Around our household,when something broke, the standard procedure used to be I would research the problem, gather all the equipment to fix it and then inevitably cause more damage or break it further. At that point my wife would say, “Just call a guy!” This process went on for years before I was finally convinced to save time, money and aggravation by just skipping the middle part of the routine and calling a guy when a problem arose. I decided that home repairs just weren’tmy area of expertise and I’m much happier now that I’ve come to that realization.
A lot of people hold the same belief about money and investing. After all,how hard can it be?It’s always interesting for us to hear about the people who not only try to do it themselves but suggest that anyone who doesn’t is an idiot.
This type of mindset thus begs the question: What are some of the key things you might need to know to manage your own portfolio?
Obviously, it takes some knowledge of financial principles and how financial markets work. It also takes time; time to research, time to diversify, time to rebalance, time to review your portfolio and time make necessary changes to the asset allocations. It takes fortitude to stay the course when markets are volatile and everywhere you turn there is bad news. It also takes courage to stand by your convictions to rebalance your portfolio even when particular sectors of your investments are performing well. And it also takes experience to know the difference between the two.
Many times, the returns an investor receives when working on his own is not only less than the return of market overall but less than the returns of the investments originally held in their portfolio.How can this be possible? In two words: human behavior. Getting too fearful or too greedy, panicking and turning a temporary decline into a permanent loss or conversely, not rebalancing when it’s appropriate. Sometimes an investor is their own worst enemy and firm, prudent and at that point, knowledgeable guidance can be priceless.
If you can do all of this, I encourage you to do it yourself. The real question isn’t really who manages your money, but who manages you?If you feel you might need a little help, call a guy. Just make sure it is the right guy or gal, someone who will keep your financial interest at the forefront of everything they do for you. But that’s another discussion for another blog.