The Pros and Cons of DIY Investing

Pros and cons of DIY investing vs. hiring a financial advisor.

I’ve been a self-directed investor for almost thirty years. Self-managing my investments has saved me tens of thousands in fees, though I’ve been susceptible to my own investment biases and mistakes. Overall, I believe the tradeoff favors do-it-yourself (DIY) investing.  

This article explores the pros and cons of DIY investing compared to hiring a financial advisor. 

DIY investing has its flaws, as does hiring a financial advisor. But the potential downsides of DIY investing are mitigable. 

Financial advisors are vulnerable to the same mistakes DIY investors make, but we pay them fees whether they make them or not. 

According to this detailed analysis, the average “all-in” cost of hiring an assets-under-management (AUM) financial advisor is 1.65% (management fees plus fund fees). The article linked there is an excellent insider view into the industry. 

Fees are generally higher for clients with account balances under $1 million and fall as account balances grow larger. 

The key takeaway for DIY investors is that we have 1.65% of wiggle room to make DIY investing make financial sense. However, cost savings are not the only consideration.

Since nearly all professional active money managers fail to beat their benchmarks, it’s doubtful that Joe Schmoe at the local Eddie Jones office can do it for your portfolio when handicapped by fees — and still challenging for DIY investors even without the handicap. 

That includes people like me who have bought individual stocks over the years and internet gurus telling you what to buy on YouTube.

However, following a simple, passively managed index portfolio approach can make near-market returns achievable. As a bonus, a simplified portfolio approach frees time for other activities. 

Several other factors to consider, like time, behavior risk, and investment approach, must be considered, and individuals must decide if hiring an advisor is worth the tradeoff. Some financial advisors charge way less than 1.65% (I’ll tell you where to find them at the end). 

Pros of DIY Investing

Reduced Fees

Self-managed investing gives us a 1.65% average advantage over a typical full-service financial advisor.

That means if you can earn 7.00% with a simple 60/40 stock/bond index fund portfolio, the identical portfolio set up by an advisor would earn you 5.35%. The advisor would need to outperform the market by a significant percentage to achieve the same results. 

Those fees often cover more than money management fees, like financial planning and other financial services. 

But from an investing returns perspective over the long term, reduced fees is the most compelling reason to be a DIY investor. 

Strategic Control

DIY investors tend to enjoy investing and prefer to maintain strategic control of their investment portfolio.

Financial advisors typically follow their umbrella organization’s guidelines and use the same investments for most clients.

If you want to drive your investment strategy, choose investments, and own your successes and failures, DIY is the way to go. 

Transparent Costs

DIY investing has no management fees aside from the time you set aside to manage your money. Many of us enjoy this activity. 

Trading fees for stocks, bonds, and ETFs are a thing of the past. Now, the primary costs to watch out for are expense ratios of our investment options.

ETFs and mutual funds spell these out very clearly if you know where to look. 

It’s our job to seek investments with low fees. 

If you invest in alternative assets such as real estate, private credit, or venture capital, platform fees are an important consideration. Know them before initiating new investments. 

Some financial advisors are very clear about what they charge and how they make money. Others make it complicated to understand and fail to highlight the all-in costs, including mutual fund costs and other fees. 

Explore Alternatives

One of the things I like most about DIY investing is the ability to explore alternative investments. My core holdings are stock and bond funds. However, I reserve about five percent of my net worth for real estate crowdfunding and venture capital investments. 

Alternative investments can help diversify our portfolios away from stock market fluctuations while still delivering passive income and solid total returns. Some assets can be riskier than stocks, but many are less volatile. 

Financial advisors stick to the basics because that’s how they are trained, and regulations may restrict their toolbox. 

Alternative asset investing can be alluring, too. So carefully consider entering alternatives before investing. Avoid hasty purchases of shiny objects and evaluate alternatives in the context of your overall strategy. 

No Conflicts of Interest

Nobody cares more about your money than you. There are no conflicts of interest when you self-manage your money. This brings me peace of mind more than any advisor ever could. 

Financial advisors try to align investment decisions with their client’s best interests in mind and often call themselves fiduciaries. But their number one priority will always be themselves, number two is their largest client, and number three is the next client under pursuit. 

The best financial advisors charge a fair price for their services, protect and grow assets, and make clients feel at ease in bad times. The worst advisors are non-transparent with fees, sell lousy insurance products, and milk clients as much as possible. 

Ask hard questions about how a potential advisor operates their business. Investigate beyond well-rehearsed answers. 

Cons of DIY Investing


Bill Gates doesn’t manage his multibillion-dollar investment portfolio. He has a team of 100+ people who manage his wealth via Cascade Investment. He’d rather spend his time on other things.

The cost is enormous, but it’s worth it to him. 

If you don’t want to spend significant time managing your investment portfolio, DIY investing is not for you.

