Should You Manage Money on Your Own?

As financial advisors, we occasionally come across people who say they’d rather invest on their own. DIY money management has gained popularity, as investors see it as a way to save money or to have more control over what they’re investing in. But in the long run, this may bring additional problems that you might not have anticipated. Here’s why managing money on your own may not be in your best interest.

Who likes paperwork?

No one likes dealing with piles and piles of paperwork, but there are certain forms you’ll need to fill out to get your accounts set up. Furthermore, you’ll have some reports to fill out come tax time. If you don’t fill them out correctly, it could lead to minor annoyances or huge headaches.

Do you have time to manage your own money?

One of the benefits of hiring a financial advisor is that you get your time back. Believe it or not, you can spend a ton of time managing your investments because it isn’t a “set it and forget it” endeavor. You need to watch over the performance of your investments regularly, and keep up to date with changing laws and regulations that may affect you.

What’s your investment strategy?

If you’re going to invest, you’ll need to do some research beforehand - it’s not a good idea to pick stocks randomly. You also need to consider your level of risk. If you’re unfamiliar with the process, you may not diversify your portfolio correctly, and your risk level may be off as well. You also might not know the allocation types that would be ideal for you as an investor, and it’s worth considering how you’ll balance your investments among stocks, bonds, short-term and long-term assets and other safe-haven assets.

After setting up your portfolio, you also need to consider your return on investment for the risk that you’ve chosen. It’s possible that you won’t be getting the highest return you could have, simply due to lack of knowledge.

Furthermore, you need to consider the tax implications of your investments. Paying attention to capital gains and knowing how to harvest incurred losses is part of a good strategy, and you could end up paying more in taxes than you anticipated.

It’s always good to get a second opinion.

By managing your money on your own, you don’t have someone to bounce ideas off of. If you’re receiving dividends or a bond payout that’s come to maturity, you aren’t getting valuable tax or investment advice before you receive that money, which could affect your taxable income.

Furthermore, as the saying goes, you don’t know what you don’t know. An advisor can answer questions you may not have asked, simply because you didn’t know to ask them.

Lastly, if you have any health issues or unexpected life events that affect your cognitive function like Alzheimer’s or dementia, you may be making mistakes and not realizing what you’ve done. A financial advisor will look out for your best interests and catch issues before they turn into huge problems.

If you’re weighing the pros and cons of managing money on your own, we invite you to come in for a complimentary proactive financial review.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. Past performance is no guarantee of future results. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.

Sincerely,

The Team at Chatterton & Associates