By Chris Heisten, CRPC®, CFP®, CSRIC®

Investing is now more accessible to the average person than ever before. Thanks to the rise of online trading platforms and the abundance of investing resources, many people have embraced do-it-yourself (DIY) investing to take charge of their financial future.

While this shift has certainly empowered individuals to build their wealth, there are still hidden costs and potential challenges associated with the DIY approach. In this article, we delve into the expenses and common pitfalls that come along with going it alone in investing. We also offer valuable insights on how to optimize your investment strategy for the best possible results. Whether you’re a seasoned investor or just starting, understanding the true cost of DIY investing is a crucial factor to consider when pursuing financial success.

Advantages of DIY Investing

One of the primary advantages of DIY investing lies in the fact that managing one’s own finances can be empowering and rewarding. With this approach, you have full control over your investment decisions, allowing you to tailor your portfolio to your specific financial goals and risk tolerance.

Additionally, it can save you money in the short term by avoiding fees. Financial advisors typically charge advisory fees or commissions for their services, which can add up over time. But it’s also important to remember that DIY investing comes with its own risks and drawbacks.

What Are the Drawbacks?

Now that we know a little bit about the benefits of investing on your own, let’s take a look at the disadvantages and potential costs.

1) Time-Consuming 

One of the most significant drawbacks of DIY investing is the amount of time and effort it can require. Unlike hiring a financial advisor who can manage your investments on your behalf, investing on your own puts the responsibility of research, analysis, and decision-making squarely on your shoulders. This means you’ll need to stay up to date with market trends, research potential investments, and continuously monitor your portfolio to keep it aligned with your goals and risk tolerance.

For the average person, this level of involvement can be time-consuming and overwhelming. With busy work schedules, family commitments, and other responsibilities, it can be challenging to find the time and mental energy to devote to managing your investments effectively. Many DIY investors often find themselves poring over financial reports, analyzing charts and graphs, and researching new investment opportunities late into the night, sacrificing precious time that could be spent on other hobbies or interests.

2) Potentially Emotionally Stressful 

The responsibility of managing your investments and making crucial financial decisions can be overwhelming, especially when dealing with volatile markets or unexpected events that can impact your portfolio’s performance. Investors may experience anxiety, fear, or uncertainty, especially when faced with losses or unexpected changes in the market. You may also feel a sense of pressure to make the right investment decisions, which can lead to feelings of self-doubt.

Unlike working with a financial advisor who can provide an objective perspective, DIY investors may also become too emotionally attached to their investments, which often leads to poor decision-making. It’s possible they may hold onto underperforming assets for too long, ignoring warning signs or market trends, or make impulsive decisions based on emotions rather than logic. In the end, the emotional stress of investing on your own can take a toll on your mental health, leading to burnout, anxiety, or possibly even depression.

3) Detracts From Important Areas of Life or Work 

Going on your investing journey solo has the potential to detract from your personal or professional life, especially if you’re not prepared to handle the time commitment or stress that comes with managing your investments. For those with busy lives, this time commitment can take away from other important activities, such as spending time with family, pursuing hobbies, or advancing your career. This is why it’s critical to be realistic about the amount of time and energy you can commit to managing your wealth and make sure it aligns with your goals and priorities.

4) Costly 

While investing on your own can potentially save money in advisory fees, it’s important to consider the potential costs and risks involved before deciding to go it alone. Many individuals who invest on their own have the idea that they’re saving money, but the truth is that it can be costly, especially for novice investors who lack experience or knowledge about investing. Without the guidance of a financial advisor, DIY investors may make expensive mistakes, such as buying or selling at the wrong time, investing in high-risk assets, or failing to diversify their portfolio. These mistakes can lead to significant financial losses, reducing the potential returns of their investments. 

5) Suboptimal and Risky

Most investors who are not well versed in finance typically lack the expertise or resources available to professional financial advisors. While some DIY investors may have a basic understanding of financial markets and investment strategies, they may not have the in-depth knowledge or experience necessary to make informed investment decisions. 

Financial advisors, on the other hand, have years of training and experience, as well as access to a wide range of investment research and analysis tools that can help them identify the best investment opportunities and manage risks. They provide a personalized investment strategy based on your financial goals and risk tolerance, which can help ensure you are investing in a way that aligns with your needs and objectives. 

Your Financial Partner

Much like many of our clients, your life is likely characterized by a busy and often chaotic schedule, which leaves little room for tending to your investments. While DIY investing may seem attractive to some, it might not be the best route for those with both limited time and experience in the world of financial management.

When you partner with a seasoned financial advisor, you can delegate the task of managing your investments, which liberates your time and mental energy for other aspects of your personal and professional life.

At Heisten Financial, we work to craft custom investment strategies that align with your financial goals and risk tolerance. We also offer continuous support and guidance to help you understand the unpredictable nature of financial markets. If you’re looking for assistance with your investment strategy, don’t hesitate to reach out to us by emailing jami@heistenfinancial.com or calling 907.222.6270.

About Chris

Chris Heisten is President and Founder of Heisten Financial LLC, a fee-based boutique financial planning firm with the focus of giving clients back their time so they can spend it doing what’s most important to them. Acting as a true fiduciary for his clients, Chris aims to solve their financial pain points and move them toward financial freedom. In the financial industry since 2007, Chris partners with business owners and oil workers on their journey through life, striving to instill calmness and a sense of direction as he simplifies the complex. He loves nothing more than seeing clients experience relief when they achieve what they thought was impossible.

Chris graduated from the University of Maine, where he played hockey on a scholarship, and retired from professional hockey in 2007. In the community, he remains engaged serving as a youth hockey coach. Chris holds the CERTIFIED FINANCIAL PLANNER™, Chartered Retirement Planning Counselor℠, and Chartered SRI Counselor™ designations. Outside of the office, he enjoys trying new food and wine, reading, traveling, playing golf and hockey, fat tire biking, and donating to local charities. His passions include being a husband and dad, lake life with the family, watching his son and daughter play sports, and spending time with his wife. To learn more about Chris, connect with him on LinkedIn.