The pros and cons of DIY investing
There is a right and a wrong way to DIY invest. Ensure you avoid these pitfalls and take advantage of easy optimizations.
Investing is a key part of financial empowerment. And at Stash Wealth, we are all about financial empowerment for our clients, for our readers, and for everyone. Financial independence and opportunity are what we are all about. Investing is a key part of that for all of our clients. And we know that it can feel like the best and easiest way to invest is to just do it yourself.
DIY Investing is incredibly tempting and easier than ever. The 21st century has ushered in a new era of online investment opportunities. You can invest starting with a few dollars, on an app, in just a few minutes. And DAMN, is it tempting to think you can do it all yourself because you have the ability to with one visit to the app store.
What we’re here to tell you is that just because you can do something doesn’t mean you should.
The #1 temptation in DIY investing
Don’t try to dip your toe in with the money you’re comfortable “losing” in case shit hits the fan.
Because investing takes time to work, getting started with a small amount doesn't really teach you anything different than if you started with a large amount. Small or large, in order for investing to work, you need to give it time. And if you're disciplined enough to give it time, you'd actually be better off starting with a large amount, because the more you invest, the more you have the potential to make over time. Are we making it clear that it’s all about time?
With that said, the amount of money you start investing with shouldn't be based on what you feel comfortable with, it should be based on what you need to invest to be on track for your goals.
We aren’t totally anti-DIY. However, if you’re frustrated, confused, or even just disappointed in the returns of your DIY “Investment Strategy,” we’re here to drop some knowledge: it’s okay to ask for help, and the professionals are professionals for a reason.
DIY investing trap
With the assistance of technology and the wealth of information available online, it can feel logical to think we can and should do everything ourselves.
Many of our clients have tried investing on their own when they come to us. We hear the same story over and over again: they opened up an online account, funded it with some spare cash, listened to tips from friends, blogs, CNBC, and in the end they wound up with a bunch of investments that don’t make sense and haven’t performed well. They aren’t much closer to achieving their long or short-term goals than they would have been with a high-yield savings account. This is what we call the DIY “I can do anything” trap.
We get it, your intentions were good, but intentions don’t get returns.
The good news is: you don’t have to do it yourself. No, really. We’re going to say it again because it can feel so foreign, especially to Millennials. We’re used to googling it all and figuring it out, whether it’s how to poach an egg or when to take your fur-babies to the vet. But when it comes to your investment portfolio, you don’t have to DIY it. You can, and we’ll talk about that more later, but you don’t have to.
Financial independence through investing
The investing world has well over 30,000 investments to choose from. That’s as many options as the number of people on Tinder in most moderately-sized US metro areas. Do you have time to swipe right on a balanced portfolio? If you want to do the research on each investment it’s going to take a lot more time and effort than glancing at some pictures and checking out an Insta feed and Spotify Playlist.
And once you’ve chosen some investments, how do you put them together? Which ones make sense for your situation and goals? And do you keep your investments when your situation changes? Let’s say you have a baby, buy a house, or get married (presumably not in that order unless you’re Kim Kardashian), do you stick with your investments or do you need to find new ones that match your new goals and priorities?
These questions don’t even start to get into the details of when to sell, how your retirement portfolio should differ from your short-term investment portfolio, and which of those you need first.
All of this is to drive home the point that investing is complicated, no matter how easy the apps can make it seem, and although it is possible to invest yourself, and learn a lot while doing it, that doesn’t mean you have to.
The professionals are professionals for a reason. They’ve put in the time and they do this full time. You hire a mechanic to fix your car, you go to a doctor when you get sick (if you have health insurance that is), and you can also chat with a financial advisor to get your investment portfolio aligned with your investment goals.
What if I want to DIY?
If you have the time and want to DIY, make sure you are utilizing the right resources. Read everything you can get your hands on. And we don’t mean read CNBC or other news outlets and reddit streams and blogs that are hyping the market and giving #hottips. We suggest picking up a real book. There are some great personal finance books out there.
Our personal favorites are The Millionaire Next Door and I Will Teach You To Be Rich.
The best investment management client is an informed client
The educated client is the best kind. We can help you with the knowledge, but ultimately the decisions are yours. Our Financial Cliffnotes emails and blogs are a great way to stay informed.
Don’t get stuck in a costly mess because you tried to DIY and got lost in the jargon and endless options. You don’t have that kind of time to waste and unless your name is Billy McFarland, you don’t have that kind of money to waste either.
Stash Wealth provides financial plans designed to assist high earning young professionals build and manage their wealth.
Stash Wealth offers a pragmatic approach to financial planning and wealth management. Whether saving up for Tahiti or a Tesla, we help you achieve your short-term and long-term goals.
Written by Stash Wealth Staff Writer
Stash Wealth Staff Writers are knowledgeable about personal finance topics. Their objective is to unravel the complexities of finance trade jargon, products, and services in order to equip HENRYs with a sound understanding of financial matters.