Do you have what it takes to be a DIY investor


Having worked as a financial advisor, I have encountered people who just don’t understand basic money management. So paying for financial advice makes a lot of sense. However, there are more tools available for the do-it-yourself investor than ever before. All of the online trading firms offer an array of charts, quotes, research and educational materials.

So, is there anything wrong with do-it-yourself investing? No, of course there isn’t. I don’t knock anyone who invests without the guidance and expertise of an experienced professional. Here are just a few of the reasons why:

  1. There are more “age-based” portfolio products also known as target-date mutual funds and index funds. These funds of funds can plot out an investment course over a lifetime which is close to having your portfolio on autopilot.
  2. We also have the rise of the robo-advisors. These highly advanced computer programs armed with algorithms, data, and speedy processing power can offer you advice on investments and planning. Major financial services firms that have built reputations to help do-it-yourself investors have invested great sums of money into these.
  3. The majority of financial advisors are commissioned based. It is difficult to find good advisers willing to look after small investment accounts. Plus investment products that they sell you can have hidden fees that you make or may not be aware of.

Now, before you quit your day job, do you have what it takes to be a DIY investor? Here are some of the factors you may want to consider when deciding whether or not to employ the help of a financial services professional or go it alone. This is by no means an exhaustive list, but I’ve identified 7 factors I think should rise to the top before making the decision.

1.    Investing takes time

  • Will you make time to reassess your personal financial situation , after your honeymoon, after the birth of a child, upon your retirement, upon a divorce or even after the death of a loved one?
  • Will you make time to take steps to start adjusting your investment portfolio ahead of major life changing events the way you’re supposed to?
  • Will you make time to follow-up on each individual investment in your portfolio? To check recent news? To rebalance your account?

2. Discipline

  • Do you have the discipline to do the research to pick and choose, buy and sell and follow?
  • Were you one of the ones who didn’t open your brokerage or 401(k) statement in 2001 or in 2008?
  • Did you bail out of every investment and convert to cash at the market bottom in 2009?
  • Did you forget how to be a long-term investor?

3. Confidence

  • Do you tend to overreact to stressful situations?
  • Did you buy that stock when it came down in price, just like you said you would the last time you checked out the quote?
  • Are you afraid of making a mistake and unwilling to take a lost?

4.  Risk management

  • Do you have a strategy, or do you kind of go with whatever is working or being touted on TV or in a newsletter?
  • Mistakes happen. Every investor, including Warren Buffett, makes investment mistakes along the way. But how you handle them and what you learn from them are much more important. Mistakes are unavoidable when it comes to investing.
  • Have you taken proper steps like diversification to help mitigate costly mistakes, which is what risk management is all about?

5. Experience

  • We all start out as novices so are you willing to learn by taking courses, reading investment books, financial newspapers ….?
  • Do you have any peers or a mentor that will share investment mistakes with you.?
  • Have you worked with people who have lived through various markets and economic downturns? Can you learn  which strategies they used to get them through the tough times?

6. Staying current

  • Are you a news junkie?
  • Do you follow economic stats?
  • Are you up to date on Federal Reserve policy?
  • Do you follow politics?
  • Do you keep up with foreign events?

7. Sweating the details or thriving on them

  • Has your portfolio grown in value? Would a mistake be more costly as a result?
  • Are you aware of holding periods regarding capital gains treatment?
  • Are you taking undue risk in trying to juice your passive income in this low-interest-rate environment?
  • Do you know which assets are best in a retirement account and which are best in a regular taxable account?

After you think deeply about the seven factors above, you may conclude you are strictly a do-it-yourself investor or find you need the help of a professional or decide that you are somewhere in between. That’s okay, we are in an era of choices and that’s the way it should be.

Here’s the key. Investing is not an easy thing to do successfully. Bear markets make all of us look like unsuccessful investors while they last. This is often when investors walk away from the market. Make sure you have a strategy that includes the possibility of losing money, the certainty of corrections and bear markets.



2nd Anniversary of Smart Money: Lucky number 2

In sports, no one cares who came in second. The number 2 rating of a stock is a buy. There are two sides in investing, you can be either bullish or bearish.  Number 2 in Chinese Culture is an auspicious number because Chinese people believe that good things come in pairs.

