Do It Yourself Investing Simplified

Should you perform surgery on yourself? Probably not. Act as your own general contractor? Not if you lack a knack for hitting the tack. What about managing your own portfolio? Well, it depends. Can you divide by 10? Navigate a simple web interface? Follow instructions? If so, you might be a better DIY candidate than you’d realized.

First, humility is important. If you think you can, on a part-time basis, outsmart professional hedge and mutual fund investors in the art and science of stock picking, you might want to get out of the arena altogether. Maybe there’s an area which possess special knowledge where you might be able to keep up, but generally speaking guys (and, it’s most often guys), you won’t outperform. But investors who are willing to forego dreams of buying the next Netflix and instead build a portfolio that consists of ten evenly weighted funds can probably save themselves potentially thousands of dollars annually in advisor fees without sacrificing performance. By using a discount broker like Schwab, T D Ameritrade, or (in my case) Fidelity Investments, investors can eliminate middleman financial advisor fees that often run in the range of 1.0% to 1.5% annually. On a million dollar portfolio, that’s up to $15,000 a year. As the phone guy says, can you hear me now?

The RetirementWalk growth portfolio has 10 equal weighted positions. Can you divide by 10? For a $180,000 portfolio, that’s ten positions at $18,000 each. If I didn’t lose you with that high end math, then you’ve got what it takes. Don’t try to do the investment research yourself. That’s the part of investing that takes hours and days and years of experience. Find a source of information that you can follow. Don’t overpay, or follow along with what I’m doing with some of my own money. Following along is free. I’ll use the Money Monday posts to keep readers abreast of what I’m doing in my growth portfolio. A word of transparency, the Income Portfolio doesn’t have real money invested in it at this point. That may change at any point, but at this point all of the money we’ve got at Fidelity is long-term growth oriented money.

If you want a more stable portfolio, you can follow the Income Portfolio. Just know that, at this point, I don’t have my money where my mouth is with that portfolio.

And that should be your first lesson of real world investing – don’t bother listening to folks who aren’t following their own advice. It is interesting the regulators don’t want advisors to be doing the same thing with their own money as clients. A regulator sees that at a conflict of interest. In the real world, we prefer chefs who eat their own cooking. If you think that regulators are out there helping protect you, remember this example. They may want to help you, but they generally don’t have a clue as to how to do it. They were practically in bed with Bernie Madoff and couldn’t see the Ponzi scheme right in front of their faces.

To reiterate, building a managed portfolio requires years of experience and an understanding of complex interactive variables. Building a passive portfolio is kind of cut and paste – a little of this, a little of that, and ignore, rebalance, and repeat. Once the portfolio is built, be it active or passive, implementing an investment approach is easy. It’s easier still when it’s designed with ease of use in mind. Ten funds. Equally weighted at 10% each. What is 1/10th of a $215,000 portfolio? $21,500? Right! You’re ready for the big time. Click here to look over our current Growth Portfolio holdings.