The Introduction
Should you invest on your own or hire an advisor? Whether you choose to invest by yourself or select an expert for your financial advice, you are choosing a consultant. Who is the best investment advisor for you? Whether you’ve invested yourself or hired an advisor, remember that the most expensive advice is the free advice.
Before Investing by Yourself, Be Humble with Yourself
The greatest virtue in being a person is humility; for the ability to admit you do not know everything is the quality that precedes all other great virtues like honesty, simplicity, patience, moderation, and humility – all coming together to yield the greatest successes in investing and other areas of financial planning. Humble people hire advisors, but humble people are also great investors. Therefore, it is important to be honest with yourself and check your humility.
Investing by Yourself (DIY)
Investing may be the only area in personal finance that has attracted more DIYers than any other area of financial planning. If you have what it takes to be a great investor, what about the other financial areas intertwined with taxes, retirement, insurance, estate planning, and cash flow management (budgeting)?
You may have done well in building a portfolio of mutual funds but have seen your overall returns decline due to not placing tax-efficient funds in your regular brokerage account… or perhaps you’ve done wonderfully saving for retirement but hit a major recession just a few years before retirement that derailed your plans… or you spend money unnecessarily on unnecessary insurance products… or you die at a younger age than you imagined and your creditors and the federal government receive most of your estate… this is the picture you get.
Investing by Yourself vs. Hiring an Advisor: Remember That “More Reduces”
There are certainly many great tools and sources of information available online to help investors make wise investment decisions. Additionally, unprecedented access to simple yet powerful investment vehicles, such as mutual funds and exchange-traded funds (ETFs), makes it easier than ever for investors to research, make decisions, and implement their saving and investment goals.
However, more options often lead to a reduced ability to make good decisions, and investors can fall into the classic error of spending too much precious time on money when they could be spending it on higher priorities, such as family, health, or personal goals.
Is It Worth Hiring an Investment Advisor? Measuring the Value of Time
How much is your time worth? Have you calculated it? What is the return on investment (ROI) of your time in financial planning? What is the non-financial cost of money? For instance, if you are at least as successful as the average professional money manager, you might achieve returns slightly above or below those of the S&P 500 benchmark. In other words, unless you genuinely enjoy researching investments or the financial planning process, the extra time spent may not be worth the financial result.
If Your Needs Are Simple, Invest in Yourself (With Caution)
Take it from me as an investment decision-maker and Certified Financial Planner (CFP); the financial planning needs of the average person are simple and can be managed without expert assistance. However, complexity arises from the misguided perception of the plans, strategies, and schemes that some people consider essential for financial success.
If you can commit to the simple rules of asset allocation, utilize comprehensive mutual funds, secure financing where possible, use term life insurance only, and keep debt under control, and you won’t surpass $2 million in assets anytime soon, then you can certainly manage your money yourself.
And with
There is an important warning on the self path: money is one of the most emotionally provoking things on earth. You need to be able to avoid your worst enemy – yourself – by not getting dragged into ordinary and harmful emotions like greed, fear, resentment, and arrogance. An investment advisor or financial planner can think about your money with minimal or no emotions at all, but you may not be able to separate emotions from financial matters, at least if you are a normal person.
Investing in Investment Advice
Skill and knowledge are less important than good wisdom. Some investment advisors and financial planners may be prone to harmful emotions and make poor decisions just like the average person handling everything themselves. However, a good advisor will look at your money logically and help you map out an objective roadmap to achieve your future financial goals while living your current life better.
What is the value of all this to you? Perhaps a financial advisor or planner has greater capacity and knowledge of financial matters than their clients, but how much does quality of life affect your decision?
Find the Right Advisor for You
Again, whether you invest by yourself or use an expert, you retain the freedom to choose an advisor. The question boils down to whether to rely on yourself or to consult someone else? If you choose to consult someone else, you want to find someone who operates in a structure that encourages the cultivation of those great virtues (humility, honesty, simplicity, moderation, and frugality) we mentioned earlier.
If you focus only on neutral advisors, you will certainly exclude most advisors who are paid solely by commission or those who receive a percentage of the products they sell. In other words, you do not need a salesperson; you need an impartial advisor who is paid only by you.
The comforting notion “the only person you can trust is yourself” may be wise. However, choosing an advisor is something you can do yourself. So, if you trust yourself, you can take the step to select an advisor for yourself, whether that’s you or someone else.
Disclaimer: The information available on this site is for discussion purposes only and should not be misconstrued as investment advice. This information is published as evidence that you buy or sell securities.
Summit with Many of the Right Things for You
The decision to hire a fee-only investment advisor can be a wise investment in itself. Image: Sam Edwards / OJO Images / Getty Images
Source: https://www.thebalancemoney.com/do-it-yourself-or-hire-an-advisor-2466477
Leave a Reply