Self-directed investing 101

The investment industry has evolved – that’s a great thing for investors.  We now have more choices than ever before regarding where, how much, and how often to invest our money.  With more choices available to us however that can mean tougher decisions and more information for any retail investor to navigate.  Money decisions can be scary.  It’s hard to know who to trust.

Today’s post will provide an overview of self-directing investing (a path I’ve chosen) – thanks to a reader question and their request for input.

Reader to My Own Advisor:

Big fan of your site and the thought-provoking insights you provide regularly.  My husband and I are ready to take control of our investments.  As you can imagine, it’s daunting.  Some of the challenges I’m having is the process to get more control of our accounts.  I appreciate how direct you are on your site and the use layman’s terms to avoid financial jargon.

The plan is to be in control of our investments by July of this year.  Any overview or suggestions are appreciated.

Thanks for the kind words about the site.  I cannot offer direct investing advice, for many reasons, but I can take a walk down memory lane.  Today’s post will highlight how I got into self-directed investing, what key accounts I use, and some considerations for you.

What is self-directed investing?

Terminology and definitions are important, so let’s start with those.  For the purposes of this post self-directed investing could apply to an account, or your style of investing, or both.

Example:  for one, you can own a self-directed RRSP.  Remember the RRSP (Registered Retirement Savings Plan) is an account, not an investment. So, this February, don’t tell others “I need to buy RRSPs” before the RRSP deadline for the 2016 tax year.  You don’t buy RRSPs.  You put money into this account (or take it out).  Like coins going into a piggy bank, consider the RRSP the piggy.  The coins can be your different investments.

There are many different types of self-directed accounts:  RRSPs, Tax Free Savings Accounts (TFSAs), Registered Education Savings Plans (RESPs), Registered Retirement Income Funds (RRIFs) and more.

Two, self-directed investing can be how you invest.  Meaning, you may prefer to invest on your own (as I do), in control of your own investment choices inside various self-directed accounts.  Slightly contrary to the terminology though you can be a self-directed investor and get some help too.  You can have a financial advisor or even a robo-advisor to help you with investing decisions.

On that note, all investors need some help, now and then, at one time or another.  So don’t misinterpret self-directed investing with never needing any help.  We all learned from someone, somewhere, sometime.

OK, there’s your primer.  Let’s move on to how I started, some considerations for you, and how I invest now when it comes to self-directed investing.

Self-directed investing – the beginning

I wasn’t always My Own Advisor, and I don’t mean this site.  For many years, throughout my 20s actually, I owned big bank mutual funds inside my RRSP* – in what was called a mutual fund RRSP account at my big bank.

*TFSAs were not around in my 20s.

Although I knew there were other ways to invest (i.e., own stocks, bonds, GICs, etc. inside my RRSP) I chose to invest in mutual funds because a) it was easy, b) I was used to it, and c) there were no transaction costs to buy more mutual fund units every few months with money contributed to my RRSP. It seemed like a good deal…

What I learned however over time:  my big bank mutual funds were costing me lots of money in money management fees – money I would never see again.  This ultimately led me to quitting the mutual fund industry**.

**Mutual funds are not bad per se but I believe pricey mutual funds costing >1% in money management fees are.  Remember – the money you pay in management fees is the money you can’t keep, you can’t invest nor grow for yourself.

After reading blogs, books and more I learned there was a better way to invest including what accounts to own, how best to contribute to them, and furthermore what to invest in them.

Self-directed investing – the considerations

Over a few weeks, many years ago, I slowly transferred my RRSP account (and my wife’s account) over to become self-directed RRSP accounts.  The process included selecting the big bank discount brokerage I wanted to invest with, based on a number of criteria; and completing the requisite paperwork to transfer account assets.

Here is some of the criteria and questions I answered back then, and what I would suggest you to consider today, if you’re curious about running self-directed accounts:

  1. Investment consolidation – Investors who are dealing with many different financial institutions may have duplication across their investments. In money terms, duplication = wasted money. Self-directed accounts allow investors to see “the big picture” and avoid “diworsification” across their portfolio.  Consider consolidating financial assets – for investment purposes – under one financial firm.  It doesn’t have to be your big bank.  There are many options available to investors.
  2. Fees – Investors should be mindful of any and all money management fees they pay to own investments. Again, I can’t say it enough: the money you pay in fees is money you’ll never see again.  Do what you can to avoid making someone else wealthy with your money.
  3. Administration – Investors may or may not want to be in control of all financial decisions. To that end there are dozens (if not hundreds) of financial companies ready to help you manage your money. These include accounts with big bank discount brokerages, accounts with robo-advisors, and accounts with independent money management firms.  Consider how “hands-on” you should be with your self-directed investments and how “hands-off’” you should be as well.  This is not a trick question or statement.  If you don’t know the answers, in rather comprehensive detail, you should strongly consider some financial professional support.  This is not a bad thing – as long as you are mindful about #2 and #1 above.

Self-directed investing – the current

You might already know from reading my blog – I consider myself a hybrid investor.  I invest in many Canadian dividend paying stocks for dividend income AND I invest in some low-cost Exchange Traded Funds (ETFs) for long-term growth.

This is how we’ve decided to invest.  Your mileage may vary.

Using this hybrid approach we consider ourselves self-directed investors with self-directed accounts.

