Should You Manage Your Own Investments?

Manage Your Own Investments
 

Last week, a very intriguing finance article just popped up on my Google Finance dashboard. The headline of “$21.8M in investment fees was mistakenly charged” strikes my interest and I gotta find out how did such a mistake occurred. Ever since I started to invest for myself, I became a strong advocate for managing my own finance. It’s headlines like these that gave me the extra motivation to be the one accountable for managing my own investments. So for this post, I will be your money advocate and present the case for you to manage your own investments.

 
Reading Finance Articles

Why I Read Personal Finance Articles

Most of the time, when I read personal finance articles, I have two purposes. The first purpose is to learn new ideas on how to increase my personal wealth and to incorporate the ideas that fit into my investment philosophy. The second purpose is to become aware of the money mistakes that others made and try to avoid them myself. It’s much cheaper to be aware of potential mistakes and avoid them comparing to learning from your own mistakes.

 
Investment Fees

Investment Fees Can Be Costly

When people invest, quite a few people don’t pay much attention to the fees that investment firms/advisors/mutual funds are charging them. The perception is that an annual fee of 1% to 3% is reasonable because they are professionals. This amount may not seem like much for one year, but let’s take my case for example. Based on my latest quarter’s net worth review, my combined family investment assets of just over $1M means that I’ll be charged an annual fee of between $10,000 and $30,000. Over a ten year period, it can cost me $100,000 to $300,000. For this amount of money, would you rather spend some time to learn how to manage your own money and earn the investment fees yourself?

 
Performance

Pay For Performance

For the fees that we are paying the investment advisors or mutual funds, there is no guarantee that we’ll make money on our investments. Everything depends on the stock market performance, the economy, the political environment, etc.. Even if our investment loses money, we’ll still be charged with the same fees regardless of performance. If that’s the case, my question is, “what are we paying the fees for?”

 
Scrutinize Investment Fees

Scrutinize Every Investment Fee

In my final step to saving a million dollars post, one of my recommendations is to review all your account statements. Question any fees that were charged to your account that you don’t understand why those fees were charged. The reason behind it is if you don’t question why a fee is charged to your account, you would have lost that money. Most likely, the institution that charged you the fee would not voluntarily return the money to you unless you dispute the charge. Also, if you leave a charge for too long, some institution would not review it after a period of time.

 
Who Should You Trust With Your Money?

Who Should You Trust With Your Money?

In the same week, I also came across another article on CBS Sports (I do have other hobbies besides personal finance) about Clinton Portis, an ex-NFL running back. He was once a millionaire back in his heydays and now just another bankrupted soul because he trusted the wrong person to manage his money. This is one life changing money mistakes that we can all avoid if we know how to manage our own money or investments. He almost committed murder of his money manager for ruining his financial life and I cannot imagine what I would do if someone I trusted ruins my finance.

 
Know What You Paid For

Know What You Paid For

Now, getting back to the fees that Royal Bank mistakenly charged their investors. Very often, when we invest in a product such as a mutual fund offered by a financial institution, we are only given a rough percentage of the fees that they charge. We have no way of knowing what the charges were and if the fee was used to improve the performance of the fund at all. There is no visibility into the fees. As a result of this, I refuse to pay for fees that I can’t review or justify why it’s being charged.

 
Be In Control Of Your Retirement

Be In Control Of Your Retirement Money

Imagine that you had been working hard for the last twenty years and making regular contributions to your company’s pension plan and you are now ready to retire. You expect to enjoy your golden years and get a regular paycheque from your pension plan. Suddenly, your company’s pension is in shamble because your company just filed for bankruptcy and suspend their contribution to the pension plan. You may not get the full income that you worked so hard for the last twenty years. This is the most likely outcome for the Sears Canada employees. Hence, I will never voluntarily contribute to any company pension plan. I will move my money to my own retirement account and be in control of my retirement money if that option is available.

My Two Cents

Too often people think that managing their own money or investments is difficult and you need to be a math whiz to be good at it. It certainly is helpful if you are good with numbers, but you don’t have to be a genius to manage your own investments. If you start with the thinking that you can’t manage your money, then you definitely can’t. My motto is to be positive. Change your thought process to think that you are capable and you can do it, then you definitely can. You should be in control of your financial well being not anyone else. Psssssssst, here are the top money management secrets that I used to accumulate and control my $1.25M net worth: develop a disciplined mindset, continuous learning, only invest in what I know and seek help in the area that I lack knowledge. This is all it takes for me to manage my investments.

