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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”!!! 

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