Online platforms have revolutionised the opportunities open to the DIY investor, delivering access to masses of information and historical data and the ability to buy, sell and monitor investments at a click of a button at low cost.
A recurring sentiment is that there is a sense of empowerment and liberation that comes with DIY investing; with online brokers and investment platforms reporting record levels of applications, and high trading volumes, it seems that many are using the current lock down to take personal control of their finances.
In a previous article ‘Financial Education: Part 1 – Before you Start Investing‘ we examined some considerations before you sign up, and throughout the site there are plenty of articles to help you on your journey; here, we go back to square one and invite you to consider whether you are cut out to be a DIY investor.
There is much to commend becoming a DIY investor; more and more people are taking personal control of their financial future as state support becomes less dependable and for many, life just seems to get more expensive.
A recurring theme on DIY Investor is ‘nobody cares more about your money than you’; that is certainly true but for all the support that comes with online technology and social media, becoming a DIY investor is not a frivolous undertaking.
there is a sense of empowerment and liberation that comes with DIY investing
You will be taking decisions that will have an effect on your quality of life and your ability to achieve your long-term financial goals.
A time-worn debate is whether investing is an art or a science; passionate cases can be made for either, and in truth it’s probably a combination of the two, but whilst it is possible to bone up on the science to ensure your levels of knowledge are adequate, this article considers how it makes you feel.
DIY Investor has many articles about risk and reward, and that’s the key; if your investments are keeping you awake at night, you’ve either taken on more risk than you are comfortable with, or you are not cut out to be a DIY investor. (How Much Risk can you Tolerate and how Does That Affect Your Investment Portfolio)
Many platforms now include behavioural questions as part of their sign up process, but if you agree with Mark Twain that ‘I am more concerned about the return of my money than the return on my money’ maybe you’re better suited as a saver.
However, if you want to successfully handle your own finances, here are the essential attributes the best DIY investors have in common:
Take the Time: Becoming a smart investor takes time, particularly if you are new to investing; Gary Player claims the quote ‘the harder I practice, the luckier I get’. In common with golf, investing requires application, and is not something to pick up and put down – think about how much time and effort you can spare to invest.
If you are already at full throttle, you may not have time to devote to running your finances, or may spend too little time to do yourself justice; perhaps look at the value of the time you would have to spend on DIY investing compared to the price you would have to receive professional advice, or potentially consider an automated solution such as can be found here.
As we would have it – Do it Yourself, Do it With me, Do it For me – just don’t do nothing!
Take an Interest: It’s undoubtedly harder to be good at something you are not interested in; if you want to be successful as a DIY investor, you should take more than a passing interest in money and finance.
You do not have to be an expert to take the first steps along the way, but the willingness and commitment to learn is a prerequisite to DIY success; think about your level of interest, your ability to research and how prepared you are to learn about all things financial.
If you have set out your financial goals, and worked out how you might achieve them, lack of interest should not be an impediment.
Be Determined: The basic principles of saving for the future should not be beyond the wit of most, but choosing the right investments requires a little application; if you want to succeed as a DIY investor, you will need the expertise to get it done.
For those with little experience and only a rudimentary knowledge of investing there are many packaged or one-stop solutions – selecting widely diversified mutual funds can be surprisingly simple; however, learning about the various types of investments and how best they can be employed will be important to your success – a strong desire to learn is valuable.
Be Disciplined: A core skill applied by both financial professionals and those that implement their own investment strategy is that of discipline.
DIY Investor’s sister site Muckle has ‘mony a mickle maks a muckle’ as its founding principle, and it is discipline that is required to ensure that you put away regular contributions, however small, to deliver the gains you want to achieve down the line.
With so many other calls on your money, it is easy to let things slip, and that could prove very damaging to your future outcomes.
Be Calm: It is not easy to stay calm when markets are in melt-down because there is a natural desire to want to do something. A hurdle to overcome is the undeniable tendency for DIY investors to buy high and sell low – attempting to time markets and adopting a herd mentality can have a ruinous effect on a portfolio.
That is the heart leading the head; a disciplined investor is in it for the long term and having made rational investment decisions based on good information the successful DIY investor does not get spooked by short-term volatility.
Experienced DIY investors know that the stock market is a bumpy ride and in times of turmoil, those who do nothing tend to come out on top; think about how you react in a crisis and let that be your guide.
It may be Rudyard, but IF (see what we did there) you generally keep your head when everyone else is in a panic, DIY investing may be for you; if not, you might want to consider an alternative that gives you the level of support and guidance you prefer, but there can be no doubt that over time financial self-reliance will become the norm.
There are many advantages to being a DIY investor, from knowing where your money is and what it is doing to avoiding financial fraud and conflicts of interest.
you will find that you are part of a rapidly growing movement targeting financial independence
The feeling of empowerment cannot be underestimated, and with greater knowledge and understanding comes the ability to respond and adapt to changing personal and environmental circumstances.
However daunting, the first step is undoubtedly the hardest; once you decide that DIY investing is for you, you will find that you are part of a rapidly growing movement targeting financial independence.
However unique you feel, there are plenty of people out there just like you; circumstance just like yours, objectives just like yours and like never before you can now interact with them and share experiences.
Before you hand over responsibility for your financial future to the person in the mirror, make sure they have the core skills and attitude they need to succeed – starting with the essential attributes listed above – and if so then embark on your personal journey to financial freedom.