Investing is a great way to create and build up your wealth over time. With smart investing practices, you’ll reach your financial goals sooner, and have an option to retire early. For new investors, the first decision that must be made is whether to invest on their own or seek professional assistance from a financial professional.
With companies like Robinhood, which allow you to easily buy and trade stocks from a mobile app, it is easier than ever to be a self-reliant investor. But is it the right choice for you? There are definite pitfalls that accompany ‘do it yourself’ investing, and if you’re not careful, you could end up hurting your financial well-being.
Pros of DIY Investing
Overview: Do it yourself investing is what it sounds like. Usually a DIY investor facilitates trades through an investing website or app. Research comes from what is published on the subject, talking to family and friends, or maybe even trial and error. Decisions regarding the investments are made on their own.
One of the main reasons people choose DIY investing is it allows for the freedom to do as you see fit. Whatever moves you want to make with your money, you can go for it and no one will tell you otherwise. This can sometimes include non-traditional investment options. Some DIY investors like the thrill of having complete control over their portfolio.
Maybe the biggest reason DIY’ers go it alone, is the cost associated with getting help from a financial professional. DIY investors may still have to pay fees to process their investment trades and selections, but they feel the amount is far less than working with a financial institution. But is it? Read on for more.
Cons of DIY Investing
Lack of Experience Investing
Especially if you’re just starting to consider investing, your experience will be very limited. As a result, you may run into situations that you unfamiliar and subsequently make a poor investing decision. Inexperienced DIY investors have a tendency to put their money towards a investments that they don’t completely understand. They are basing their decisions on the latest headline or financial news that tells them this is the thing to do. That can be a costly choice. Working with a team of credentialed, experienced professionals can bridge that gap for you so that costly mistakes are not made.
Lack of Knowledge of the Market
Investing is a little more complicated than just simply buying and selling stocks. The fact of the matter is, if you’re new to investing, there is a learning curve, during which you may find yourself losing money. Sure, there will be some DIY investors who are well versed in the market through self-taught market research or courses they took, or if they are up to date on financial news, but others will have less knowledge.
Because of this, small-time investors may find investing on their own a more favorable option than choosing an advisor, as their risk isn’t large because they only invest an amount of money that they are comfortable with losing. But if you’re looking to do some serious investing, going on your own is a risky decision.
Pros of Using a Financial Advisor For Investing
Overview: A financial advisor will sit down with you and help create an investment portfolio that is in line with your current financial situation, as well as your financial goals.
An Advisor is Experienced and Has Extensive Knowledge of the Market
An advisor will combat any inexperience you have with the many years of investing they have under their belt.
By using an advisor, you’re also benefiting from their knowledge of the market. They’ll help you know when to trade your stocks, when to buy, and when the economy is strong versus when it isn’t. Overall, with an advisor, you’ll know that your finances are in good hands.
Remove the Emotion
As much as investors try, it can be challenging to always remain rational in the investment decision making process. Emotions and psychological influences can often cause havoc even for the most rational and level headed investors.
Despite the best of our intentions, it is nearly impossible for an individual to be devoid of the emotional biases that inevitably leads to poor investment decision making over time. This is why all of us on the Trust Point team make a concerted effort to utilize the experience we have gained throughout market cycles. We apply our core investment principles every day. Although we are very aware of current headlines and driving influences in the market, we keep our eyes focused on our clients’ long term goals. Our systematic investment process helps steer clear of the emotional pitfalls in exceedingly strong or weak markets to reduce the impact of human emotions.
Cons of Using a Financial Advisor For Investing
Less Freedom….but Also Less Hassle and Time
With an advisor, you are still the ultimate decision maker, but the decisions you make are influenced by the advice of your experienced advisor. However, if it means you’ll see a bigger return on your investments, then giving up a little freedom is a small price to pay.
While you may have less control, you will have more time to focus on other things that you enjoy. You don’ t have to be the investment expert. If you enjoy it, do the research and have discussions with the team at Trust Point regarding your investor options. But leave the heavy-lifting for the financial professionals. Our ongoing research and clear investment philosophy combined with proven principles result in tailored solutions for each client.
Need Help with your Investments?
Anyone that wants to take control of their financial future could benefit from meeting with a professional advisor. Whether you need a financial assessment, management, or strategy, an advisor can provide the insight and know-how to maximize wealth opportunities. If you’re hoping to grow your wealth for your children’s college funds, or if you want to retire comfortably, Trust Point’s financial advisors will help you determine the outlook of your finances, from now, to well into the future, as well as the best way to achieve your desired wealth goals.
We are looking forward to working with you to reach your financial goals!