DIY Investing: Is This Right For You?

Small Business, Investing, Personal Finance

After saving, the next step in your personal finance journey is to build wealth through investing. We already discussed here that saving and investing and two different things. Only by investing will you be able to build wealth. However, the big question is, should you work with a professional or do it by yourself.

DIY investing is where an individual or retail investor builds and manages their investment portfolios without the help of professional managers or the services of a full-time broker. DIY investing is not new. Thanks to Robo advisors and endless sources of information online, it’s possible to do this. But that doesn’t mean that it is the right step for you. Here’s how you can determine whether it is the right route for your investing journey:

Table of Contents

You Make Emotional Decisions

While several emotions are behind our financial decisions, investment decisions are ruled mainly by fear and greed. DIY investors are prone to making emotional decisions, especially when the market is in turmoil. More often, they liquidate their investments, fearing that they will make losses. Others rush to sell their assets when something happens in their life.

Because these are rush decisions are primarily emotional, they hurt your overall financial plan and success. For instance, markets always recover after every downturn. So rather than sell your shares during this period, you should, in fact, be buying more.

Unfortunately, it’s hard to see things from this perspective without professional help. Unless, of course, you are well versed with investments and financial markets. But, if you know your emotions will get the better of you and cloud your investment decisions, DIY investing is not for you.

Lack Enough Financial Expertise

There’s more to investing and making investment decisions than just looking and assets and deciding what to buy. If you’ve downloaded the free Roadmap to Financial Success, you have seen that budgeting, saving, risk, and debt management are all part of financial success.

Before making any investment decisions, you need to understand your overall financial situation, from debts to savings level and risk, for better planning. For instance, if you have high debt levels, the goal should be eliminating these debts first before channeling the rest of your remaining funds into investments.

Plus, what are your investment objectives and goals? Understanding these helps you know what investment assets and strategies are right for you. Again, a qualified professional can help you with all this planning. On your own, all this information could be overwhelming, especially when you lack financial expertise.

Unless, of course, you have enough time, which leads us to the next point.

Related article: Basic Investment Terms You Should Know

Do You Have The Time?

Just like you need a lot of time in your hands to do DIY financial planning, you will need a lot of it for DIY investing. This is not a one-time decision where you decide to buy a stock and sit back.

No. You need to stay updated with the happenings in the market, the companies you invest in, and your portfolio. You need to read often about investment strategies and ideas. All the risk assessment, asset allocation, portfolio diversification, and portfolio rebalancing work fall under your hands. That means tracking your portfolio regularly to ensure you do not deviate from your investment objectives and goals.

If you are busy throughout the week without enough time, you are better off hiring a financial planner to help you.

Can You Consume All The Finance & Investment Content

And there is a lot of it! Professional fund advisors spend the better part of their day following market trends and reading all the available information. Also, keep in mind that investment assets respond differently to economic factors, both macro, and micro.

Even if you have enough time on your hands to follow your portfolio, can you consume all the available content to make a well-informed decision? Can you make sense of every piece of content and how it affects your investments and financial goals?

If not, consider getting a professional to work with you. They are trained for this, have enough time, and can consume all the available content to give you a final breakdown that works for you.

Tax Management

Are you well versed with tax issues? Can you keep up with any changing tax regulations that might affect your investments? If not, you might end paying more taxes than necessary. Worse still, you might not know what taxes to pay and when to pay, leading to accumulated penalties and fines from the tax body in your regions.

It is best to work with a professional. Apart from working to ensure you pay the required taxes in time, they also help lower your tax liability legally.

So, is DIY investing right for you? If any or all of the above situations apply to you, you should work with a qualified professional. However, if you are sure you can do it, watch out for our next post. We will be sharing top tips that will get you started in your DIY investing journey.