I’m back from vacation folks…now back to the world of personal finance and investing…
In recent decades, the financial world has changed. With the click of a mouse, you can buy or sell pretty much anything; stocks, bonds, mutual funds, ETFs, commodities, the list goes on. More and more, people are taking charge of their own investments. Power has been given to the masses. On the contrary in many respects, the financial industry is becoming more complex. More choices and more products seem to make things more difficult to understand than ever before. Some of us are quick to throw up our hands in defeat and just want to forget about it – they seek professional help. For some, that’s a good thing. Others still, speaking for myself now, see the financial industry as a challenge; something to understand, learn from in order to create my own tailored future.
Here are a few reasons why some folks consider “going it alone” (some of the reasons I did at least) to become a Do-It-Yourself (DIY) investor.
1. You’re tired of investment management fees.
For every $10,000 invested in a mutual fund that charges 2% in fees, you’re kissing $200 per year goodbye. Mind you, there are some very good and productive mutual funds out there, but I’ve learned those guys are few and far between. Mutual funds over the long-haul rarely keep up with their respective index. Instead, I’m a fan of index products like iShares XIU, XIC, XDV, XBB and XSB to name a few and Claymore products like CRQ, CDZ, CBO and CLF. These ETFs offer investors an opportunity to buy highly-transparent, liquid investment products, with very low management fees. Straight-forward what you see is what you get kinda stuff which is an ally to the DIY investor. Personally, I like that. I understand that if I buy XIU (I own it) I’m buying a product that has the relative performance of the S&P/TSX 60 Index; the 60 largest (by market capitalization) Canadian stocks listed on the TSX. I figure if the 60 biggest companies in Canada aren’t making money, who is? I’m happy with whatever returns those big-blue chip boys are going to get.
2. You’re tired of feeling out of control.
If your money, err, my money is managed by someone else, am I really going to follow it that closely? I know the answer to this. I didn’t. I just assumed everything was running along just fine for almost 10 years of my investing career. For some, that may be OK. For me, I finally woke up I guess. Some folks use financial advisors or other professionals who are excellent at looking after their client’s best interests. That’s great. I have a few friends that are financial advisors. They have their client’s interests front and center. I’m not convinced the industry at large works this way. Businesses are in business after all to make money, not make friends. Looking back, my financial advisor never made my investing goals his priority. He was all about meeting sales targets and rightly so I guess. I must have had a bulls-eye on my chest when I walked into his office years ago.
I’ve learned I get more satisfaction from things in life when I’m in control of my own destiny. My journey to financial independence is no different. This doesn’t mean I haven’t sought some help and guidance from time to time, but simply put, my overall financial health has been better when I’ve taken more responsibility for it. I feel better about my future since taking ownership of my financial plan a few years ago. I haven’t looked back since…
3. You’ve realized it’s not THAT difficult to get started.
Think about this: you’ve probably managed or are currently managing some of your personal finances already. If you have a company pension plan, you probably sat down at some point and wondered what on earth to select for it. You’ve probably wondered how that plan is doing when the market gets hot or cold. If you’re in charge of paying the bills around your house, you’re already actively managing your money (just maybe not effectively yet). To be honest, you’re probably already doing many things related to personal finance and investing already, which means your journey is already underway right underneath your nose. One thing that is generally missing from the broader money management approach is simply taking some time to bring it all together. Looking at your assets and liabilities holistically. Setting some goals. Monitoring performance to those goals. You don’t need to start a blog, make up a bunch of spreadsheets tomorrow or make it your profession years from now. Just taking 15 minutes every month to stop and reflect how income and expenses are being managed is a huge start, an activity all adults can do with ease if they start dedicating a couple of minutes each week to unwind and think about things at the kitchen table. That’s the key right there - make the time.
In conclusion, I’m not saying DIY investing is for everyone. It’s not. You might seek help to get started and you want continual help to stay the course whatever that course may be. Everyone is entitled to manage their lives how they wish; the arena of personal finance is no exception. However, if you’ve taken time to read this blog today, either you’re already a DIY investor or you want to know more how to become one. You probably want to save on fees, feel like getting vested in your financial future or you feel it’s time, to make the time, to reflect upon where you are and where you want to be.
Contrary to what some companies in the financial industry tell you, is there anything wrong with that?
As always, I look forward to your comments!
My Own Advisor