By Dr. James M. Dahle, WCI Founder
Q. What do you think are good ways to ensure someone is really ready to take on their personal finances for themselves? From reading posts on The White Coat Investor Facebook Group, many people seem very educated about finances and are asking good questions. However, I also find that some who comment seem more confident than anything else. Other than continuing to read and learn, I wonder if there is a certain point where a person should know that they are capable of being a do-it-yourself investor rather than using the various types of assistance out there.
A. I thought this was a great question and spent a long time thinking about DIY investing before writing this post. Hopefully, I answered it well, but if I didn't, I'm sure you'll let me know in the comments section.
#1 You Don't Have to Be Fanatical
Thanks to the reach of this website and podcast, I've interacted with literally hundreds of thousands of high-income professionals over the years. Many of those have used the information I have presented to learn how to competently manage their own finances. By doing so, each of them will save hundreds of thousands, perhaps millions of dollars in advisory fees over the course of their lifetime. However, this DIY financial planning and investment management thing is too often presented as a dichotomy–you either have a full-service advisor or you do it all yourself. In my experience, there are many, many people who have found a middle path. That path may involve using a good fee-only advisor to draw up an initial financial plan, answer some questions, and set up a portfolio for you. The path may involve using an advisor for a few years before taking over yourself. Sometimes the advisor manages one account while you manage another. Sometimes people just check in with an advisor periodically for a second opinion on what they're doing. This is especially common as people approach retirement.
Of course, there are also people who don't want to do it themselves at all. I met another one the other night, a residency-mate of mine. She has zero interest in finance. She will never read this blog post. Frankly, the best thing I can do for her is to make sure she's getting good advice at a fair price. Yes, she's going to end up paying a lot of money for this, but she will be far better off paying a fair fee than doing a poor job of planning and investing on her own.
So, the first thing you need to realize if you're going to be a competent DIY investor is that you don't have to DIY to be successful. You can work with a financial advisor and reach your goals.
#2 You Find Investing Interesting
A major characteristic of DIY investors is that they find personal finance and investing interesting. Not necessarily thrilling, but there is a certain amount of a hobbyist mentality that seems to be required. If you have enough interest, you will develop the knowledge and discipline required to be successful. But there's very little that can be done if you can't find even a modicum of interest in this stuff.
#3 You Can Write Your Own Financial Plan
Producing a written financial plan isn't that hard to do. Many DIY investors are perfectly capable of doing so after reading a few good books and blogs and perhaps participating on some good internet forums for a while. Others need a little more help. Katie and I feel having a written plan is extremely helpful in reaching your financial goals, so much so that we spent two months of our lives putting together an online course to help you to make one. Many who don't yet feel competent making their own plan will feel so after taking that course. However, others will need even more help and should hire an advisor to help them draft a plan, even if they don't plan to continue to use the advisor.
If writing a financial plan seems easy to you, you're probably ready to do it on your own. If that task sounds impossible, you're not ready.
#4 The Fees Become Onerous
Most DIY investors are really bothered by paying advisory fees. It's not that these investors are cheap (although they often are), it's that they simply don't see value there equal to the price being paid. When you start looking at your advisory fees and they really start bothering you because you feel that any mistakes you might make are going to cost you less than you would be paying someone else to prevent them, you're probably ready to do it on your own. I wish it were true that advisors never make mistakes either, but unfortunately, that's far from the case, especially given the minimal requirements to call yourself an advisor.
I'm not talking about ridiculous fees here. If you're paying five figures a year for financial services, you can almost surely get similar quality advice for less. But when an advisor offers to manage your portfolio for $2K a year (a VERY fair price) and you think “No way I'm paying that,” you're probably ready.
DIY camping on a 2,000-mile road trip from SLC to Cabo San Lucas.
#5 When You Start Poking Holes in the Advice
After a while, many DIYers realize that they know more than many advisors. They start poking holes in the arguments and recommendations of the advisor. They can actually take a position and argue it well in many of the common debates out there such as:
- The ideal asset allocation
- What factors a portfolio should be tilted to and how much
- What a safe withdrawal rate is
- Roth vs traditional IRAs and 401(k)s
- How to incorporate real estate into a portfolio
- How to prioritize debt pay off vs investing
- Passive vs Active Mutual Funds
Many of my readers have had this experience as they've tried to teach their advisors about the Backdoor Roth IRA or the Multiple 401(k) Rules. When they realize they're paying to teach their advisor, they're probably well on their way out the door, along with their assets.
