Skip to main content

Can You Be A DIY Investor

Before I begin this post, let me say it loud and clear - I have a conflict of interest in this topic as I am professionally engaged as a a mutual fund distributor. That part out, let's begin.

 Can you roll on your own?

Let me rephrase the question – should you roll on your own?

Simple answer – yes, one “should” always try to be a DIY investor. Because if one is able to do it appropriately, and for a real long time, the end results may be much better than if you get professional help, either by way of a fee charging advisor or an agent who gets compensated by way of commissions. A part of this “better” portfolio performance will come from savings on fee or commission being paid to the “helper”, and compounding of savings invested will add to it significantly. And with the help of google and host of free apps available, being a DIYer, at least in theroy is not that tough.

But there is world of difference between “SHOULD” and “CAN”. Here what the dictionary says about these two words:

-          “Should”: Right or appropriate way of doing something,

-          “Can”: ability to do something,

-     

And I would add another dimension - willingness to learn the ropes. If you want to be DIYer, one needs to be aware of what a professional helper brings to an investment program. My view – a professional investment “helper” plays, rather should play three roles:

  •          Identifying poor investment products and avoiding them
  •           Ensuring persistent implementation of chosen investment plan, and
  •           Acting as a “financial psychologist” or “behavioural coach” in times of extreme events – both positive and negative  

Of this, various studies have found out the last one adds most value to any investment program. This article here shows the benefit added by way of behavioural coaching maybe as high as 2%.

If you think, you can do all these things successfully, DIY should be the way to go.

Or,  you may try out both options for, say 3 to 5 years and compare the results. Such a period will mostly encompass at least one market cycle. Say you want to invest INR 25 lac  – do 50% through a helper and rest in DIY mode. Make sure you stay true to the test and chose different products and strategy than the helper. Decide after observation whether helper is worth the cost!!!

As I read somewhere – “successful investing is a practical craft, not an academic discipline, and certainly not a science”!!! 

Comments

Post a Comment

Popular posts from this blog

Lump Sum Equity Investing – The Capital Protection Way Part II

Long ago, here  I posted how I would go about investing a sizable amount in equity index funds. I assumed in this blog that for next 5 years, equity markets will enter their worst phase and deliver poor returns – in fact negative returns of 10% annualized for next 5 years. Such a bad phase would result in equity fund corpus down by nearly 41% in absolute terms. Have the equity markets done that bad historically? Not at all. The worst case 5 year equity markets performance, basis Nifty 500 Index TRI has been in covid times @ minus 1.4% annualized for March 2015 – March 2020 period. Essentially, our assumption of minus 10% annualized ROI for 5 years was way too bad than actual worse case seen. Let us redo the numbers basis some realistic data: -           Actual worst case 5 year CAGR seen:   Minus 1.4% -           Assuming things can go even worse than this sometime in future, we c...
Post a Comment
Read more

War And Equity Investments

Uncertain times are upon us. There is a shadow of war post killing of tourists in Pahalgam. So far, equity markets have not shown any signs of cracking up despite of high expectations of armed conflict with our wayward neighbour. Is it the calm before the storm as far as equity markets are concerned? It is anybody’s guess that if a protracted war does happen, economy will take a hit in near term, which in turn will impact our daily lives, including equity markets. When and how this will happen is again anybody’s guess. Should you take a relook at your equity investments in such a scenario? Nothing wrong in being a little conservative in such times. Here’s what I think can be considered:     -           Scenario I: You have designated INR 100 for equity investments and are fully invested. While you do have money in non equity investments, in case of equity market downturn, YOU WILL NOT PULL MONEY OUT OF SUCH INVESTMENTS AND DEP...
Post a Comment
Read more

Why SIPs Work Only When You Are at It For Significantly Long Time

No, this blog is not about how a SIP  running for long periods (10 years?) lets one weather the market cycles and average your buying cost. Enough has been said about it and that remains. By the way, there’s no standard definition of “LONG PERIOD” as such. It’s left open to investing entity!!! This blog is more towards accumulating capital, as (HIGH) returns really matter only when they are earned on reasonable amount of capital. Even extraordinarily high returns on piddling capital (savings) don’t amount to much in absolute numbers. And it takes time to build up capital if you are doing it gradually, even after taking impact of compounding. Let the numbers come to our help. But first, we need to establish some benchmark to evaluate how long should one run a SIP, alongwith a projected rate of return. Here’s a simple benchmark for SIP duration – my investment should double at the end of SIP period for a particular rate of return. I will consider that duration as “LONG TERM”. ...
Post a Comment
Read more