There is only one thing that every serious investor contemplates. Should they seek professional help, or should they do it themselves?
There's no right answer to this question. For some investors, a DIY approach works. Whereas for others, professional guidance is the solution. So, which one should you pick?
DIY Investing
Free Financial Advice: Free financial advice compounds on the internet. Five minutes on twitter will lead you through a rabbit hole of stock picks and opinions. When you pay nothing for advice, accountability is limited. Most free advice comes with a high price tag. So, one never knows how much of this is good advice. Popular opinion is often not the right fit. Even the best investors lack a perfect track record. Today, retail investors can access research reports, opinions, and news on investment opportunities. A healthy balance of diverse views allows investors to make more objective investment decisions. Price does not always correspond to the quality of advice. So, a DIY investor must consider a variety of ideas and vet the quality of advice.
Time Commitment Investing is an ongoing process. Every investment requires monitoring. The investment strategy evolves along with the market context. A "do nothing" approach to investing rarely works. DIY investors spend a considerable amount of time sifting through information, making choices, evaluating their decisions, and preparing the next steps. More importantly, DIY investors must keep themselves up to date with market trends, news, and investment opportunities. Many of us would rather spend time with our friends, families, or pursuing hobbies. Choosing to be a DIY investor means allocating meaningful chunks of time towards developing personal finance.
Investor Behaviour In investing, behaviour matters more than technical knowledge. Behavioural science shows that we're particularly irrational when it comes to money. Most investors miss making market-linked returns because they inadvertently act against their own interests. DIY investors don't always have wealth creation partners. This means that they need to be more conscious of their behavioural biases and mindful of their investment actions.
Professional Guidance
Selecting A Partner Selecting a wealth creation partner is no easy task. The right partner understands your wealth creation objectives, knows your risk profile, and nudges you towards better choices. A wealth creation partner is accountable and dependable. Before selecting a partner do your due diligence. First, determine your needs. Then, understand their service offering. Next, seek references, and credentials.
Trust & Performance The most important aspect of professional guidance is trust. Trust is strengthened over time through market cycles. During your initial interactions, you can estimate comfort levels. Trust depends on how well your wealth creation partner understands your needs and how they keep your interests at heart. Every investor worries about performance. Under professional guidance, performance comes under more scrutiny. In most market contexts, risk management matters more than investment performance. When your risk is well managed, performance will follow. Always ask your wealth creation partner what risks they foresee and how they plan to manage them.
Financial Fee Good professional guidance comes at a fee. One could opt for a fee-only SEBI Registered Investment Adviser. RIAs offer investment advisory services on stocks, bonds, mutual funds, and financial planning. RIAs may charge a flat fee model or an AUM based fee. Alternatively, one could opt for a distributor or broker. Here incidental advice is offered for every investment. Distributors and brokers earn money through commissions. Mutual fund distributors must disclose commissions on their products. This enhances transparency.
If you have the time and inclination a DIY approach will work well. However, if you'd rather outsource some of this work, then professional guidance might be ideal. Whichever path you choose you'll still be on your way to wealth creation!