Note that becoming furious at bad advice that you've been given is not enough to DIY. Just realizing you've been sold whole life insurance inappropriately and overcharged for advice isn't enough, although that often provides the motivation to get to enough in more ways than one.
#6 You Have Read Some Books
While it may be possible to become a competent DIY investor without ever reading a financial book, it seems unlikely to me. I'd put the bare minimum for my readers at four books – a book on personal finance, a book on investing, a book on behavioral finance, and a physician-specific book. Here are some recommendations.
#7 You Know How to Answer Your Own Questions
When you first get started, you don't even know what questions to ask. Then after a while, you know the questions but need some guidance to find the answers. I get these questions all day by email, Facebook, Twitter, and even in person. The next step is knowing how to answer the questions yourself. That might just be knowing who to ask, but more likely it involves knowing the language of finance so you can Google appropriately. It also involves a baseline level of financial knowledge so you have a framework into which you can insert the new information. It's probably going to involve knowing your way around the various IRS publications and form instructions. You'll know how to use the Morningstar database and mutual fund provider websites to learn about funds. You'll have found some reliable forums and blogs that you can trust. Maybe you'll even have built a network of trusted advisors or friends you can go to. But however you find the answers, you'll know you're competent to DIY when not knowing the answer to a question no longer fills you with dread and a desire to run out and hire someone to just do all this “money stuff” for you.
#8 You Find Yourself Teaching
Here's another common experience among DIY investors. They find they are spending far more time teaching than learning, whether in person or online. Many of them start blogs, do podcasts, or become fixtures on internet forums. They are often the “go-to” financial person in their group or residency program. If you feel like you could give a lecture to other doctors on the basics of personal finance and investing, you are probably ready to be a DIY investor.
#9 Balance Confidence with Humility
The classic surgeon stereotype is that they are sometimes right and sometimes wrong but never in doubt. It takes a certain amount of confidence to take on a task like managing hundreds of thousands or even millions of dollars. If you don't yet have that confidence, you may not yet be ready to be out on your own. Of course, you don't want to be overconfident either. For example, if you think you have a working crystal ball that will show you future economic scenarios, interest rate changes, or market performance, you're probably overconfident. A certain dose of humility about how much more there is to learn is helpful, but you don't want to be so “humble” that you're paralyzed from taking necessary steps. Many DIYers have commented to me that their confidence actually trailed their knowledge by about a year and that they should have fired their advisor about a year before they did.
#10 You've Developed Discipline
While I believe that most people with sufficient interest will develop both the needed knowledge and discipline to be successful, you don't really know how disciplined of an investor you are until you've suffered through your first bear market or economic downturn. I'm always amazed and worried to see brand new investors extolling the virtues of 100% stock portfolios and heavy doses of leverage. I think you are better off erring on the conservative side of asset allocations and leverage until you know yourself a little better. Then if your behavior in your first bear market is good, you can ratchet up the risk a little bit. If you're like most though, you'll probably find your risk tolerance is a little lower than you thought.
Underestimating your risk tolerance is no tragedy. Your return matters far less than your savings rate early on anyway. But overestimating it can be a financial catastrophe, especially late in an investor's career. Risk tolerance is a lot like The Price is Right–you want to get as close as you can to your risk tolerance without going over. That would be a lot easier if your risk tolerance were stable. Unfortunately, we all have higher risk tolerance when we're making money than when we're losing it. The risk tolerance you care about is your risk tolerance AFTER you've lost years worth of savings.
I hope these ten suggestions can help you determine whether you are now competent to be your own financial planner and investment manager. It's certainly a lot easier if you start earlier when the consequences are smaller. But it's really the same game — later on, there are just more zeros at the end of the numbers. I've managed four, five, six, seven, and perhaps eventually an eight-figure portfolio. It really is the same thing. I used to get nervous to buy $1,000 worth of stock but now swing around six-figure amounts just to do some tax loss harvesting. With time, you become more and more competent. Well, at least until the last decade or two of life, but that's a subject for another time.
