Even if you are a hands-on person and can build your own furniture, should you build your own investment portfolio?
DIY furniture can be sturdy, but will a DIY investment portfolio build a secure financial future?
The term, “DIY,” or “do-it-yourself,” often conjures up images of a large store full of different types of furniture and household items that you can assemble yourself. The coCredit: Free image courtesy of FreeDigitalPhotos.netncept of DIY is that it saves you time and money. Just as DIY may be useful for furnishing your home, many investors consider that DIY investment is helpful for building their wealth.
DIY investors reason that if you don’t pay a financial planner to be your money manager, you can save a lot of money on costs and fees. However, this is not always the case and you can actually end up losing. As Professor Robert Schiller of Yale University says, overconfidence in one's own ability can lead to substantial financial losses, and most people struggle with managing their own investments effectively.
While you may not need any specialist knowledge of carpentry to assemble a simple DIY desk, you do need proper knowledge of the markets to make good investments. If you time your trades properly, you may reap great rewards, but if you're not intimately familiar with the markets and with money managing, the opposite can happen. You have the risk of suffering huge losses by buying into stocks that then plummet and selling them before they recover. A professional money manager has experience dealing with market volatility, though he certainly cannot guarantee and returns.
On top of that, the complexities of the tax code can diminish the returns of investing. Having a solid, professional team to guide you can lead to better, long-term results.
DIY furniture might save you money, but it is usually not of the greatest quality, and it often falls apart after a time and use. Investments need even more specialized care, and without professional advice, they can cost you a lot more than a rickety table. Therefore, before you decide to go the DIY route with your investments, think about the time and money that you can ultimately save by wasting it on a knowledgeable financial adviser.
Disclaimer: This article is for educational purposes and is not a substitute for investment advice that takes into account each individual’s special position and needs. Past performance is no guarantee of future returns.