“The symbolic meaning of number Two is kindness, balance, tact, equalization, and duality. The number Two reflects a quiet power of judgment, and the need for planning. Two beckons us to choose. The spiritual meaning of number Two also deals with exchanges made with others, partnerships (both in harmony and rivalry), and communication.

2 number

What is the 2nd best investment that you can make?  The number two  investment really depends upon your age, where you live, your risk tolerance, your income level, your time horizon and your family situation. The number two investment choice for someone in their 20’s could be paying down debt. For someone in their 30’s, it could be buying a house.  For a high income earner, it could be maximizing their contributions into their retirement account. For someone who lost their job, it could be starting a small business.

So what is number one?  My answer is YOURSELF because our education system gets a failing grade regarding financial literacy. All these choices requires some financial knowledge and some basic math skills in order to be successful. I was shocked at the results of a recent financial literacy test.

Would You Pass the Global Financial Literacy Test?

Question 1: Suppose you need to borrow 100 U.S. dollars. Which is the lower amount to pay back: 105 U.S. dollars or 100 U.S. dollars plus three percent

Question 2: Suppose over the next 10 years the prices of the things you buy double. If your income also doubles, will you be able to buy less than you can buy today, the same as you can buy today, or more than you can buy today

Question 3: Suppose you have some money. Is it safer to put your money into one business or investment, or to put your money into multiple businesses or investments?

Question 4: Suppose you put money in the bank for two years and the bank agrees to add 15 percent per year to your account. Will the bank add more money to your account the second year than it did the first year, or will it add the same amount of money both years?

Question 5: Suppose you had 100 U.S. dollars in a savings account and the bank adds 10 percent per year to the account. How much money would you have in the account after five years if you did not remove any money from the account? (a) $150 (b) more than $150 (c) less than $150



Highlights of the survey:

  • The U.S. lags behind other major English-speaking economies in its percentage of financially literate citizens. Citizens of Canada and the United Kingdom beat the U.S.
  • Only 35 percent of respondents around the world got the right answer to Question 3.
  • Many homeowners can’t calculate the basic interest owed on their loan payments. About a third of adults in the U.S. have an outstanding housing loan; three in 10 don’t understand how their debt accumulates.


Answers to the literacy test

  1. 100 U.S. dollars plus three percent
  2. the same
  3. put your money into multiple businesses or investments
  4. more money in the second year
  5. (b) more than $150

Some may argue that personal financial literacy isn’t the number one investment because you can always pay a professional. I would agree if you are lucky enough to select a good one. In twenty years of running a small business, I changed accountants three times. I changed stock brokers countless times until I became a do it yourself investor. I have dealings with three different banks to meet all my financial needs. Plus selecting the right professional still takes some financial knowledge, the ability to understand the advice and act on it.

In reality, the first and best investment that you should make is in educating yourself. Did you get take the financial literacy test and did you answer all five correctly?

Obituary for Common Sense; unknown author


Today we mourn the passing of a beloved old friend, Common Sense, who has been with us for many years. No one knows for sure how old he was since his birth records were long ago lost in bureaucratic red tape.

He will be remembered as having cultivated such valuable lessons as knowing when to come in out of the rain, why the early bird gets the worm, why life isn’t always fair, and how, on occasion, maybe it was my fault.

Common Sense lived by simple, sound financial policies (don’t spend more than you earn) and reliable parenting strategies (adults, not children are in charge).

His health began to deteriorate rapidly when well-intentioned but overbearing regulations were set in place. Reports of a six-year-old boy charged with sexual harassment for kissing a classmate; teens suspended from school for using mouthwash after lunch; and a teacher fired for reprimanding an unruly student, only worsened his condition.

Common Sense lost ground when parents attacked teachers for doing the job they themselves failed to do in disciplining their unruly children. It declined even further when schools were required to get parental consent to administer aspirin, sun lotion or a sticky plaster to a student; but could not inform the parents when a student became pregnant and wanted to have an abortion.

Common Sense lost the will to live as the Ten Commandments became contraband; churches became businesses; and criminals received better treatment than their victims. Common Sense took a beating when you couldn’t defend yourself from a burglar in your own home and the burglar can sue you for assault. 

