If you’re just getting started with investing you’ve got an important question to answer. Before you even pick a broker or start researching stocks, you need to decide whether you should manage your own money.
It’s easy to get overwhelmed by the prospect, but the fact of the matter is, it’s never been easier to handle your own investments than it is today.
With the proliferation of online brokers and low-cost ETFs, you can build a professional-quality portfolio from the comfort of your own home.
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After that, it becomes a matter of managing your portfolio, whether that’s via trading stocks or periodically rebalancing funds.
If you’re willing to put in the time to learn, there’s nothing stopping you from generating the same returns that you would with a fee-based advisor.
It does take some effort. We’re not advocating that you pick a handful of funds in your 401(k) and simply call it a day (although target date funds can get pretty close to a hands-off portfolio).
But there are much better options available than set-it-and-forget-it or hiring a high-priced financial advisor. In fact, a recent survey found that roughly half of investors use self-directed accounts exclusively.
Here are five reasons to manage your own money:
- Self-directed advice is not expensive. Financial advisors usually charge 1% to 2% of your portfolio balance every year. That can really add up. Investment advisories on the other hand will tell you exactly what to do to meet your financial goals—at a very small fraction of the cost of a financial advisor.
Your circumstances can change. Stop us if this sounds familiar: You meet with a financial advisor to set up an investment account, he or she puts you in a variety of mutual funds that fit your investment goals at the time … then you go years without paying much attention to your account other than to look at the total return listed on your quarterly statements. But what if your investment goals change?
What if you set up the account as a 30-something newlywed just hoping to conservatively save for retirement, and now you’re a 40-something father of two who wants to invest more aggressively to be able to afford to send both of them off to college in a few years?
Those years can sneak up on you if you’re not paying close attention to what you’re actually invested in. If you manage your own account, you’re well aware of what’s in it. You bought and sold all the stocks yourself. And you know whether you want to be more aggressive, more conservative or more diversified. If someone else is managing your investment account, it can inadvertently become an afterthought.
Investing on your own is much easier today. Until the Internet came along, things were a lot harder for self-directed investors. Advice was mailed to you, which meant it could be days before you received an alert to buy—or sell—a stock.
Today, online investment advisories provide expert opinions on what stocks to buy and where the market is headed. And online brokerage sites like Robinhood allow you to create and manage your own investment accounts without having to hire a broker. Put simply, the Internet has given self-directed investors more tools to do it themselves than ever before.
Not all financial advisors are created equal. Even if you’re willing to spend the extra money to have someone manage your money, you may not be better off. Some financial advisors just aren’t very good. Many fail to regularly beat the market. Others may not have your best interests at heart, convincing you to put your money in funds you shouldn’t be buying because they take a percentage of every transaction.
Now, most advisors are above board and act responsibly. But even a well-meaning advisor may be beholden to company guidelines, pushed to sell a new product, or even forced to prioritize high-value clients instead of average investors. In those cases, you can easily feel like an afterthought.
- NO ONE CARES MORE ABOUT YOUR MONEY THAN YOU! It’s worth reiterating. There are plenty of honest financial advisors out there. But is one of them managing your money? You may never know for sure. When you manage your own portfolio, you—and you alone—decide where your money goes.
Manage Your Own Money—The Bottom Line
There’s less mystery surrounding investing on your own these days. With so much information at your fingertips, do-it-yourself investing is much easier than it was 20 or 30 years ago.
And that’s what we do at Cabot Wealth Network—make your job as a self-directed investor easier. With plenty of advisories and memberships offering a range of investment styles, you can find the advisory that matches your goals today, and change to a different style as your goals change. If you’re willing to invest on your own, we’re here to help—and have been since 1970.
Investing on your own isn’t as scary as you think. Managing your own money is empowering and educational, and profitable.
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