Updated 24 January 2022
If you want something done properly, should you do it yourself – or hire an expert instead? The truth is, it depends. IFA Steve Johnson is here with some tips on how to choose the right kind of investing for you.
I’ve been a financial adviser for a few years now, and it’s instructive to see how a client reacts to gains and losses on their investments. My experience is that most clients feel the pain of losing money far more than they enjoy the experience of making gains. Another notable thing is how quickly people get bored. Managing your money can soon become tedious for many people – at least until they start to make big losses, at which point it rapidly becomes ‘exciting’ again, though not in a good way. And I’ve noticed too how many people like to make their financial decisions tomorrow (which of course never comes).
So when should you seek professional investment advice, and when can you go it alone? Here’s how you can decide for yourself.
Think about the following potential advantages and challenges of do-it-yourself investments.
There are a few different ways in which you might pay for investment advice. One is to choose a ‘managed’-style fund where you pay a fund manager a small fee to invest at a risk/reward profile of your choice. Another is to have a financial adviser, bank or stock broker acting as your wealth manager. Your wealth manager will consider all your circumstances, e.g. income, background, expenditure, tax position and future plans. They will then construct a portfolio of investments for you, tailored to this unique profile. They should also offer a regular review service to make sure it continues to meet your needs.
I always start off with new clients by explaining one thing in particular. There will be times when we turn up for your regular reviews and your portfolio will have fallen in value. So at the start, ask yourself whether you are ready for this.
Timescale is a key factor here – when will you need the money? If the answer is next month or next year, then don’t invest. On the other hand, if your financial goal is five years or more in the future, then you have a good chance of doing better than a cash savings account, and of beating inflation too.
Whether you pay for investment advice or go it alone will depend on a range of factors – from the value of your assets to how confident and knowledgeable you are, and how much you value guidance. Professional advice does cost, but the whole point of it is to make more money that you might otherwise have done. If a financial adviser’s clients don’t see good results, that adviser quickly goes out of business.
So which is best for you personally? If you have the discipline to research and choose funds, and also to carry out regular reviews, then DIY investing can work well and you may well enjoy it. If you’re not motivated or find the subject frightening or boring, then an adviser will be able to show you what you’re missing out on.
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