Common Sense finally gave up the will to live, after a woman failed to realize that a steaming cup of coffee was hot. She spilled a little in her lap, and was promptly awarded a huge settlement.

Common Sense was preceded in death by his parents, Truth and Trust; his wife, Discretion; his daughter, Responsibility; and his son, Reason. He is survived by three step brothers; I Know my Rights, Someone Else is to Blame, and I’m a Victim. 

Not many attended his funeral because so few realized he was gone. If you still remember him pass this on. If not, join the majority and do nothing.


Common sense is a basic ability to perceive, understand, and judge things, which is shared by (“common to”) nearly all people and can reasonably be expected of nearly all people without any need for debate.

Our education system gets a failing grade when it comes financial literacy. Everyone should know some basic money lessons like how to budget, the time value of money, implications of too much debt and how credit works.

Making financial decisions and managing  your investments still requires some common sense. You will be successful if you have some.


You need more than money to have a pleasurable retirement

9th hole

Having worked as a financial advisor, my main focus in retirement planning was building a sizable nest egg for clients’ to enjoy their golden years. I used to think that the senior who greeted me at Walmart, rang in my groceries or served me coffee needed the extra income in retirement. Did something gone wrong with their retirement plan or did they just fail to save enough to enjoy a life of leisure?

However, I am starting to think that these seniors may also be bored. Imagine, you have been traveling at 100 miles an hour at work and now have come to a dead stop in retirement. No one really prepares you for the shock of getting up in the morning with no place to go. What do you do with all that extra time?

Step One: Avoid the retirement shock, start to plan ahead

There is more to life than your work. Most of your work friends will slowly disappear once you retire. Having a social network outside of your work place is a key to a pleasurable retirement. A common mistake is not developing a balanced lifestyle before you retire. (All work and no play!)

One of my business associate retired at 63 and decided to start to play golf. He join a golf club and found that he didn’t really enjoy playing golf. He hated winning the most honest golfer award. (A prize for the worse score)

Here are a few networking opportunities to make some new friends prior to retirement:

  • Over 55 sports leagues, baseball, basketball, hockey …..
  • Racket, curling and golf clubs
  • Bowling & dart leagues
  • Church groups
  • Alumni groups – high school, college and sport teams
  • Being a scout leader for boys or girls
  • Coaching or being a mentor

If you don’t have any hobbies yet, I suggest that you plan to get some before you retire. Sitting on a beach under an umbrella drinking margaritas sounds great but you will get bored after a while. You may not have the time right now but many schools offer adult learning classes. A friend of mine took a class on how to fix small engines. It is never too late to learn something new and it might just keep your brain from turning to mush.

Step Two: Retirement is a life changing event, prepare to change

Married couples have to adjust to being together 24 /7 which can add stress to your relationship. It’s a good idea for couples to have different hobbies and interests. Spending some time apart makes for more interesting dinner conversations. For example, I like to golf and my wife enjoys genealogy.

Household chores can be a thorny issue. Sharing or dividing these tasks will depend on your individual skill levels. My wife does most of the cooking but I will do most of grocery shopping and together we maintain the lawn & gardens. I recommend scheduling your household chores to be done during a weekday, save your nights and weekends for socializing.

Avoid becoming a couch potato, it is a sure way to shorten your retirement years. A regular exercise program should be part of your everyday routine. You don’t have to go to the gym and lift weights to stay fit. There are many simple ways to keep active; walking, cycling and swimming, just to name a few. If you have a partner, find something that you both enjoy doing, having someone to workout with can help you get off the couch.

Step Three: Take on new challenges

Learn to play a musical instrument, speak a second language or better yet give back to the community. There are many fine organizations that are in desperate need for volunteers. You have a wealth of experience, professional expertise and invaluable personal wisdom that shouldn’t go to waste. You have a lot to offer, find things that you are passionate about.

In my case, playing football was a strong positive influence in my life. In honor of all my football coaches, I spent six wonderful years coaching kid’s football.

When people ask me what I do all day, I tell them; “I am so busy in retirement that I was surprised I found the time to work”! Remember, variety is the spice of life.