What do you think? Are you a DIY investor? How did you know you were competent to do so? Were you overconfident at first, or underconfident? Comment below!
I’m definitely a DIY investor, though I don’t think everyone has to be. I realized that I was when I became the go-to person for questions about personal finance at work. I’ve spent some time in the land of over confidence, but hope that I’ve now found a happy middle.
I think what prevents a lot of people from becoming DIY investors comes down to fear of getting something wrong, a perceived lack of time, or a complete disinterest in the topic.
Once people realize that they can usually make a few mistakes, that it doesn’t take nearly as long as they think, and that skipping the fees might save them a bunch of money – the interest often develops.
I break the people I talk to into three groups as well:
1) DIY investors
2) the “dot the i’s and cross the t’s group” who just want to make sure everything looks okay when they run it by a professional.
3) the “outsource group” that views finances like lawn care, car maintenance, or cleaning the house. They just want someone else to handle it while they are busy taking care of their medical pracrice..
My goal is to convert as many people from group 3 into group 1 and 2 as possible. Or at the very least to make sure my friends in groups 2 and 3 know what good financial advice looks like and how to separate the wheat from the chaff when it comes to financial advice.
Overcoming that initial fear that “this stuff is so complicated that a doctor can’t do it” is really the biggest moment. It doesn’t have to be complicated.
However, figuring this out usually takes reading a few books, blogs, listening to some great podcasts, and asking questions in reputable places (white coat forum, boglehead, etc).
TPP
This is an important question and a topic I haven not seen anyone write about before. It is kind of like asking my daughter when she knows she can ride her bike independently. Or like the famous supreme court judge who asked about the definition of pornography. “I can’t define it but I know it when I see it.” I am utterly amazed about how many people come to me that have paid over 5 figures for an advisor yet don’t have a backdoor Roth IRA. Or, that have not tax loss harvested. The goal of any advisor should make it so that you don’t need an advisor. After all, how hard is it to have your money sit in VTSAX for decades. That said, some like the check in once a year. Some have no interest in doing anything in which case an advisor can add value. Some have inherited money and don’t have this incremental learning curve and feel way too intimidated for a year or two, but even this group eventually settles in and won’t need an advisor. Some of the super rich actually WANT to pay for an advisor because they don’t want to buy what the common man buys—-even though the common man will get a better result. Looking forward to the book release, Jim.
Balancing confidence with humility is an important skill. This is true for life in general. I believe that as physicians we have a tendency to seek out out an expert consult. We think that this “money guy” is an expert and will put our best interest first. The first thing to realize is that most “financial advisors” are salespeople and have no deep knowledge of finance. It behooves all who use an advisor to understand the term fiduciary. I personally find investing, asset allocation, SWR, etc interesting and had the epiphany that I knew more than a broker many years ago. Good post Jim.
What an excellent question posed by the reader and it was nice to have your guide as a way to confirm my decision to go DIY.
The most important message was risk tolerance especially to young investors who have known nothing but a bull market the past decade. And your risk tolerance does change as more and more money comes into play. When you potentially see six figure losses starting to crop up with relatively small market drops (which I have this past December) that surpass what you have had invested in total in 2009, it really can test your resolve.
There is nothing wrong with needing financial advice. Paying a fee to prevent you from doing something unwise is far better than stubbornly refusing to get help and making a major mistake on your own. But for those that visit financial blogs and enjoy the process, you can save a lot of money over the years by taking a DIY approach.
One benefit that a financial advisor provides that should be considered for any DIY person is the fact that although you may not require one, it might be good at some point to have one involved to make the transition smoother when you pass and your heirs/spouse/partner is thrust into something that he or she may not be comfortable handling. Another great alternative option I have seen is those DIY people writing a “letter to my spouse” which details why you chose an investment plan like you did and also recommendations of what to do to continue success at your demise.
