more people are taking charge of their investments, making decisions about what to buy and sell themselves. But is DIY investing right for you? That depends on several factors, including your level of investment knowledge, the time you have to devote to trading, and your risk tolerance.

In this article, we’ll take a closer look at DIY investing and explore some of the pros and cons to help you decide if it’s right for you.

What is DIY Investing?

DIY investing, also known as self-directed investing, is when investors manage their portfolios rather than relying on professional money managers. With DIY investing, investors have control over the types of investments they make and when to buy and sell them.

The rise of online brokerages and trading platforms has made DIY investing more accessible than ever before. In the past, individuals would have to place trades through a broker, which could be costly. Now, with online platforms, investors can trade directly without having to pay brokerage fees.

Why Are More People Opting for DIY Investing?

There are several reasons why DIY investing is on the rise. One reason is that people are tired of paying high fees to professional money managers who often underperform the market.

Another reason is that with the advent of online trading platforms, it’s now easier than ever to trade stocks, bonds, and other investments yourself. 

We can’t ignore free online resources such as blogs, YouTube videos, and even online courses that have made DIY investing more popular. With so much information readily available, it’s easier for people to learn about investing and make informed decisions about their portfolios.

What are the Pros of DIY Investing?

There are several advantages to DIY investing. Let’s take a look at a few of them.

1. You are in control: When you’re the one making investment decisions, you’re in control of your financial future, and you don’t have to rely on anyone else to make decisions for you. You will gain a lot of experience as well as a better understanding of how the markets work when you’re actively involved in your investment decisions.

2. Lower costs: One of the biggest advantages of DIY investing is that it can save you money on fees. If you’re paying a professional money manager to manage your investments, you’re likely paying high fees, typically > 2% annually, sometimes 3% – 4%.

With DIY investing, you only have to pay the costs associated with buying and selling investments, such as brokerage commissions. These costs can be much lower than what you would pay a professional money manager, commonly $7 – $15 / trade.

3. More flexibility: With DIY investing, you have more flexibility when it comes to your investment choices. You’re not limited to the investments that a money manager picks for you. You can choose to invest in stocks, bonds, ETFs, and other investment products that you’re interested in.

4. Potentially higher returns: With DIY investing, you have the potential to earn higher returns than if you were to invest with a professional money manager. That’s because you’re in control of your investment decisions and can choose investments that have the potential to perform well. It’s simple math: if you pay less, you have more money to invest.

5. You can start with a small amount of money: You don’t need a lot of money to start investing. Many online brokerages have no minimum account balance requirements, so you can start investing with just a few hundred dollars. It also minimizes the risk since you can start slow and gradually build your portfolio over time.

What are the Cons of DIY Investing?

There are also some disadvantages to DIY investing that you should be aware of before making a decision.

1. Riskier:  DIY investing is riskier than working with a professional money manager. That’s because you’re the one making investment decisions, and if those decisions are not successful, they can lead to losses. Money managers are highly trained and experienced professionals who know how to manage risk. Portfolio managers have resources that you don’t. They may buy or generate private studies like history charts or correlation charts. The portfolio manager talks to the CEOs & CFOs. Question: will the CEO of the Royal Bank have breakfast with you? No. So you individually don’t know where the CEO see his company going.

So if you are not experienced, you can experience large losses. Do you have the guts to buy now when markets are down?

2. Requires a lot of time: DIY investing requires a lot of time and research. You need to educate yourself on the different investment options available and make sure you’re making informed decisions. If you don’t have the time to commit to research, then DIY investing may not be right for you. For example, would you like to participate in the U.S. Mid Cap space? Do you have the resource tools to compile a portfolio of such companies? No. The portfolio manager can offer you access to this space.

3. Requires discipline: Successful investing requires discipline. You need to be able to stick to your investment plan and not let emotions get in the way of your decisions. This can be difficult for some people to do on their own. Are you smart enough to have bought Shopify? And were you there to sell near the top? How about Nortel, many bought in and many lost out.

4. Limited resources: When you’re DIY investing, you’re limited to the resources that are available to you. This includes online research, books, and articles, and if you’re not sure where to start, it can be overwhelming.

5. No professional guidance: When you’re investing on your own, you don’t have access to professional guidance. This can be a problem if you’re not sure what you’re doing or need help making investment decisions. What about tax planning? We have an estate planning team replete with accountants, lawyers, actuaries, etc. They help us when required to guide you to manage your tax bracket.

Is DIY Investing Right for You?

Now that you know the pros and cons of DIY investing, you can decide if it’s right for you.

If you’re willing to take on the risk and are comfortable making your own investment decisions, then DIY investing may be a good option for you. However, if you’re not sure about your investment choices or don’t have the time to commit to research, then you may want to consider working with a professional money manager.

The best thing you can do is to educate yourself on the different investment options available and make sure you’re making informed decisions. If you’re not sure where to start, there are many resources available that can help you. Warren Buffet’s rule: only invest in companies that you understand. He missed the tech bubble. We don’t participate in crypto. Six months ago we looked stupid, not so much now.

Remember, there is no right or wrong answer when it comes to choosing between DIY investing and working with a professional money manager. It all depends on your situation and what you’re comfortable with. Whichever route you choose, make sure you do your research and understand the risks involved.

The Advantage Of Having A Certified Financial Planner In Your Corner

DIY investing might be for you if you’re willing to take on the risk and are comfortable making your own investment decisions. However, make sure to do your research and understand the risks involved before making any decisions.

Investing can be complex! Avoid making risky decisions by having a Certified Financial Planner on your side. With over 20 years experience, we’re here to help you navigate and simplify creating your own investment for retirement each step of the way. We provide you with a variety of options. Click here to schedule a virtual zoom call to learn more about how we can help.


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