DIY Can Be Fun, Profitable…And Risky
Max Blank and Bernie Marcus, the Jewish founders of Home Depot, enabled millions of people to become “Do-It-Yourselfers” (DIYs). Customers of all backgrounds use the store’s vast selection to become weekend handymen, home designers, and building contractors. However, simply having access to tools and materials doesn’t mean that a job will be well done. DIYs’ homes often have a topsy-turvy look, or worse, unsafe plumbing and electrical systems. While tinkerers can save money while having lots of fun, people need to make sure they are up to the tasks they undertake. Like home improvement, it’s never been easier and cheaper to be a successful DIY investor. However, though one can’t electrocute himself while investing, financial mistakes can be very costly. Before you decide to take your own path, you should seriously consider if you have the time, interest, and suitable nature to do the job right.
Do You Have Time And Interest?
Basic investing concepts are not hard to learn, but as with any topic, it takes time to research and absorb its language, players, and rhythm. If you can invest the time required to read a few books and familiarize yourself with the investment marketplace, you can probably pull together a strong portfolio by yourself. Afterward, maintaining this plan and staying on top of new developments shouldn’t take more than several hours a year. Depending on how you value your time, it may be well worth it for you to develop the knowledge required to manage your own investments. Highly paid professionals or businessmen, on the other hand, may be better off financially just paying for an investment adviser and reserving all their available time to be “sold” to their own clients.
Directly connected with having enough time for something is the level of interest in that field. It’s a lot easier to make time to study something we’re curious about, and if you don’t enjoy reading about the stock market, you probably won’t find time for it in your limited schedule. Also, interest in a topic is the key to understanding it, as our brains open up to what we want to learn. When speaking to kids who tell him they don’t have the brains to remember their Torah learning, Harav Reuvein Feinstein shlita always asks them if they follow professional sports. Somehow, a boy who can’t remember a mishnah can parrot lists of statistics about each team and player he follows, l’havdil! The problem in this case is clearly not a lack of kishron but of ahavas haTorah, which requires a different remedy. Likewise, good DIY investors tend to be people who appreciate the topic.
And What About Personality?
Even if you have the time and interest, you may not have the right personality for investing. Unlike plumbing or electric projects, managing money requires ongoing emotional discipline as markets shift. People become very anxious about their money, which causes them to overreact and make irrational choices. Everyone knows that the worst time to sell something is when prices are low, but panicked investors do so anyway. On the opposite side, many successful business-people are hyper-focused on their portfolios and lack the patience to allow their investments to ripen. (Imagine a farmer who keeps switching his seeds…from wheat to corn to melons, instead of letting anything take root!) Many studies show that most investors lose a great deal of potential growth as they jump in and out of investments, causing experts to conclude that “the biggest threat to your portfolio is you”! Unless you can be emotionally disciplined, having an investment adviser at the wheel is well worth the money.
It’s Not All Or Nothing
One important final point for you to realize is that the decision of being an investment DIYer doesn’t have to be an all-or-nothing one. In home improvement, many who are comfortable doing minor jobs, like changing a light fixture or painting their house, will hire professionals to undertake larger or more complicated jobs. you can follow a similar path by hiring someone to design your portfolio but managing its maintenance on your own. Even if you are confident enough to completely direct the investment part of your portfolio, you will probably want to hire tax, law, and insurance professionals when such issues intersect with your investments. Unless you somehow find the time and interest to do those things yourself as well…but frankly, I think that’s pushing it.