Is Do It Yourself Investing for You?

I loved those old TV advertisements with the talking baby. You know the ones—the baby is sitting at the computer trading stocks, bonds, and who-knows-what-else. When his Mom makes him take a nap he whips out his smart phone and keeps on trading.

What I love about the ad is the cute baby. To me it is a comedy—depicting a scene so farcical that it is funny. But this and other ads from different discount brokers also peeve me. They imply that, just because of the technology at your fingertips, even those as fresh and innocent as a baby can successfully navigate the markets and manage an investment portfolio.

Then there are the magazines, books, video series, seminars and workshops; all of which tell you that they will give you the tools, the information, to be able to wrest control from Wall Street and beat them at their own game.

Why would you want to use all these nifty gadgets? After all, putting your money to work for you is pretty easy, just buy a mutual fund. The easiest way to do that is to buy a broad-based index fund…essentially buying a wide representation of whichever market you are interested in.

But who wants to just do average? That’s why you see all the ads purporting that with their technology, techniques, or “secrets Wall Street doesn’t want you to know” you can get a leg up on the market. Anyone can equal the market by just buying an index fund; but you are special. With those special tools at your disposal you’ll not only match, but beat the market. You’ll see trends and data in such a way that you’ll spot the winners and navigate past the losers. You’ll be able to come out on top.

The subtle, and sometimes not-so-subtle, theme is that Wall Street is out to get you. They are evil, only care about their own profits, put themselves first, and are interested more in separating your money from you than in growing it for you. The only way to keep from getting taken is to get into the game yourself and take control of your investments.

I’m actually in partial agreement with this sentiment. You don’t have to follow the news for long to realize that for many companies their profits are much more important than their customers’. But the financial world isn’t any different than other sectors of business. Car manufacturers and their dealers also want to maximize profits, so should you build your own car? The housing industry is the same, so should you build your own house? Thing is, some of you should. Some have the talent, time, and personality to take on a project like that and succeed at it. The same with investing. But for the vast majority of people out there, do-it-yourself investing is not the way to riches, but rather to mediocrity—if not worse.

Instead of spending all the time, effort, and money to become an expert, I’d rather you find the professional that puts your interests first, that can explain things at your level of understanding, and who takes the time to get to know you rather than trying to fit you into a one-size-fits-all investment program.

And no, it doesn’t have to be us.  -- Excerpt from Real World Investing by Gary Silverman, CFP®

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