There is a lot to be said about being a DIY investor. You do not have to worry about conflicts or interest or misguided advice when the person handling your finances is the one staring back from the mirror. But before you fire your financial advisor and take the monetary reins, you need to know you are really up to the job.
The desire to become a DIY investor may be strong, but actually carrying it out can be another thing altogether. If you want to handle your own finances and succeed as a DIY investor, there are a few key qualities that will make it easier. Here are the essential skills the best DIY investors have in common.
The Time to Do It Right
Smart investing takes time, especially if you are starting your DIY adventure from zero. Before you fire your advisor and take over your financial decisions, think about how much time and effort you have to invest.
If you are working 80 hours a week on the job, you may not have time to tackle the family finances as well. For busy workers, DIY investing may simply not be in the cards.
You will also need to look at the value of the time you would have to spend on DIY investing compared to the price you are currently paying for professional advisory services. If you are paying a fair price and receiving solid service, staying where you are could be the smartest move.
An Inherent Interest in Financial Matters
It is hard to be good at something you are not interested in. If you hate the game of golf, you will probably not be hitting the links anytime soon. If you dislike working out, a daily trip to the gym is probably out of the question.
If you want to be successful as a DIY investor, you should have a strong interest in money and finance. You do not have to be an expert, at least not right away, but a willingness to learn is a vital prerequisite to DIY success. “Before you go DIY, think about your level of interest, your research skills and how willing you are to learn about all things financial.” Says Patrick Dwyer formerly of Merrill Lynch.
The Expertise to Get it Done
Saving for the future is not rocket science, but choosing the right investments is not always simple. If you want to succeed as a DIY investor, you will need the expertise to get it done.
You do not need all that much experience to get started, and selecting widely diversified mutual funds can be surprisingly simple. Even so, learning about the various types of investments will be very important to your success, and a strong desire to learn could prove to be a valuable skill.
Self-Discipline
One of the most overlooked benefits financial advisors bring to the table is a sense of discipline. Financial advisors set up accounts for their clients, but they also develop ongoing contribution programs. They know that putting a small amount of money aside on a consistent basis can provide huge gains down the line, and this enforced discipline helps their clients succeed.
If you plan to show your current financial advisor the door, you will need to replace that type of discipline, and doing that on your own can be a big challenge. With so many other things competing for your money, it is easy to let consistent investing slip, and that could prove devastating to your future.
A Calm Outlook
It is not easy to stay calm when the world, or at least the financial world, is falling apart all around you. When the news is all bad and the stock market is crashing, there is a natural desire to do something.
In those times, however, the ones who do nothing tend to come out on top. Experienced DIY investors know that the stock market is a bumpy ride, and they recognize the folly of panicking when they should be buying instead.
Before you take the financial reins, think about how you react in a crisis and let that be your guide. If you can keep your head when everyone else is in a panic, DIY investing may be for you. If not, you might want to stick with your current professional advisor.
There are plenty of advantages to being a DIY investor, from knowing where your money is and what it is doing to avoiding financial fraud and conflicts of interest. But before you leave the investing to the person in the mirror, you need to make sure that person has the skills they need to succeed, starting with the essential attributes listed above.
