“The professional has learned that success, like happiness, comes as a by-product of work.”
— Steven Pressfield
Investing is a decision to take on a calculated amount of risk today under the assumption that you're building a brighter, more secure tomorrow. Unfortunately, there are few guarantees in the world of portfolio management, and while making the right decisions can improve your life drastically, the wrong ones can set you back.
And there are a lot of decisions to make, but the first one is whether you want to be a DIY investor or hire a professional. Both directions are viable—depending on your circumstances and capabilities, however, one is likely a better fit.
As a DIY investor, you're responsible for overseeing every aspect of your portfolio. This includes researching opportunities, managing risk exposure, rebalancing asset spreads, purchasing and selling securities, tax-efficiency planning, understanding regional differences, and more.
It can be overwhelming, but according to a recent survey from eMoney, 34% of Americans are confident enough to manage their own investments. Yet the confidence may be misplaced—Dalbar's 30th annual Quantitative Analysis of Investor Behavior found that between 1994 and 2023, the average investor without professional guidance generally underperformed the wider market.
Similar to a professional, a do-it-yourself individual needs discipline, time, knowledge, and the ability to keep emotions in check.
Discipline: One of the key benefits of professional investment advice is the willingness to adhere to a plan. Short-term volatility is common, but it usually only impacts long-term performance if it's the primary influence behind your decisions. Goals, circumstances, risk tolerance, and needs should be the leading factors in a disciplined financial plan.
The hidden cost: Without commitment, a plan is just a dream without clear direction.
Time: There's a reason being a portfolio manager is a full-time job—it's demanding. From monitoring daily market activity to parsing financial reports, you'll need to dedicate significant time to continuous learning and adjusting your asset allocations. Busy, employed professionals may struggle to find room for managing their own investments effectively.
The hidden cost: Time is money, and it happens to be the only asset we can't buy more of.
Knowledge: Professional advisors have dedicated their lives to learning the ins and outs of investment theory, market analysis, and comprehensive financial planning. The basics of the differences between stocks and bonds are simple enough, but grasping the nuances of rebalancing, risk management, strategic diversification, tax implications, and beyond takes decades.
The hidden cost: Uninformed investors may incur unnecessary tax expenses, take on surplus risk, or suffer losses.
Emotions: It's your money. Your life savings. Your future. If you'll pardon the pun, being emotionally invested in your wealth is natural—it's your money, your life savings, your future, and your security. Managing your personal finances should be based in logic, however. Panic-selling, fear of missing out, and sunken cost fallacies aren't conducive to your success, and a financial advisor can offer reassurance and objective insights.
The hidden cost: Emotional reactions can lead to poor decisions or erase years of progress.
What are the financial benefits of DIY investing?
One of the primary motivators for individuals to manage their own holdings is the expectation of reducing advisory fees or commissions. Digital platforms encouraging self-managed accounts typically don't provide personalized advice or a human touch point, allowing them to charge lower fees.
That said, they're not exactly free—Wealth Simple, for example, comes with a 0.5% management fee for clients with $1 to $99,999 in assets. Comparatively, professional assets under management fees usually range from 0.59% to 1.18%, according to a random sampling study by AdvisoryHQ.
Although moderately higher, value is relative to the services provided and overall performance. Comprehensive wealth management services, such as tax preparation, financial planning, and investment strategies, will likely result in better long-term outcomes regardless of a slightly higher fee structure.
How does DIY investing provide greater control?
Managing your own money means you can dictate every aspect of your investment decisions. Some may find this overwhelming, whereas others appreciate a greater sense of control and direction.
Needs: A financial advisor's job is to understand your needs, but in all likelihood, you're familiar with them yourself. If you're a young investor with a high risk tolerance seeking growth, you can allocate more of your capital to stocks. As you near your retirement, you can build a larger sleeve of bonds to supplement your retirement income.
Values: Some may be reluctant to support certain industries like weapons manufacturers or tobacco companies. While most portfolio managers account for these preferences and allow clients to opt out of certain sectors, not everyone is as accommodating. With a self-managed account, your assets can reflect your values.
