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Why Investing on Your Own May Not Be Your Best Option

Guest Post, Investing6 Comments

Why Investing on Your Own May Mot Be Your Best Option

Hello everyone! Today I’m having my first guest post, which is from Kayla of ListenMoneyMatters.com. Let me know if you would like to guest post on Finance For Geek.

I think we all agree that nobody begins investing in order to lose money. Rather, if you are going to go to the trouble of investing your money, you want to gain something for your time and effort. But while it may not be possible for you to end up a millionaire overnight, you can take steps to learn how to maximize your investments so that you gain the most. One thing that can help is to learn why investing on your own may not always be the best idea to get a good Return On Investment (ROI).

Choosing investments wisely

When you try to go alone as far as investing is concerned, you may not choose your investments wisely. Money is so emotional, which can get in the way of wise investing. This is one argument for hiring an investment firm or an investment advisor. Of course, you could also go with a robo-advisor to help you. If you aren’t sure which one to choose, check out what a few robo advisors have to offer first.

They can be easy to use, free up your time, and they help you make better investment choices so you can have better investing results.

Experience & Education

Investing on your own may sound like a great idea because you get to skip paying all those pesky fees attached to hiring an advisor. But the fees aren’t all that high when you compare how much you pay to what you get. Have you paid for an education that centers on banking and investments? If you answered no, consider that an investment advisor probably has and so have those that worked to create robo advisors.

In addition, investment advisors are usually experts in their field. They work with investments all day long. In contrast, you may only look at information about your own investments for a few hours each week, if that. The end result is that you may pay a little in fees for an investment advisor or robo advisor, but you make more on your investments to cover those fees and then some.

Investment choices

Another reason it may sound enticing to invest on your own is because you have more control over what you invest in. However, going back to both education and experience, you may lose out.

Inexperienced investors often panic if the market takes a downturn and pull their money out of an investment too soon. Sometimes that is the right thing to do, but not always. At times, pulling your money out and putting it elsewhere could cost you thousands. When you are investing on your own, how do you know when to ride it out and when to get out? That’s where an investment advisor can help.

Rebalance your investments

Rebalancing your investments is just one more reason it can be wise to have an investment advisor or robo advisor. It can be tricky to decide how to match your risk tolerance to your investment portfolio.

But an advisor will ask you questions to help determine what your risk threshold is. Based on that information, your investments can be moved around to help you earn greater returns.

Will you become a millionaire overnight by using an investment advisor? The answer is, probably not. It will still take time for your investments to grow. But as you can see, there are reasons why investing on your own may result in lower returns.

Kayla is a personal finance blogger in her mid-20s who loves to write about money topics of all kinds.

What about you? Are you investing on your own or are you already using robo-advisors? Let me know in the comments!

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  • Avatar for Finance For Geek
    Dinero Pro (Javi)
    Apr 11, 2017 at 2:32 PM

    Great post! I personally do investing myself with some low fee mutual funds and index funds. However, Vanguard has awesome advisers that can answer any questions if the investor needs clarification or help. I definitely agree that the market up and downs can hurt us if we panic so if people are investing for themselves they will absolutely need a thick skin! Great Job Kayla, thanks for sharing FFG!

  • Avatar for Finance For Geek
    David
    Apr 28, 2017 at 9:53 AM

    What tangible advantages do you see investment advisers providing over a typical self-managed 3 fund portfolio of low-cost ETFs? What about compared to typical “robo advisors” such as Future Advisors?

    I have a simple 3 fund portfolio that is weighted 70% ITOT, 20% IXUS, and 10% AGG (I use Fidelity so these are commission free). My bond allocation is probably a bit high given that I’m 26 with many investing years ahead of me. I keep it at 10% as a small hedge against a recession. Timing the market is impossible, but at least I’ll have something to re-balance with. Worst case, there is no recession and my portfolio is up which makes me happy.

    • Avatar for Finance For Geek
      Finance For Geek
      Apr 30, 2017 at 11:12 AM

      I can’t say anything regarding self managed investment because I’m only using robo advisor (Wealthsimple) at the moment. Still it seems you’re on a great path for your age! And heck yeah no matter what track you choose (self vs robo advisor) the important thing is to start asap for people who haven’t already.

      • Avatar for Finance For Geek
        David
        Apr 30, 2017 at 5:41 PM

        Starting early is definitely super important. Time in the market is more important than anything else. I can see the importance of having an investment adviser when your net worth hits 8 figures because you really need to consider the tax implications of all of your actions.

        • Avatar for Finance For Geek
          Finance For Geek
          Apr 30, 2017 at 5:45 PM

          Yes! It definitely takes a different approach when reaching some milestones. I’m personally still on a growing phase so I don’t think it matters a lot at the moment.

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