 

So, would you manage your investments? If you have someone managing your money for you, how do you know if that person has your best interest?

 

Leo T. Ly, Canadian Personal Finance Blogger/Enthusiast and a Realtor Living in the Markam, Ontario, CanadaAbout Leo
I am a Canadian personal finance blogger/enthusiast and a Realtor living in Markham, Ontario, Canada. I built a net worth of a million dollars over a ten year period. I did it by being a disciplined saver, taking advantage of income tax rules and borrowing money to invest rather than for consumption. I am often excited to take advantage of free money from employers and governments in addition to building more passive income sources. After accumulating my first million dollars, I am now embarking on a second journey towards achieving financial independence. On this journey, I will strive to increase my net worth to two million dollars and retire by the age of 48 - Freedom 48. Come along and follow my journey on Facebook, Twitter, Pinterest or Google Plus.



There are 42 opinions expressed on this post.

  1. I’m a fan of either self-management or a low-cost “robo” solution. While .25% can still add up, it’s MUCH better than the averages and can often be justified the time savings and automation features (assuring consistency in your investment practices).

    What often surprises me is how few people have ANY idea what they’re paying or what they are getting. I’ve had that conversation with a few people recently. one even said “Yeah, I know I sound like that commercial, but I’ve never asked my guy…” Ugh. So scary!
    Brad – MaximizeYourMoney.com recently posted… Your Investments: Yes, you’re already paying; what are you getting?My Profile

    1. @Brad, this may sound blunt and mean, but when people are investing and they don’t know how much fees that they are paying, then they are just making money for other people and not for themselves. Being ignorant of the fact that their lives revolve around money and their future financial well being depend on how much effort they put into taking care of their money now, is not an excuse. I hope that people really reconsider the consequences of their lack of financial knowledge. Some financial mistake may be overcome, however, you don’t want to be one of the victims from the articles that I referenced.

    1. @Lance, going with low-cost index funds would probably be suitable for the majority of investors. I know that I should be doing that too. However, I like to incorporate different strategies such as tax efficiency, options and real estate into my investment portfolio. It’s a lot of work, but I enjoy doing it and seeing the result of my hard work.

  2. @Leo, it’s a point isn’t it that so many people do not know how to handle their own finances to not being knowledgeable or comfortable investing in the stock market, indexed funds even mutual funds & it’s only the few that do that it really well – my guess is less than 10%l. That is why the banks are loaded with interest savings accounts & GIC’s/CD’s.

    As someone once said ‘don’t put your money in a bank account/term deposit’ – that instead ‘buy the bank’ [stocks, bonds etc]

    Folks that get burned trusting other people to manage their money generally will stick whatever they have into a low interest bank account

    On fees, any fees, lots of folks don’t mind paying fees, yeah they’ll moan about it, yet wont take care of it.

    I’m a person that pays zero fees on anything & I mean anything. Maybe it’s old school.

    1. @John, when it comes to managing money, my motto has always been: “it’s your money, you should be responsible for managing it.” I have heard too many stories about people who lost their life savings because they either trust the wrong people with their money or they were lead to investing into something that they thought are safe investments.

      As for fees, I don’t mind paying for performance if it can be justified. If it can’t, then I’d rather pay myself the fees.

  3. I used to be oblivious to my investment fees until I realized how high they were. I’m a happy “Do It Yourself-er” now but have had to learn lessons the hard way (invested in penny stocks etc, or didn’t know how to invest in the stock market). Now about 10+ years of doing it myself I have learned what works and what doesn’t and it’s a great feeling to tell potential schmoozy financial advisors to buzz off haha!
    GYM recently posted… GYM Dividend Income Update June 2017My Profile

    1. @GYM, investing is a marathon, not a sprint. There are a lot to learn and we will make mistakes here and there. That’s okay because no one is perfect. As long as we don’t make the same mistake twice, we’ll be find. In terms of investment fees, my view is to pay for performance. Since most money managers can’t beat the S&P 500 index, I am not willing to pay 2% of my money to them when I can pay a lot less to own the S&P 500 ETF.

