3 great reasons to become a do-it-yourself investor in 2019

Think you can’t be like a professional when it comes to investing? Think again.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Taking full responsibility for your finances, including any investments, is both daunting but highly recommended. After all, no one should (and does) care as much about your money as you do.

Here are three more reasons why I think the do-it-yourself approach should appeal to many Foolish readers.

Reason 1: Investing doesn’t need to be difficult

The financial services industry would have people believe that investing and the stock market are far more complicated than they actually are. Throw in some scary-sounding jargon and impressive charts and it’s easy to see why those hesitant to handle their own money and low on time are throwing it in the direction of the professionals.

In reality, investing is one of the few pursuits in life that almost anyone can become successful at. Far more important than academic qualifications, or decades of experience in the City, is a willingness to take calculated risks and the ability to remain calm when everyone else around are losing their heads.

Nor does profitable investing necessarily require countless hours of research. If you’d rather not analyse individual stocks, just direct your money into passive vehicles such as index trackers and exchange-traded funds. Since they follow the market, you’ll never outperform, but you’ll never under-perform either. You’ll also only need to check your portfolio once or twice a year.

Reason 2: Save on fees

Cutting costs as much as you possibly can ensures that more of your money is put towards compounding your wealth rather than lining the pockets of the aforementioned fund managers and financial advisers. It’s arguably one of the key principles of successful investing that isn’t mentioned often enough.

Why pay a professional 0.7% or so a year to pick what she/he considers to be the best large-cap income stocks when you can do something similar with a passive fund for far less, while still generating a reliable dividend stream? Even if the former outperforms the latter, the higher fees eat into this better return. It’s also worth mentioning that very few professional investors are able to beat the market consistently over the long term. 

Reason 3: Freedom

Taking control of your finances means that there’s no one else to blame when things go wrong. The flip side is that it provides you with enormous freedom to invest in whatever you want.

The professionals should be so lucky. If a manager is charged with finding value, she/he can’t simply sell their holdings and invest in high-growth companies, even if they suspect that this might generate the best returns over the next few years or so. You have that power. 

As a private investor, you’re at liberty to invest based on your attitude to risk and time horizon. If you’d rather operate a fairly concentrated portfolio consisting of 15-20 high-quality stocks, so be it.

Your principles are also relevant. If you’d rather not buy ‘sin’ stocks (e.g. gambling and tobacco firms), you don’t need to. This would be one example of when index trackers should be avoided since they buy a little of everything.

Regardless of what you do, a final advantage worth noting is that you are able to be nimble in a market where fund managers can only ever buy in bulk. That can also be a huge bonus if you want/need to exit positions quickly.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Would Warren Buffett buy BP shares, as oil excitement grows?

Warren Buffett is a big investor in the oil business, and BP's performance has been attracting investor attention in results…

Read more »

Cropped shot of an affectionate young couple posing with a bunch of flowers in their kitchen on their anniversary
Investing Articles

Here’s how long-term loyalty to UK shares can lead to dazzling returns!

The most successful UK and US share investors buy shares to hold for the long term, as this report shows.

Read more »

Investing Articles

NatWest has just smashed brokers’ dividend forecasts!

After NatWest delivered a Valentine’s Day surprise to investors, our writer thinks the experts may have to raise their dividend…

Read more »

Investing Articles

The NatWest share price slips in early trading despite positive FY 2024 results. What’s the deal?

The NatWest share price is down slightly this morning after the bank released its final results for 2024. Our writer…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

My Legal & General shares have climbed just 7% — so how come I’m sitting on a 20% gain?

Harvey Jones' trading account is showing only a modest return on his Legal & General Shares, but on drilling down…

Read more »

Investing Articles

Prediction: the BP share price could rise in 2025 (or it might fall!)

Following this week’s release of the energy giant’s 2024 results, our writer reviews the prospects for the BP (LSE:BP.) share…

Read more »

many happy international football fans watching tv
Investing Articles

What’s gone wrong with the FTSE 100’s ‘King of Trainers’?

Feeling the pain of a 28% drop in the JD Sports share price over the past three months, our writer…

Read more »

Investing Articles

Is it too late for investors to consider buying these outstanding FTSE 100 shares?

Stephen Wright wonders whether now's the time to consider buying shares in the FTSE 100’s outstanding companies, despite some high…

Read more »