Am I better off managing my portfolio myself?

Category: News

DIY investors now have unprecedented access to investment information and markets. This has levelled the informational playing field between them and professional investors.

Even though you may have the tools to do manage your own portfolio, should you go down the DIY route?

What you need to be a successful investor

Time and interest

You will need to dedicate a lot of time to develop a strategy and maintain it. This should involve studying the various ways to build a portfolio (of which there are a few) and deciding what you want to do. This should take in as many different perspectives as possible.

Once you have formulated your strategy you will need to review it and the portfolio on a regular basis.

You should consider whether doing this is a good use of your time. Do you have a better use for it? Could you be spending time with your loved ones? Could you be spending it on furthering your career and earnings?

Do you have the interest in investing to devote countless hours to studying it? Do you care enough about the subject to have it become one of the things you know the most about maybe at the expense of other subjects or pass times?

Patience and discipline

Investing can be a rollercoaster. When everything is going up you can feel like it is never going to end. When markets get scary you think the exact opposite. The media will constantly tell you about the new “hot thing” or that “billions were wiped off the value of companies”. Every time your gut will tell you that you should be “doing something”.

If your studies were similar to our own you will understand that successful investing often involves doing very little. This means you will need to do the opposite of what your instincts might be screaming at you to do. If you do something you could be further lead astray by countless behavioural shortcuts which served humans well when they were hunting mammoths but do not help now.

Investor behaviour can impact returns more than fees or the choice of investments. A recent report estimates an investor could lose up to 50% of their portfolio if they cannot be disciplined in managing their investments.

How have individual investors fared?

A frequently quoted, but also frequently criticised, study on the subject comes from DALBAR. This indicates DIY investors massively underperform the market. Research by CASS Business school found DIY investors typically underperform the market by 1.5-3 percent every year.

This underperformance is something commentators have referred to as the “Behaviour gap”.

Is financial advice guaranteed to outperform?

We believe, and studies back this up, that good financial planning will leave our clients better off. One thing we focus on is ensuring our clients stick to their strategies and minimising their behaviour gap. This does not mean better portfolio returns are guaranteed. This is because they are not our sole concern We are looking to help our clients get a better return on their lives.

Whilst this involves ensuring every aspect of a clients planning is as good as it can be (tax, estate planning etc) this is not what it is really about. It is really about showing a client what is possible and helping them give themselves “permission” to do the things they want to do with their lives.

Would you like to see how we could help you get more out of your money and your life? Feel free to book in a free no-obligation chat here or get in touch.

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