As self-directed investors we are working on maximizing contributions to our registered accounts first.  We rebalance our portfolio by adding new money and buying assets that have lagged in price.  We try and avoid selling any assets regardless of how far their prices may fall.  If anything, we try and celebrate falling prices – we buy more of what we own.  We avoid financial headlines of doom-and-gloom and euphoria alike.

The things we focus on in our self-directed accounts are keeping:

  • Our contributions, steady
  • Our investment costs as low as possible
  • Diversification across our investments (i.e., investments from different sectors and countries)
  • Tabs on any taxable concerns.

We save, we invest, we reinvest (money paid to us from our investments) and we rinse and repeat.   That’s pretty much it.

The Summary

Self-directed investing may or may not be right for you.  Owning self-directed accounts however can provide a number of strategic benefits, including investment consolidation, a lower-cost fee structure, and ease of administration to name a few.  Consider your investing goals and financial objectives before making any major financial decisions.  If in doubt, please discuss all money matters with a financial professional.

Got a question or looking for a perspective?  Send me a comment or an email.  I’d be happy to consider it for a future blogpost.

My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.

10 Responses to "Self-directed investing 101"

  1. I don’t worry about daily fluctuations in the stock market nor do I worry about recessions (and I have been through many). My portfolio spins off a generous dividend income equivalent to about 6% of the value of my portfolio, while my portfolios grow annually at about 9%. I came across this method of investing after an investment advisor lost $300,000 of my life savings that he had put in mutual funds. Back then I knew nothing about investing.

    My background was in designing commercial risk scoring systems for large banks, insurance companies and other corporations. I took what was left of my money and approached investing the same way I did any commercial risk situation, by building a stock scoring program. This software has served me well for almost 20 years. My portfolio is more than 300% greater than when I started.

    An 80 year old woman asked me for help in January of 2019 because her investment advisor had lost hundreds of thousand of her life savings. While she was quite computer literate, she knew nothing about investing. I taught her how to use my simple software and how to invest. She has not only doubled her monthly income but recovered much of what she had lost. She insisted I finish a book I had started on investing several years ago. I did and, thanks to her hundreds of questions, it is much better than it would have been. It is called, “Income and Wealth from Self-Directed Investing” (Ian Duncan MacDonald at

    Most people don’t want to read books. They still need help. I summarized the book into 4 ten minute Power Point lessons with audio. I provide the lessons free to anyone who sends me an email ( and asks me for them. My objective is to open investors’ eyes to what goes on in the investment industry. I do not want anyone to suffer a loss like I did.

    Anyone who sits through these lessons is going to be much, much wiser and a more careful about investing than I was. I do get into how someone with very little to invest can be frugal about their spending and slowly build their life savings.

    I read recently that 60% of investors want to know more about direct investing. It is much easier to do than most people imagine and it sure beats not understanding what your money is being invested in. Yes, there will be many who will be too intimidated to try something new and many who are too apathetic to take real responsibility for their investing. However, all I can do is try to educate them.

    1. Thanks very much once again for your insights and details Ian. I am happy to check out your stuff and I will get to it/them eventually 🙂

      Kudos to trying to help educate others!

  2. Hello,

    I know I’m behind in asking a question to this post but…

    We have about 100K in RRSP’s at BMO. We would like to make that self-directed. Do we open an account with Investorline or switch to something like Questrade? I can’t seem to figure out if the costs make of those options and types of switches profitable. I am afraid, by being uneducated, I’ll actually end up spending MORE money than if I just let the bank take care of the funds.

    Not sure if I was specific enough, but am happy for ANY feedback and it’s much appreciated,


    1. There are a number of self-directed accounts you can own – RRSP, TFSA, taxable, LIRA, etc. You can open those at BMO, CIBC, Questrade, other very easily or transfer your mutual account to a self-directed account and simply leave the funds you have in the new account. Consider accounts like a container. You can have different containers to put stuff in (investments). A self-directed account (container) is a pretty flexible since it can hold stocks, bonds, ETFs, mutual funds, cash, GICs, etc.

      I would do some reading on self-directed investing from various institutions (thanks for reading my post) and then figure out which account by which institution is right for you.

  3. We have a very similar investing path. I also started with the traditionnal bank mutual funds. Although I tend to consider myself more as a self-directed investor, I do have some hybrids move! I don’t control my pension plan from work but it is sill a good chunk of my retirement resources.

    Other than that, I now entirely control my investments and I wouldn’t move back! Returns are much higher and I also feel a lot more confident about what I pick as investments. I guess time and experience are there for a reason! 😉



    1. Great to hear from you Mike. Where the heck are you now? 🙂

      I wouldn’t invest any other way right now but I wouldn’t rule out robo-advisor services to keep my hands even more off the steering wheel.

      Best wishes and safe travels.

      1. Hahaha! Currently in Costa Rica but working on my online business like never before. Lots to come! 😉 Amazing how a trip like this changes your perspective and pushes yourself to new limits! Road to financial independence has never seemed so clear.

        Can’t wait to tell you all more!


  4. “My husband and I are ready to take control of our investments.”
    That’s the starting point, wanting to manage ones’ own finances. For me that would exclude Financial Advisors, bundled products, Robo-advisors, etc. But before taking control, one must evaluate the various options and decide which suits their time horizon, investment style, and the goals they’ve set for their investments.
    You’ve certainly given a good overview and lots to consider Mark. Taking charge should boil down to leaning as much as one can and then implementing a plan of action over a period of time.


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