The choice between “fee” and “free” is usually a no-brainer. Paying extra? In this economy? We get it. Plus, some things are a lot more satisfying to DIY than it would be to pay someone else to do them. (Looking at you, sourdough starter.)
But when it comes to managing your investment portfolio, the choices you make today won’t just affect you now, or tomorrow, or the next few weeks. These are decisions that may very well determine your financial health in the long-term. We’re talking rest-of-your-life impact.
Of course, getting help costs money, and fees can feel like a waste, especially if you’re not sure what you’re paying for. But here’s the thing: When it comes to your investment portfolio, it’s usually even more expensive to take the DIY route. From missing out on lesser-known investment opportunities to letting ~your gut~ overrule data in the decision-making process, the cost of managing your portfolio on your own may be higher than you think. A financial advisor can help you invest strategically and plan thoroughly for the future you really want. The thing to keep in mind is the value of the fees you’d be paying (or not): Sure, DIYing it might help you avoid paying a little now, but at what cost to Future You?
Here are four big ways we’ve seen investors without a good advisor lose out.
1. Investing without expertise
Say you have a quarter, and you flip it nine times. All nine turn up heads. For the tenth coin flip, someone asks you to bet on it. If you don’t know anything about probability, you might agree — maybe you think the last nine were heads, so it’ll be heads. Easy money! Or you might agree and call tails, because you figure a tails flip is long overdue. But if you did know something about probability, you’d know that, regardless of results before or after, the likelihood of this flip is still an even split — 50% heads, 50% tails — so you might not take the bet at all.
That’s the difference between DIY investing and going in with the help of a savvy advisor: experience. When you base your investments on how those investments have performed previously — it’s called “chasing past returns” — that’s the “heads because it’s always been heads” rationale. When you make investment decisions with “your gut,” that’s the “tails because tails is overdue” rationale. The problem with these approaches? Neither is grounded in real data.
For example, on your own, a volatile market might make you nervous enough to sell off valuable long-term assets. But with an advisor in your corner — not just any advisor, of course, but one with plenty of experience and knowledge — you’d have a smart, research-backed plan to help you decide whether to ride out those waves when they turn up. Plus, if your advisor has specialized industry knowledge, they’re likely to think of opportunities that you may overlook if you’re managing your finances.
2. Losing sight of the big picture
If you were to manage your own portfolio, how much time would you have to spend on it each week? Make sure to factor in any and all time you’d spend educating yourself on the various investment options available to you. Oh, and all the tax implications and efficiencies and optimization strategies for each potential investment. And what about how your estate plan fits in? And then after all that, are you prepared for the ongoing upkeep and adjustments you’ll need to make to help keep that portfolio on track, healthy, and growing?
Now consider: It’s financial advisors’ full-time job to understand a broad spectrum of options and implications (not just the most commonly applicable ones) before they even start working on a client’s portfolio. So when they get to yours, they’ll already be able to see the big picture. They’ll know all the strategies and which could work well for you and your goals. They can partner with you on things like tax strategies, mutual funds, Roth conversions, Opportunity Zone investing, donor advised funds (DAFs), and capital gains, and more. And they keep track of important dates and tax code changes, market shifts and larger financial trends — again, that’s their job. A good advisor should be able to explain any of it to you — why something is or isn’t relevant to your situation, what timelines you should be paying attention to, etc. — in much less time than it would take you to DIY it.
Think of your advisor as an experienced tour guide on the path to financial security. Sure, you could certainly take the long route. And you could probably get yourself there eventually but you’re a busy person with lots of other goals and priorities to keep track of. You’ll probably need to outsource something eventually — make it the thing where someone else’s expertise can maximize results.
3. Gambling with your future
With cryptocurrency, meme stocks, and NFTs dominating financial conversations these days, you may believe that the markets are experiencing a gold rush right now. Perfect time to get in on the ground floor, right? Experiment? Play your luck?
Not so fast. This isn’t Vegas, and your financial future isn’t something to gamble with. Without an advisor in your corner, it’s harder to get the full picture of how playing the market might impact your long-term financial health. No one truly knows how these new investment categories will shake out, at least not yet. But with a seasoned advisor, you’ll have in-depth knowledge and experience to help make sure you’ll still be secure in your core investments if you want to go out on an experimental, dogecoin-shaped limb.
4. Procrastinating while inflation wins
In uncertain times, putting aside money for the future might feel like a luxury, hiding cash under the mattress like the safest investment you can make right now. But cash — money you haven’t invested, or perhaps money sitting in a savings account — loses purchasing power every day. Even if you’re putting off the decision of whether to invest, in the market’s eyes, that’s still making a choice!
On average, women hold 71% (!) of their assets in cash. But markets move forward with or without us, especially when you take inflation into account. Working with a financial advisor can lend you expertise, yes, and bring accountability. Having someone on your team can help you not only invest soundly, according to your financial situation, and they can also help make sure investment decisions are made, period, rather than put off.
Your time is precious
Building a house, coding a program, fixing your own plumbing … if you’ve spent 15 minutes scrolling through Instagram or TikTok, you know that you can learn how to do pretty much anything yourself. And at Ellevest, we agree. Given enough research, tools, and time, we know you could probably manage your money just fine on your own.
But that’s just it — it’s about research, tools, and most of all, time. If, for you, managing your own portfolio is worth the amount of time it takes to learn all the ins and outs or subtleties to do the job right, we say go for it. But if you’re going the DIY route because of the potential cost of an advisor, make sure you’re also factoring in how those fees translate to actual value for you as an investor. Multiple comparisons conducted at multiple investment firms have found that clients’ returns outstrip the fees they pay.
While you may pay your advisor now, consider it a DIY investment itself — in your own future.
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