There's virtually no security, strategy, or form of investing that's risk-free—including a do-it-yourself approach. Some risks are obvious, whereas others may be a bit more surprising and require consideration.
Risk management
No two investors are alike, and neither are their risk profiles. While equities soaring to new heights may seem promising, chasing "hot stocks" can lead to greater losses than finding more reasonable valuations.
Similarly, as your needs evolve over time, your portfolio should follow in lockstep. If your income or expenses have changed recently, have you rebalanced your holdings to reflect your risk tolerance? If your goals have become more ambitious, has your risk appetite grown as well?
Cycle susceptibility
A properly diversified portfolio strategically selects securities that complement one another. A classic (although recently less effective) example would be the 60/40 portfolio consisting of stocks and bonds. The negative correlation, in theory, means that when one asset class falters, the other thrives to offset the difference. Without diversification, your entire portfolio could suffer losses.
Resilient portfolios should be capable of weathering full market cycles. It's impossible to control economic or market conditions, but how you prepare for different scenarios can create sustainable, long-term success.
Lost time
Life is full of commitments, and managing your accounts may detract from more important areas that require your attention. Your assets should empower you to dedicate yourself to what matters, whether it's spending more time with your family, advancing your career, pursuing hobbies, or socializing with friends.
Kelsey Doiron, a family wealth advisor serving clients in Nova Scotia, remarks that “it’s no secret—managing a portfolio of any size is extremely time intensive, even for professionals.” She continues, highlighting Bellwether’s structure with “an entire team dedicated to ensuring client portfolios are fully customized to their goals, ready to adapt to either changing personal circumstances or market conditions.”
True wealth isn't a number on the screen—it's an opportunity to do what you want and the confidence to know you can afford it. If your solo investment journey puts you in a strong financial position but robs you of the time to enjoy it, you may want to reevaluate priorities.
Personal stress
Given the attachment we have to money, managing your own investments and monitoring performance charts can be stressful. While this may not directly impact your wealth (unless emotional decisions come into play), it can be detrimental to your well-being and peace of mind.
Financial security, after all, is meant to alleviate worries, not magnify them.
No direction
The value of a financial planner shouldn't be underestimated. With a comprehensive plan in place, not only will you have a clear understanding of your financial goals, but more importantly, the motivations behind them and a strategy to achieve them.
At the end of the day, your portfolio is only a portion of your financial plan. Goals provide direction, and making investment decisions should start with asking how each one brings you closer to your destination.
Chris Jardine, a family wealth advisor with a CFP designation, notes that “even the most talented athletes rely on coaches—not because they lack skill, but because a coach introduces perspective, experience, and a sounding board to help them elevate their performance.” In a similar manner, financial advisors can “offer guidance, insights, and an objective view to ensure you’re making the most of your financial game plan, no matter how talented you already are.”
Familiarity biases
Biases are as common as they are diverse. For those who prefer to be in control of their investments without working with an advisor, there's a good chance they're unknowingly letting biases shape their future. Since they "know" the business—having shopped there, driven past it daily, and become comfortable with it—Canadian investors are more likely to buy Canadian securities.
Unfortunately, they may not realize there's a whole world of opportunity to capitalize on. Home-bias investing can limit exposure to other nations and viable companies with strong fundamentals.
There's a case to be made for either, but it's not ours to make—it's yours to reflect on. Depending on your circumstances, preferences, or intentions, the decision ultimately comes down to what you're looking for.
Of course, there are pros and cons to a DIY investing journey, but even if you manage your portfolio with the utmost efficiency, there are some questions to consider. What happens when it comes time for estate planning? Do you have a clear succession candidate for the family business? Have you plotted out your retirement income and expenses?
While we may be straying from the initial focus of today's discussion, this departure is warranted. Financial advisors are much more than an alternative to DIY investing—they're a reassurance that every aspect of your personal finances is working toward building the future you want and, frankly, deserve.