^Blog The Hidden Costs of DIY Investing

Doing it Yourself

Do-it-yourself investing (DIY) has gained popularity in recent years. For many, it’s a great alternative to paying high fees to mainstream institutions. However, depending on your assets, knowledge, free time, and situation complexity, professional managers can be well worth the cost. While many people choose DIY investing based on fee savings alone, this is just one small piece of the puzzle. Peace of mind, emotional guidance, proper risk management, and diversification are larger factors that should influence your decision.

Retirement considerations

Life stage plays a key difference in considering what level of service someone might need. Young investors accumulating assets for retirement have a long time horizon. They can take more risks, as they have time to recover from potential losses. During pre-retirement years, cash typically flows in with minimal withdrawals. However, the approach to retirement and retirement itself present a different scenario. As retirement nears, risk should be reduced since these assets will soon be drawn upon. This may seem straight forward, but it’s more complex when you consider the tax implications of various investments (e.g., dividends vs. capital gains) and different account types (e.g., RRSPs or non-registered accounts). Balancing investment types, risk, taxation, income levels for government benefits, account types, drawdown rules, market cycles, and other factors that influence your financial landscape becomes highly intricate.

Value added from experts

We’ve all seen commercials claiming, “By investing yourself, you can save X fee, and over time you’ll have X amount more money.” In a controlled environment, this might be true—you save X, so you have X more. However, real-world investing isn’t so straightforward. Markets are unpredictable, and individual investment skills vary widely. When dealing with your own money, logic can often take a backseat to clouded emotions. With a professional advisory team, emotions are generally removed from the equation. The real difference between self-directed and professionally managed investing lies in potential lost returns and increased taxes. That said, the level of fees charged remains crucial. You deserve high-quality planning and investment management for a fair price.

Having a trusted team matters

While anyone can attempt to manage their own portfolio, handle financial planning, write legal documents, or do their taxes, there’s a significant difference between merely doing these tasks and doing them well. This is why a team of experts is crucial. Setting up your finances properly from the start may cost more initially, but it will likely save you much more in the long run. If at some point in the future you become unable to manage your investments due to mental incapacity or start making poor decisions, you may not have someone to rely on. For high-net-worth individuals especially, professional planning integrated with proper investment management is essential.

Three60 Wealth is an independent, unbiased, fee-for-service financial planning firm focused on helping clients achieve their financial goals. If you are interested in a new approach to your planning, connect with us to set up a complimentary introduction meeting to see how we can help you.

For a truly different financial planning experience, contact our office online or at 403-640-4414 to schedule an introduction meeting.

Authored by: Braeden Osske, Wealth and Estate Planner at Three60 Wealth