DIY Investing: Is It For You?

DIY Investing is a much more popular approach in today’s world, especially to the younger generation, thanks to the influence of social media, easy-to-use apps and — most recently — lockdown “boredom”. Whilst it is true any individual can educate themselves and make their own financial decisions, making sure you know why you are making those decisions is important. Is DIY investing for you?

We are easily influenced by friends/family, that guy down the pub, and those annoying YouTube ads showing how to become rich quick, too often resulting in younger investors taking too much risk without understanding the consequences. Many of us are “thrill-seeking” when it comes to money, enticed by the promises of easy money, big gains and financial freedom when in reality only a small percentage of investors obtain this goal.

We see things on the news like Tesla, Gamestop and Crypto, making it easy to want to jump on the bandwagon, without really understanding what you are getting involved with; this lack of risk awareness can seriously damage your financial wealth. More and more people are choosing to invest on their own without the help of an adviser, without a real grasp of what they are doing.

“The biggest reason that DIY investors fail is that they don’t stick to the plan and attempt to time the market…DIY investors should heed the Wall Street adage that time in the market is more important than timing the market.” (Robert Johnson)

That said, I am not against DIY investing — I’m all for it, and I’m an adviser myself! It is simply imperative that you take the time to research, understand your own circumstance and manage your emotions effectively and efficiently. It may or may not be right for you, especially as your emotions can be your worst enemy when it comes to investing. 

“Having A Go”

Early investors are largely inexperienced and are mostly moved by “hype” and what they hear is the next best thing on the news, or what their friends are doing. In the process, little research is conducted nor applied to their own risk profile, opting for shortcuts in their decision making. They are also focused very much on the short-term rather than their long-term gains. 

The “thrill” they seek comes from the risks they take to chance high returns they see others making, almost “blindly” making decisions and simply following the crowd or the “hot topic”. Whilst this doesn’t always mean they won’t succeed, it poses a high risk to their wealth owing to the gambling element they are taking with no real knowledge of what they are doing.

What happens for many of these kinds of investors is that they are buying into unsuitable investments for their own stage in life. The demographics are usually younger and look for a quick-fix approach, tempted by hyped trends or large companies that they believe come with low risk. Social media exposure plays a large part in influencing their decisions, with the multitude of content available to digest, especially those easily persuaded and prone to marketing tactics. 

For example, many investors are diving headfirst into these “exciting” investments in front of other forms of savings, namely their emergency funds or retirement savings, which is a highly worrying factor for these individuals in the long term. 

And remember how our emotions can cause havoc to our portfolios? Combine that with the psychology of money and you’ve got recipe for disaster.

There are three psychological traits in particular that are hurting DIY investors.

  1. Fear
  2. Greed
  3. Overconfidence

Getting Started

Alright, so you’re a newbie to the financial world — where do I begin? 

At this stage, you are likely to have little knowledge of the investment world nor the ability to afford financial advice (or so you think). However, there is a wealth of knowledge available to you (thanks, internet!) that you can sink your teeth into, but you must be mindful you apply this to your own situation. Often, just starting is the biggest hurdle and many people start too late in their lives, so find a platform to get going with and have some fun!

Depending on your country of residence, you could open a platform such as eToro or StashAway, among many others at your disposal. As for strategy, one of my favourite sites to use is Morningstar, where you could honestly build your entire portfolio from their free content.

The key here is taking the time to research, research, research! Many sites can offer recommendations, risk profiling and model portfolios, but you must ensure your strategy aligns with your goals, desires and stage in life. The added benefit to independent research is an appreciation of the craft, which can in turn help effectively tweak your portfolio as you progress through life, as well as understand the process if you do seek help at a later stage.

“There are definitely benefits to making your own investment decisions as early as possible – you’ll learn about market ups and down, and find out how you react to them, and you’ll appreciate the complexity of investing and therefore appreciate the value of professional advice when you do come to take it” (Mike Coop) 

If you can earnestly dedicate time towards DIY investing, then I would say give it a go! As you learn the ins and outs, you may find you can carry on yourself or realise you may need some assistance after all.

Now, this doesn’t mean your only option is an adviser. One idea is to do your initial research and then entrust the legwork to a multi-asset or multi-manager fund/”fund of funds“. This way, you are still in control of your investments whilst “outsourcing” the more intricate work to professionals. You will pay a small percentage of your amount invested for the fund’s management, but this is less costly than a fully-fledged adviser.

Another option to consider is a “hybrid” approach, whereupon you manage some of your investments on your own and partly with an adviser. Maybe you could make it a competition…?

Time For Help?

There are times when it will benefit you to seek guidance, whereupon advisory may help you manage your finances more effectively. There can be many reasons for this; everyone’s position is unique and intrinsic to their circumstance. 

For some, it may be as simple as absolutely not wanting to “do it yourself” and want another human to guide them (over AI, for example). Often when major life changes occur you will need holistic and intricate planning to cover all areas, and managing this on your own with your own commitments can be overwhelming. Furthermore, without careful planning, you may incur high costs, miss out on better-suited approaches or loss of capital. 

A good indication of when to receive financial advice is when your situation gets “complicated”, which may be right from the start, when growing your family, or when receiving an inheritance, for example. Advisory can help you plan your present and future situation as a whole, rather than just simply expanding your wealth through investments.

I would argue that with the right attitude, time and knowledge, most people can positively invest in the financial markets with a DIY approach. But when your life expands beyond simply “growing your money” and into more complex matters, it may be prudent to seek some professional advice.

DIY Investing not for you? I’m here to help!

If you have any questions or are seeking some advice, drop me an email at:

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