What will your own plan get you?
Maybe you still think investing on your own is the way to go. But even though a DIY approach to investing might seem simpler, it can have some big downsides in the long run. Is it worth the risks when your retirement is at stake?
Let's take a closer look.
Risk #1: You're Complacent
The first risk you run when you invest on your own is that you set your investing on auto pilot. If you're not reviewing and evaluating your portfolio on a regular basis, you'll miss out on the advantages of a balanced level of risk in your investments.
According to a Fidelity study of their NetBenefits participants, 87% of DIY investors have not changed their investment allocation over the past year.
Even more concerning, a whopping 77% of these participants admitted to not having the time or investment knowledge to be confident in their investment decisions.
Is a “hope for the best” approach the best you can do?
Risk #2: You Jump In and Out of the Market
Or maybe you're really involved in how your investments are performing. That sounds like a better approach, right?
Not necessarily.
When you're caught up in the roller coaster of watching your investments go up and down, the fear of losing money can cause you to make irrational decisions that negatively impact your investments.
In a survey by Natixis Global Asset Management, 65% of investors admit they struggle to avoid making emotional financial decisions when the market is unpredictable.
How does that impact your bottom line? A Fidelity study found that those who jumped in and out of the market during the downturn of 2008 realized a 6.1% growth from September 2008 to March 2010. Those who stayed invested? Their growth was nearly 22% over the same 18 month period.
Risk #3: You're Just Plain Stressed
Managing investments on your own can leave you worried and anxious. Do you want the stress that comes with knowing your retirement future rests solely on your shoulders?
A recent Ramsey Research report found that Americans who work with a financial advisor are nearly twice as likely as those who don't to say they are very confident they'll have enough money to retire.
Going it alone exposes you to risks you don't need in your investment strategy, which only makes you more stressed out about your future. A good investing pro can help you:
Evaluate your investment performance on a regular basis
Stay level headed even when the market is unpredictable
Prepare for a secure retirement