Should I Manage My Own Investments?
by Ryan Repko, CFP®
Many people wonder whether it would be better for them to hire a financial advisor to manage their investments or to pursue a do-it-yourself approach. The truth is, many people can successfully manage their investments themselves, making it unnecessary to pay someone to do so. To determine if you are a good candidate to manage your own investments, you should first ask yourself a few questions.
The first question is “do I have the expertise?” A successful investment portfolio needs to be low-cost, globally diversified, and occasionally rebalanced to ensure the appropriate asset allocation based on your goals. With enough research, you may be able to determine what investments you can use to build a portfolio that checks these three boxes. But remember, mistakes are very costly.
The second question is “do I have the discipline?” I have found that when the market is up, many people think they have the discipline to be their own investment manager. However, it becomes significantly more difficult to stick with your investments during temporary declines, or long periods of little-to-no return. Making emotional mistakes at the very worst times can permanently affect one’s retirement.
The third question is “do I have the time?” Successful investment management requires time during every part of the investment cycle. On the front end, researching how to invest and manage your portfolio requires a significant amount of time. Between regular adjustments to your investments and staying on top of your required minimum distributions, investment management only becomes more complicated and time consuming as you age.
If you have the expertise, discipline, and time you should be able to manage your own investments. Over my years as an advisor, I have met many people who successfully manage their own investments, who would consider paying an annual advisory fee to be wasteful.
But more often than not, I find that completely capable people with the time to manage their own investments choose to hire an advisor to take the burden and the responsibility off their own shoulders. They value paying an advisor so they don’t have to make (and likely second-guess) all their own decisions. There is an incredible peace of mind knowing that a trusted, capable professional is watching out for your livelihood, or for your spouse’s if you predecease them.
Ultimately there is no right or wrong choice; just the one that’s best for you and your family. If you’re not sure if you have the expertise, discipline, and time to manage your investments yourself, you may want to seek the help of a financial advisor.
Ryan Repko is a Certified Financial Planner™ professional with Ruedi Wealth Management in Champaign, Illinois.