I agree that it is a great question, and I like the thought put into the answer, but i will say that 1) your advice seems overly conservative and that 2) certainly not all 10 criteria need to be met before some can competently embark on a DIY path. It seems that some of the items above set a pretty high bar for DIY competence, and I wonder what percentage of physicians or high income professionals you feel fall into that category of being competent to be DIY investors. Not your readers, because I know that will be a much higher percentage due to the concentration of interested individuals, but all folks out there in the ‘target audience’. Would you say it’s 50%? 15%? How much of these 10 checklist items do you feel someone should have checked before becoming a DIY investor- it seems to me that if there are several checked(especially the interest or being fed up with fees), then it may be time to start that journey and that eventually you will reach a point where most are checked. And for many people, not only do they not need to be fanatical, but they could likely competently manage their personal finances and investing even if they chart a path toward being DIY-lite rather than a super user such as a forum regular or moderator…
I agree all 10 don’t need to be met. But all 10 are signs that you might be ready to DIY.
I’ve always said about 20% of docs can and want to manage their own investments and be their own financial planners.
I like the hobbyist mentality and know thyself points you make. I’ve come to really enjoy personal finance. Reading it, writing it, teaching it (as best I can). That spark of interest is what drives the rest.
My wife, equally interested in the FI lifestyle, is completely disinterested in how to make it happen. She out sourced that to me! DIY isn’t for everyone ?
Most of us newbs don’t truly know our risk tolerance per your definition. We are getting a taste of a break now but even this isn’t much of a test. I hope my risk tolerance is as high as I think it is! I know my wife’s isn’t but I think we will stay the course.
It’s funny to me these same people who are intelligent enough to become a physician feel they can’t figure out how to invest money. I had an advisor for a while, and paid the 1% fee. That fee, along with performance worse than the s&p 500 for quite some time forced my hand. I have done far better since that time. Those fees really add up and especially hurt when the market is down and you could use that $ to buy at a discount.
“I’ve always said about 20% of docs can and want to manage their own investments and be their own financial planners.”
You make a very persuasive case for DIY, yet 80% prefer not to manage their own investments. These same people may also prefer not to do their own home or car repairs. All perfectly logical. These doctors would prefer spending their time doing work that they enjoy and hire others to do what they consider to be the unpleasant work.
What the 80% should be doing is measuring the cost/benefit by comparing their own compensation to that of the financial advisor. How much does the doctor make per hour in his practice. Maybe it will make more sense to consider the hourly earnings in two categories covering high and low value services. There are various ways to figure this, but it is possible to come up with a reasonable estimate.
Now consider how much you are willing to pay a financial advisor per hour for his services. Probably no more than what you estimate as the hourly rate for your low value service. Very few FAs bill at an hourly rate, but it is certainly no more difficult for them to estimate that hourly rate than it is for the doctor to estimate his hourly rate. If you cannot find an advisor who is willing to explain his fees in terms of hourly rate equivalents, look elsewhere.
There’s no doubt that managing your own money is the best use of your time. I mean, a typical doc could manage a basic portfolio in less than 10 hours a year. At $10K/year to a 1% AUM advisor, that’s $1,000 per hour. There is very little that docs can do that makes more than $1,000 an hour. After-tax too.
However, for the 80%, it is obvious that they do not consider that the best use of their time is managing money. In that case, they should refuse to hire an advisor whose effective hourly rate is more than their own hourly rate for low value services, say, $200 per hour.
That’s a bizarre recommendation. If they could get good quality advice for $50, why pay $200? If they can’t get good quality advice for $200 but could for $300, why limit themselves just because of their own hourly rate? That doesn’t make any sense. Pay the best rate you can for high quality advice. Good advice at a fair price. The fair price is what the market offers the advice at, not some arbitrary number.
I absolutely agree. The suggestion to know your own hourly rate is only to help in setting a ballpark figure. The important,(essential) point is to have all such fee analyses and discussions in the context of an hourly rate, regardless of how the FA may actually set his rate.
I agree that’s a good idea.
Books can definitely be useful, but they aren’t necessary these days. You can easily get all of the information you need regarding personal finance and investing on the Internet for free. The Bogleheads Wiki, for instance, has a huge quantity of information on these topics.
Yes, because books are too hard to get and cost too much money. /eyeroll
Sure, they might not technically be necessary, but I challenge you to name some DIY investors doing it well who have never read an investing book. Oh, you don’t know any either? Join the club.
