How to succeed at DIY investing


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You may find it weird to see a financial advisor telling others how to become great do-it-yourself investors.

I understand that. But I’ll let you in a little secret. I know that there are people who are simply better suited to make their own financial decisions rather than work with an advisor.

Not everybody needs an advisor. Not everybody should have an advisor. There are plenty of people who do need professional financial advice and others who don’t. What’s wrong with that? Nothing.

If you’ve decided you fit nicely into the DIY category, the first question is, how do you get that going on? Let me share a path that I believe will work great.


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I believe that the following advice is sound for those looking to invest on an ongoing basis or trying to figure out what to do with a big pile of money they just fell into.

1. Plan

Before embarking on any great journey you need to know where you want to land and plan the best route to get there. This is exactly what your financial plan does for you.

Does it take a little time to put together? Yes. But so what? Having a financial plan is the best insurance you can get against making hair-brain investments. It keeps you clearly focused on:

  • What your goals are.
  • What you need to do in order to reach your goals.
  • Your investment time-frame and the best investments to make in order to achieve your goals with the least amount of risk.

You can run your plan yourself or you can hire someone to do it for you. Either way, it doesn’t mean you have to hire that person to execute the plan. Those are two different things entirely.

If you are serious about becoming a successful DIY investor, get serious about your financial plan “muy pronto” amigos.

2. Identify buckets of money

Once you’ve created your plan you’ll see that different pools of money serve different purposes in your life. This is important because you don’t want to get over-extended.

The worst situation for an investor is to have too much money invested leaving him or her short when unexpected expenses roll around.

Your plan helps you distinguish between your short-term, medium-term and long-term investments. Each needs to be handled differently. Identify how much you need in each bucket.

Once you fund those buckets you will be ready for the next step.

3. Strategize

In order to invest well you need a formula that tells you three things:

  1. What to buy.
  2. When to buy.
  3. When to sell.

You don’t want to leave these decisions up to chance. Likewise, you don’t want to make these decisions based on how you are feeling at the moment and you don’t want to ignore your investments either.

Having said all that, you probably want an approach that’s easy to understand and implement.

There are three major approaches to investing; buy and hold, asset allocationtactical market allocation. Each has its pros and cons.

There is no one best investment method. It depends on your investing demeanor, financial resources and goals.

I’ve provided some pretty good links to discuss these alternatives at length. Take your time and really think this through and study.

This isn’t about picking the right strategy to make the most money this week, month or year. It’s about finding the right approach to help you reach your long-term goals with the least risk possible.

Get clear on your investment strategy before investing a dime. Ok? Don’t make me come over there.

4. Set up your account

Once you are clear on what to do you will be ready to create a platform for your trading. If you plan on buying stocks, bonds, funds or ETFs you’ll need to set up an account at a fund or at a good discount brokerage.

I strongly recommend dealing directly with fund companies. When you open an account with a specific fund company you will only have access to that company’s funds. That’s very limiting.

Instead, open an account at a discount brokerage. You’ll still have access to plenty of no-load and/or no-transaction cost funds and ETFs.

You might have to pay a little more in very specific cases for specific trades but it won’t be much and the benefits far exceed this miniscule cost.

By having your money at the right discount broker, you’ll have vastly superior choices, a far superior suite of investor tools and consolidated reporting. In my opinion, this is a no-brainer.

5. Keep learning

Financial advisors are required to continue their education every year. You should take a page out of their book. Always look for opportunities to deepen your understanding of how investments work.

Look at your results as objectively as possible. Are you achieving your goals? Are you paying attention to the risks? Is there a way you can improve your results? How?

If at the end of the day you decide that being a DIY investor is not for you, it’s not the end of the world. Find yourself a good advisor and get to work. The time you invested in creating and implementing your financial plan will help you work collaboratively with them.

Being a good DIY investor is like being good at anything. It requires planning, time, dedication and patience.

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