(*Content provided by the White Coat Investor)
Why Be a Do-It-Yourself Investor?
There are really three main reasons to be your own investment manager.
#1 – It's Fun!
The first is that DIY investing is fun. If you detest it, you may want to rethink doing this on your own because you are unlikely to learn as much as you need to learn and unlikely to pay as much attention to it as you should (which isn't that much, but it does require some attention).
#2 – Control
You get to be in control. Personally, I have zero tolerance for someone else screwing up my stuff. No advisor cares about my money as much as I do. I also get to completely eliminate the risk of my advisor ripping me off, as this recently happened to a dentist in my neighborhood who no longer has a nest egg.
#3 – Save Money
Perhaps the most important reason to be a DIY investor is to save money. Good financial advice is expensive stuff. It is silly to mow your own lawn, clean your own house, and work on your own car in order to save money, and then turn around and pay tens of thousands of dollars per year to have your money managed. You would be better off learning to manage your own money and paying someone else to do those other chores.
How much does advice cost at typical prices? Well, consider a doctor who decides to save $80K per year for retirement starting at age 30 and pays 1% of her assets to advisors each year. By the time she retires at 60, her portfolio will be $1.5M smaller ($9M vs $7.5M) if she used an advisor. If she lives another 30 years, her portfolio stays about the same size over those 30 years, and she takes out 4% a year in order to live and pay the advisor, she will pay the advisor another $2.3M in retirement. So the way I look at it, if you can learn to be your own competent investment manager, you can make up to $3.8M worth of mistakes and still come out ahead! Think of managing your own money as a very well-paid hobby.
However, although I'm against bad financial advice and against over-priced advice, I am in favor of good advice at a fair price. The financial advising industry isn't hosing everyone and not all advisors are charging 1% AUM fees. Some advisors are better than others and I've compiled a list of fairly-priced advisors that I trust to help you when needed. If an advisor can help you save and invest in a reasonable plan, and can keep you from doing dumb things with your money (like bailing in a bear market), paying a reasonable fee can be worth millions of dollars to you.