Actually, there are many DIYers following standard Boglehead advice that have probably never read an investing book and frankly don’t need to. Yes, they could buy Bogle’s book, or they could read the Wiki and get the same advice. There’s nothing special about a book.
Yes, a profession-specific book for someone like physicians is probably well worth it. But for the average person, it’s not at all necessary.
I’ve personally only read a couple of personal finance books and none on investing, yet I believe that my knowledge of investing, obtained from pouring over investing materials from all over the Internet as well as academic journal articles, is more than adequate for whatever I need.
Okay. Name them. Seriously. I don’t believe you. I would bet if we could still run polls on Bogleheads.org, that the % of competent DIY investors there who have never read an investing book is in the low single digits.
I don’t deny that it is possible to learn all this on the net. I’m simply stating that isn’t how most learn it.
So you’re claiming that the some needs to read a book in order to implement a 3-fund portfolio with low cost index funds or even a low cost target date fund? That’s just silly. There’s a reason the 3-fund portfolio has been referred to as the ‘second-grader portfolio’, and it has generally outperformed the ‘fancier’ strategies crafted by those writing investment books.
It may be true that the average person does learn about investing from books, but that’s very different from saying that they need to learn using that one method.
One of the problems with books is that they can become outdated quickly. The tax law changes in 2017, for instance, made significant changes to what was optimal with regard to personal finance strategy (e.g. mortgage interest deductibility being effectively reduced). People need to get accustomed to getting more current information than what books can provide. Blogs like yours, forums, etc. are excellent means of achieving this.
98% of what you need to know about personal finance and investing is available in 10 year old books.
I’m not going to die on this sword though. If you want to learn about investing without ever cracking a book, I’m sure it can be done and becomes easier and easier as the years go by. I don’t personally know anyone who has ever done it.
I had not read a finance book until your 2 books this year. I’m not a competent DYI investor. After I started reading your blog I was surprised to learn that I’m already rich. I didn’t read finance anything! It turns out I was following your advice nonetheless. Make a lot of money. Live like a resident. Max your tax advantaged accounts. Contribute to a Roth through the back door. One wife, one house, etc. My wife and I got all the basics right. Our parents taught us the importance of saving money. To be a competent anything I think you have to read books. However, books may not be required to get rich.
It’s surprisingly uncomplicated isn’t it?
Subscribing to the Wall Street Journal is a good adjunct for the DIYer. Not only are there many personal finance articles,
learning about the ways of Wall Street is helpful in the understanding of all things financial.
Great post, Dr. Dahle. This is fabulous and has been top of mind for us we seek to better understand our client base of DIYers. Our clients are intellectually curious, confident but humble, somewhat skeptical, diligent, resourceful, self-reliant and self-disciplined. Or just excited to more fully develop these qualities. Our goal is to educate, guide and encourage our clients to take control of their financial lives. Yes, they will save money by not outsourcing to an advisor. More importantly, though, they will have a better understanding of their strategy so they can be comfortable that it’s appropriate for their situation.
Many great comments on this thread. I was videoconferencing with a client today and talking about this article. The client is a White Coat reader, but not super-interested in investing and he definitely doesn’t want to spend a ton of time thinking about his investments. He knew, though, that he couldn’t just hire someone to manage his money without doing enough homework to make sure he wasn’t going to get swindled (as Bean1970 put it below). He knew he couldn’t blindly outsource his financial future to someone; the costs of picking the wrong person and/or the wrong fee structure are just too high. So he did some homework, mostly reading White Coat, and decided he didn’t want or need an advisor. He could be a DIY investor as long as he kept it simple and worked with a flat-fee planner. My point is that if you don’t know enough to DIY your investments, you may not know enough about investments period. Self educate and caveat emptor.
Excellent list of DIY readiness indicators. I suggest an additional indicator that might deserve a high ranking, skill in mathematics and enjoyment of the discipline. I feel a basic skill level is necessary to succeed at DIY financial management(given the educational requirements, which are significantly greater than required of most financial advisors, this should not be a problem for white coats and related fields). The enjoyment of mathematics, at some mimimal level, is valuable, so you keep up the skillset over your lifetime. A key part of this combination is developing an innate sense of what makes mathematical sense, which comes from practice, rather than coursework, as it serves as a backstop, sort of a spidey sense that gets us rechecking our work, before mistakes are make.
