The plentiful benefits of DIY investing

Last week I extended an invitation to you to join me for an event I am planning, where we will discuss all things investing.

Robby P.

In the column, I mentioned “do it yourself” investing.

This week I’d like to expand on the concept and explain why I believe anyone can do it.

Firstly, I need to point out that one of the main reasons people do not invest in the market is the fear of the unknown.

It makes sense after all.

If someone were to approach me to invest in race horses, I might shy away, purely because I wouldn’t have a clue where to start.

I don’t know the industry.

I wouldn’t even know how to tell the difference between a potential champion or a potential “donkey”.

I would have to trust someone else’s advice, and that’s risky.

But if someone were to tell me that bicycles outnumber people by three to one in Nigeria, I might consider opening a bicycle repair shop in Lagos.

What I’m trying to say is, with the right information, we can make better decisions for ourselves.

Here’s a little secret: you don’t have to know very much at all to “do it yourself”.

There are broking firms that pay very clever people a lot of money to know as much as possible about as much as possible.

These analysts spend all of their time finding, forecasting and calculating value.

DIY investors cheat.

Assuming you have a good broker, you are privy to this information.

It is in every broker’s best interests that their clients are profitable.

When I spot some good research, I share it with my clients and they then have sufficient ammunition to make an informed decision. That’s how you learn and empower yourself.

Your biggest responsibility as a potential investor is choosing a good and reputable broker.

One who is accessible and who is able to impart good advice and solid research.

DIY investing is different from having a managed portfolio.

If you want your investment portfolio managed, you usually have to put your cash into a structured product, according to your risk profile.

Such investments cost a little more than doing it yourself, because you need to pay the fund manager’s fees and, if he/she beats his/her benchmark, you could pay “performance fees”, which means he shares in your profits up to point.

Don’t get me wrong, I have no problem paying my fund manager if he/she is making me money, but you do need a sizeable lump sum.

It also gets a bit “iffy” when the market falls three per cent and your managed portfolio only falls two per cent, because, technically, your fund manager has beaten the market.

DIY investing is a great way to start your investment journey.

You are not simply thrown into the deep end (as long as you have a decent broker).

Share accounts and fees have become so low-cost now because of the competitive environment and are as simple to open as a bank account.

For me, the most important thing is that you are in control.

I am planning a free event for my readers to talk about all things investing, including DIY investing.

If you are interested in joining me, all you need to do is email to benonicitytimes@caxton.co.za and I’ll fill you in on the details.

I’m looking forward to hearing from you.