  4. I read that article on Clinton Portis and that was crazy. Living in the DC area it was all over the news here and it was definitely disappointing. I definitely feel like I learn a lot more from people making mistakes than some of the things people have done right. More often than not I rather let someone else make them mistake and I’ll learn from them.
    Mustard Seed Money recently posted… The Undeniable Appeal of a New CarMy Profile

    1. @MSM, Learning from other people mistake can definitely safe us a lot of money. Potentially, it may save us a fortune comparing to Clinton Portis’ situation. One of my main motivation for managing my own money is that I don’t want to leave any chance that my wealth can be ruin by someone else. It would be terrible if you are in your retirement and someone that you trust had either lost all your money or worst defrauded you with a Ponzi scheme. Hence, I am not taking any chances.

    1. @Kylie, you should definitely start to pay more attention to your investments. Remember, you don’t need to manage your money alone. You can always seek help while you are learning. You can start to take over once you have acquired the knowledge to handle your own finances.

    1. @Ankita, recognizing that there are help out there and you can enlist people with more knowledge to help you is a good thing. I would encourage you to continue to manage your finance and to advance you finance knowledge further. This way, you will be on your way to truly manage your own finances.

  5. I think that it would be easier and cheaper to manage your own investments….if you know what you are doing. It’s always smart to hire someone to help you until you learn the ropes of investing.

  6. Hi Leo!
    Very helpful post for those of us who really are clueless about investing. I do invest, but I fall into the novice category. I never paid much attention to fees but I will now. Thank you so much for this information! I am now a happy follower!

  7. If I were as savvy as you are I might try this … but I defer to the expertise of financial advisers.

  8. Even though I am extremely good at math I am still scared of handling my own investments. Maybe I am just a victim of fear mongering and should take your advice to heart. It’s generally brilliant advice that can be applied to any walk of life “Change your thought process to think that you are capable and you can do it, then you definitely can.”. So simple but on point.

  9. I really need to think about investing. I’m a little nervous about it, but this is a really helpful read. I’d probably let someone else handle it though, because I’m terrible with math.
    Amber Myers recently posted… Hey, It’s OkayMy Profile

    1. @Amber, it’s okay to have someone else manage our money as long as we know that they are putting our needs before their needs. Also, I don’t think that you need to know calculus to manage you money. I honestly think that basic math is sufficient.

    1. @Muna, it sounds like you have a good grasp of your investment and are doing the prudent thing to protect your money. As I’ve mentioned in the post, it’s our money, we should be the one responsible for it.

    1. @Blair, recognizing that you need help is a good start. There is no shame in not having any financial knowledge as most of the every day personal finance is not taught in school. I would definitely encourage to you learn more and take control of your own finance.

  10. I know very little about investments asides from payment depends on the stock market so this was an educational read. Crazy to think that you might have to pay fees and not get anything back in return!

    1. @Ana, there is no such thing as a guarantee as there is no risk free investments. The performance of any investment is always related to either the economy, interest rates, stock market or government policies. I hope that this post can be a starting point for you to learn more about investments and help you better manage your finances.

  11. My major is related to finance management. So your blog post is really useful for me. I also try to apply some above advices into my job. Thank for sharing and look forward to your next posts!

  12. While your points are valid and helpful, money management isn’t everyone’s forte. I believe in delegate, delegate, delegate to the most qualified person who can help and stay on top of the results. We all have specific skill sets and should be paid accordingly for our services. All investments have a measure of risk…. so that’s my two cents. I’m staying with my finance money manager.

    1. @Elizabeth, there are good money managers out there that you can trust. If you’ve found one that puts your interest first and are happy with the performance that the manager had delivered, there is absolutely nothing wrong with that.

    1. @David, Investing can become less tricky if you take the time to learn the basics. Don’t let the fear get into your head as everyone start with zero finance knowledge, including me. Once you get acquainted with the mumbo jumbo terms in the finance world, it’s just like any other subject. Anyone can get a handle on it.

  13. I have a lot of student loans that I need to pay off. I have been contimplating trying to invest as a way to help pay it off. I have 1k to start with and I don’t know where to go with it. It has definately been a challenge. Thank you for your post.

    1. @Jim, if you have been struggling to pay off debt, I would recommend that you take that extra $1K and payoff your student loan so that you can pay less interest. Once you have a good handle on your debt, then slowly try to start your investment journey. However, it doesn’t hurt to learn more about investment right now.

    1. @Eliza, I am happy to hear that you find this post helpful. It really motivates me to work harder to produce more quality posts to help others with their finances. Welcome to the ISaved5K finance community :).

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