Many investors like the “do-it-yourself” approach for one or more of the following reasons:

  1. To save money on fees
  2. They think they can do a better job than their advisor
  3. They enjoy the process

Perhaps DIY investing was a lot of fun in the beginning.  It felt good to fire your advisor.  Maybe the prices on your investments started to soar.  You were proud of the great job you were doing.

Related: Why I Became A DIY Investor

But since then life has taken over.  It’s hard work to find the right investments and make good decisions consistent with your future goals and at a comfortable risk level.  It’s tough to remain disciplined with your own finances.

Procrastination can quickly become the simplest and most likely course of action.

DIY investors often lack financial literacy

Some investors do a good job, but just because you regularly watch BNN and subscribe to Money Magazine doesn’t make you an expert.

DIY investors follow trends and fashions

First mutual funds were popular.  The Globe and Mail had a regular monthly insert that tracked the return of every mutual fund.  Dozens of books were and magazine articles were published detailing how to purchase the best funds.

Then people realized that they were paying a lot in fees – front load, back load, trailing fees and high MERs.  It became popular to build a portfolio of individual stocks.  Just look at the top 10 holdings of your mutual fund and buy the same individual stocks, we were told.

Different styles of investing became popular depending on what the stock market was doing – value, growth, buy-and-hold dividend investing.

It takes a big time commitment to research individual stocks – and we’re told it’s impossible to beat the market – so make it easier and buy ETFs.

Often when following the latest trend, people tend to invest aimlessly.  The result is a mish-mash of investments that are not consistent with a well thought out strategy.  Which strategy fits you best?

DIY investors become too emotional

We know the exuberant high we get with the thrill of victory when a hot stock tip pans out (at least initially), and the despair when we experience the agony of defeat as our investment plummets.

Related: Why Is It So Hard To Sell Those Investment Dogs?

We are also emotionally attached to our purchases.  We have a hard time selling losers, but what about our attachment to stocks purchased 5 – or even 25 – years ago?  It makes us feel good to see that they have doubled or tripled in price, and look at the dividends we’re raking in.  What a great job you’ve done!

Would it work for your strategy to set a price target – a range in which you would consider selling all, or a portion, of your stock to lock in gains?  Would you be able to take advantage if a better opportunity came along?

DIY investors often make mistakes

When the stock you picked with high hopes tanks within a few months we consider that a big mistake.

Related: The Beginner’s Guide On How NOT To Start Investing

But what about when you’re making your discount brokerage purchase and end up buying RY when you meant to buy RYL, or indicating T instead of N for the stock exchange, or a preferred share instead of common?  Then again, sometimes it might pan out in your favour.

DIY investors often fail to address changing situations

Our long-term strategy needs to change when our life circumstances change.

We also need to address any changes in a company that we have invested in.  How will it affect us?

I currently hold stocks in Empire (EMP), which has recently purchased Safeway.  My market value has increased quickly by almost 40%.  Do I sell?

Related: How Do You Know When To Sell A Stock?

I also own Shoppers Drug Mart (SC), which has been purchased by Loblaws.  I have now been given a choice.  I can accept $61.54 per share (which would give me a profit of just over 50%) or exchange them for approximately 1.3 shares of Loblaws’ stock, which would increase my quarterly dividend payment by about $3.

I’ve always liked Shoppers Drug Mart but I’m leaning toward taking “the cash please, Gaelen.”

Portfolio challenge

If you are a DIY investor I challenge you to take a couple of hours to do a complete review of your portfolio.

Do you have a hodgepodge of products that sounded good (and maybe were) at the time, but don’t make overall sense now?

Do you need to do some rebalancing?  According to Gail Bebee, author of, No Hype – The Straight Goods on Investing Your Money, an individual stock should represent no more than 5% of a portfolio.

Do you lack diversity?  Check out the holdings of your mutual funds and ETFs.  If they have similar names – High Dividend Payers, Canadian Blue Chip Equity – they probably hold the same underlying companies.

Related: Is It Time To Say Goodbye To Dividend Investing?

For example, if you hold individual shares in several Canadian banks AND iShares Dow Jones Canada Select Dividend Index Fund (XDV), know that financials (all the major Canadian banks) make up almost 54% of this ETF.

Re-assess your original plan and long-term strategy.  Be sure to also factor in any company pension plan or group RRSP you may have.

Does it still serve you?

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