What level of math is required for investing? Fourth grade? You certainly don’t need algebra, geometry, trigonometry, or calculus. A passing understanding of statistics is useful, but most docs get that in Evidence Based Medicine classes in medical school.
I’ve been a practicing dentist for 9 years. I have wanted to do my own financial planning for years. I started reading the WCI site about 9mo ago. 1 month ago I fired my financial adviser and it was a moment of pure joy. Happier not just because I was paying ridiculous fees (>1%), but because I felt like I was now in control and doing what my gut told me. This article was the icing on the cake because it took me years to say I was ready, but now reading all 10 items I could confidently say YES!
Congratulations! Well done.
I’ve been a DIY for at least 20 years and love doing it. One day I got a cold call from an “advisor” (salesman?) drumming up business. I told him I did it myself. he then asked me then how I’d done, After I told him, he then asked ME how I did it. Being kind, I didn’t tell that one way I’ve done it was to stay away from “advisors”. I should have sent him a bill.
I appreciate this article and especially the final comment about financial management in the most senior years. The study titled “Old Age and the Decline in Financial Literacy” was an interesting read for me a couple years ago where the Texas Tech researchers found a consistent decline in financial literacy after age 60. I’m curious about how a previously successful DIYer fares as their financial competency declines but their financial confidence may not. Are they better able to spot abuse by a financial advisor or are they unwilling to let go of the reins despite it being time to do so?
I have read the conclusion of that article (interested since I’m in WCIs last decade or two class).
“The results suggest that falling financial literacy scores in old age are related to the well-established decline in cognition documented in the aging literature.”
Despite the decline many remain overconfident.
“For example, older drivers generally do not perceive a decline in their driving skills despite a predictable deterioration in sensory ability with advanced age. However, they report that those who did perceive a decline in their abilities, and those who took an objective test that provided evidence of a decline, modify their driving behavior to reduce the likelihood of getting into an accident”
The conclusion reached :
“It is possible that increased awareness of the natural decline in cognitive abilities essential to making effective financial decisions will lead to greater demand for more passive financial instruments such as annuities or passive investment vehicles that automatically rebalance. It may also increase demand for professional services such as financial planning, accounting and legal assistance that substitute for one’s own decision-making ability.”
It all seems reasonable and logical. However, with respect to those of us in the 20% DIY class, perhaps a lifetime of accepting our ignorance of what the markets or economy will do is unlikely to be changed by age to overconfidence.
What should motivate any non DIY investor is to know about what Bogle calls “THE TYRANNY OF COMPOUNDING”-what a 2% fee over 40 years does to your net wealth-You will lose 77% of profits in a personal account and a bit less in an IRA acct.
Every investor should read Bogle’s books on mutual funds
You will save hundreds of thousands or even more over your lifetime. Even if you make a few mistakes along the way, you will come out way ahead following Bogle’s advice
My problem with this list is that it assumes that some professional money manager is going to take care of things if you don’t. But you have to hire that manager. By the time you know enough to judge whether the manager you are hiring is competent/non-criminal, you can manage on your own, at least for the basic stuff. Maybe you need a fee-only advisor to guide you through the esoteric, high-income stuff, but the basics are pretty simple. Nobody is going to care about the whole of your financial life as much as you do. Your advisor may care a lot about your portfolio (and his %AUM), but that could mean he gives you conflicted advice, especially regarding retiring debt versus investing.
If one doesn’t take some care in selecting that advisor, one could wind up with a firm that excels in milking its cash cows. Recommendations from colleagues who themselves are financially clueless are not likely to be helpful in avoiding the sharks.
This is a helpful list.
One of the most common questions I get after talking to physicians is “Do I need a financial advisor?” I used to think paying anyone was a waste of time and money. I guess I still feel that way for me.
But I now realize that many if not most would benefit from professional help. Not because it is so difficult but because the doctors have limited time, knowledge, or interest. We can delegate, just not abdicate our financial responsibilities.
