Should You Manage Your Own Investments?

So you’re just out of college and your career is launching like the new Tesla P85D. Maybe you’re in your 30s, you’re married with children and you’ve managed to build some savings. Or just maybe you’re thinking about retirement and you have several 401ks from previous employers and you don’t’ know exactly what to do with them. Whatever your situation, you’ve decided you want your money invested in something earning more than the .08% offered by your local bank.

So you ask yourself the question: “Should I manage my own investments?” After all, you’ve seen those television commercials for the brokerage firms that provide all the tools, research and knowledge needed to make it so easy that a talking baby can do it. Well, let me pose some additional questions and give you some things to consider.

1. Do you have the time? Ask yourself this: Do I have time to follow the market and track my investments every day? How much time should I spend on research before I feel confident in my investment choices? How much time should I dedicate to watching the news and understanding what economic factors are affecting or could soon impact my investments? How much time will it take to develop an effective investment strategy that fits my needs today and tomorrow?

2. Do you have the desire? Even if you decide you have the time you really need to know that you have the desire. More specifically, do you find the financial markets interesting? Interesting enough to spend the time to find out why a company’s stock just fell 25% after a positive earnings report? Or how much, if any, of your investments should be in ETFs or bonds this year, next year or 10 years from now. Or maybe you’ve decided you’ll pick some well-known companies and buy their stocks. . . after all they’ve been around for decades.

3. Do you have the temperament? So you’ve decided you have the time and the desire to manage your investments. Well, we’re not done yet. . . are you sure you have the stomach for it too? Can you maintain an objective view of your investment portfolio when the market takes a sudden turn downward like we saw last month? Should you “cash out” and sit on the sidelines or do you feel confident that your strategy is sound and you can ignore the short-term volatility? Will you find yourself “selling low and later buying high” because you get spooked from a story on the six o’clock news?

Spend some time thinking about these things before you decide how to manage your money. Then meet with a professional investment advisor or financial planner and ask them about their experience, credentials and how they will work with you. Many of us like to do things for ourselves, if not just to get a better understanding of how they work. But just because you enjoy fixing things around the house doesn’t mean you should tackle a complex job like installing a central HVAC system.