DIY Investing vs. Hiring a Financial Pro
With the recent U.S. stock market euphoria after the surprise Trump presidential victory, people have become more optimistic about the prospect of investing when the markets are right near all-time highs. Some investors also feel that they can do it better themselves now (and that’s great if they truly can), but I would provide a few words of caution on this matter (after all, this is professional advice):
- We haven’t had a bear market (defined as falling 20% from the previous highest point) since the 2007-2009 (dubbed the Great Recession). We did come close in 2011, but never did officially touch bear market territory. Usually we experience a bear market every 5-6 years – seems like we could be overdue for a downturn at some point in the future (the sky is falling???). BUT…
2. …that doesn’t mean you should panic and sell your investments just because we haven’t seen a bear market in a while. This should give you some perspective: since 1926 bull markets on average lasted nearly 9 years with an average cumulative total return of 490%. On the other hand, bear markets on average lasted 1.3 years with an average cumulative loss of -41%. Keeping a cool head (talk to your financial advisor) when markets go south (especially if you own quality investments – NOT penny stocks) can help you avoid blowing up your own future financial plans.
3. Never sell investments just because you’re nervous (that’s almost always a mistake); sell because it makes sense to do so (re: your situation). Investing with emotions is THE number one mistake most people make (you’re supposed to buy when prices are low, and sell when prices are high, not the other way around). Most investors buy when they should sell (because the markets are high) and sell when they should buy (if people think you’re crazy for investing during a bear market, remind those people that Warren Buffet loves to buy quality investments when there’s “blood on the streets”). If your home goes down 40% in value, are you going to sell it right then and there? Probably not, so think about your investments in the same way.
DIY investing and/or financial planning can be challenging (there is so much to know), so tackling it on your own can be difficult. You can spend hours researching information, and sometimes still not be sure what you should do going forward. Just remember: true financial professionals will act as fiduciaries and help guide you on the best path to help you achieve your financial goals. It’s an often-cited point that investors tend to stay on track with their financial plans when they work with a real financial professional/team. Don’t let yourself fall off the tracks because you want to DIY – real help is always available…you just need to know where to find it!
Find an experienced financial advisor who deals with financial planning regularly, works for an RIA firm, earns his/her money from fees (NOT commissions), believes in having an abundance of investment choices for clients, and has the heart & demeanor of a teacher, NOT a salesperson, and chances are you’ve found the right financial advisor to help you plan and prepare for your financial goals.
To learn more about Martin Federici at MF Advisers, view his Paladin Registry research report.
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