I occasionally will pay someone for a few hours of their time to review everything. We all have gaps and blind spots. Sometimes others see those.
I also pay for good legal advice and help with my taxes from a CPA. I respect WCI and others who do their own taxes (with software) but I don’t do that currently. It takes my accountant hours of work and my time is more valuable in the marketplace. We can use these piecemeal services as needed.
I agree with the points you have made and would suggest that you need to be competent to decide among different choices and be able to articulate your decision, on paper to yourself or clearly to another. The decision to hold a 3 index portfolio should come from an informed decision making process compared to the choice of tax exempt municipal bonds and dividend heavy stock portfolio or a single premium annuity for example in retirement. All work. Some work better than others and some are easier. You do need to have a fairly decent grasp of taxes. Over the last year this has been the most lucrative hobby I’ve picked up. The discipline from studying personal finance seriously for a year also helped me stay the course when I lost a year’s paper salary over 2 weeks in December. Fortunately much of it came back. This time took more fortitude than 2000 or 2008 when I was not as aware of the potential for great disaster. You have made a real difference in my life. I thank you.
You’re welcome.
i think the other thing to remember the DIY is WAYYYYYY easier than let’s say 1986. Most of us didn’t have computers then. To open an account or even buy a fund you generally had to pick up the phone and call the servicer, who was either a broker or some sort of broker/FA morph….There were heftier fees, even for an index fund because you had to pick up the phone to buy it or buy a stamp to send in your check with the buy slip…it just was cumbersome as a DIY I think many people gladly just paid someone to manage. There really isn’t an excuse in 2019 not to be able to DIY… so much information at your fingertips…it is just a matter of some interest and weeding out the junk.
i do also think that even those that turf out investing, a little knowledge is still key to avoid getting swindled, watching for things like churning ,etc ….. Yes. I take my car in for routine maintenance. I really don’t DIY, though with youtube it is pretty easy to figure out some of the basic car needs. But having a little knowledge goes a long way….like the time I went to Kmart….bought my own air filter and replaced it…then drove across the street to get my oil changed….and guess what…they told me it was time to change my air filter and try to sell me one…..my little knowledge of doing my own air filter totally helped me getting swindled…….
This is a great article. One of the biggest challenges as an advisor is to understand where you add value (and when you may not). I ask the following questions of prospective clients to see if they may be a fit for hiring me, but they can just as easily be used to do a DIY “suitability” check.
1. Do you have the time?
2. Does it interest you?
3. Can you stick to a plan?
If you can say yes to all three, you are probably well suited to DIY. If not, hiring an advisor may be one of the best investments you can make.
This is a great article. One of the biggest challenges as an advisor is to understand where you add value (and when you may not). I ask the following questions of prospective clients to see if they may be a fit for hiring me, but they can just as easily be used to do a DIY “suitability” check.
1. Do you have the time?
2. Does it interest you?
3. Can you stick to a plan?
If you can say yes to all three, you are probably well suited to DIY. If not, hiring an advisor may be one of the best investments you can make.
I have thought about this article for a week now and finally broke my personal no-internet-commenting rule to come back here and share my thoughts.
I manage my own finances but definitely don’t meet more than 7 of your criteria. I haven’t read any investing books, don’t really understand things like the efficient frontier, and wouldn’t feel confident teaching others.
The way I figure it, I am pretty safe taking the advice of Jack Bogle or Buffett’s advice to stick to 90/10 or 80/20 using 2 very-low-fee broad market index funds and holding to the course. I (believe) I have read enough of this site and bogleheads to understand my best tax strategies and am saving 33% of gross. I don’t follow the markets day-to-day and have no temptation to fiddle other than checking in every 6 months and rebalancing if necessary.
Maybe as an informed investor I could do better, but I feel that free advice from Buffett is likely better than fee advice from a financial manager.
In case it isn’t clear, the article doesn’t say you have to meet all 10 to competently manage your own money. But the more of those you can check, the more likely you are to be competent. 7/10 is pretty good I think.
My doc is now in to covered calls and options
The highly educated think they can beat the casino; not all but many
GREAT GREAT ARTICLE-using it for my Finance club meeting with seniors