We can minimize the time it takes to manage money by simplifying our portfolios, but only so much.

Outsourcing lawn care, house cleaning, and DIY home projects saves time and leaves the tasks to the experts. The same goes for individual investment management.

Professionals and others who don’t have the time to manage the complexities of personal wealth may be comfortable hiring an advisor to do the job for them. This can save several hours per month, and the cost of freeing this time may be worth it. 

Behavioral Risk

The best DIY investors carefully craft an investment strategy and stick to it over the long haul. 

Sounds easy. But we are constantly bombarded with data points that can influence our investment mindset. Crashing markets and shiny object investments can cause us to veer from our long-term strategy. 

DIY investors are our own worst enemies, and must remain disciplined to avoid self-inflicted mistakes. Ignore the daily noise and expand your investment horizon to decades from days to reduce behavioral risk. 

Financial advisors offer a buffer between impulse and action, helping clients pause before acting. That buffer is expensive, but investing mistakes can be more expensive.  

Mistake Ownership

Aligning a DIY investor’s best interests with a market-return-targeted portfolio allocation can lead to excellent long-term outcomes. We bask in our success during bull market runs.

But there is always room for error. And when DIY investors lose money, we have no one to blame but ourselves. 

Mistakes can lead to a spiral of worsening decisions and reduce confidence in our abilities to invest. This can be especially true when times are not so good

Blaming a scapegoat when the tide rolls out may be comforting.

Investment Selection

Some DIY investors struggle with selecting individual investments, which can be overwhelming with so many options out there.

Investment selection consumes a significant amount of time for DIY investors, whether researching individual stocks or narrowing the universe of potential ETFs. The paradox of choice can make it difficult to finalize decisions. 

Financial advisors remove this responsibility from clients, using the same or similar options as their other clients or recommended by their brokerage house. 

Favor one low-cost investment provider for fewer options. Choose broad market funds with low expense ratios so you need fewer funds to achieve your investment objectives.

Only invest in individual stocks if you are committed to the research and maintenance, and accept it reduces your chances of market performance. 

Knowledge Requirement

Even a simple retirement portfolio requires knowledge of allocating funds and placing orders. This can be overwhelming for new investors and those uncomfortable with technology. 

Multiple online brokers now make investing cheap and intuitive, but we still need basic knowledge of portfolio design, investment selection, and tax planning.

DIY investors must learn how to invest on the job and continuously improve and adapt to the times.

After setting up an investment strategy, we still need to monitor and modify a portfolio as our situations evolve from growth to wealth preservation.

With so many investing components and complexities, knowledge is a limiting factor for self-management. DIY investors cannot stop learning. 

Growth vs. Wealth Preservation

Passive index investing in stock funds is a relatively simple way to invest. When we don’t need the money soon, we are more comfortable taking risks. A longer investment horizon improves our chances of success. 

Transitioning from a growth portfolio to capital preservation is a far more challenging task.

Maintaining and spending our wealth becomes more important than growing it gradually as we age. This requires a shift in thinking and portfolio management. 

If we’ve invested one way for decades, it can be hard to transition to a new way of thinking, especially as we age. 

Stocks return 9% over time, so we just need to be patient, right? Well, that’s fine when the economy is healthy, the stock market is bullish, and actuaries give us 35 more years to live.

Bull markets end quickly. Maintaining wealth becomes the paramount objective if invested funds are critical for spending needs over the next five years.

Financial advisors can play an important role in wealth preservation — a less intuitive task for long-time DIY investors.

Positioning a retirement portfolio to withstand adversity and provide reliable income is a challenge for which DIY investors may not be suited but are too stubborn to admit. 

Not All Financial Advisors are the Same

Our ability to manage our finances relies on our willingness to learn what’s needed to execute an age and risk-appropriate investment strategy.

The quality and capabilities of financial advisors vary dramatically. Thankfully, advisors are required to be educated and licensed, so there is a minimum threshold. 

But there is still a wide spectrum of services and value provided. 

The 1.65% fee I mentioned at the top is the average all-in fee for AUM advisors, who charge an annual percentage of the account assets. 

For example, if a client account has $1 million, the advisor would withdraw about 1.00% — $10,000 — in management fees per year, while another 0.65% — $6,500 — would succumb to mutual fund expense ratios and other fees. 

But some advisors charge more or less, while others have a completely different fee structure and business model.

Matching a client’s needs with the appropriate service and cost is critical. 

Fee-Only Fiduciaries

Fee-only advisors charge a flat fee for specific services or hourly consulting. For example, they may charge $1,500 for a one-time comprehensive financial plan and then hand it over to the client to implement.

This can be a good option for DIY investors who want a second opinion or peace of mind when scenarios become more complex due to life events.

Fiduciaries are required to operate in their client’s best interests. However, I’ve learned over the years that simply asking an advisor if they are a fiduciary is not enough.

The fiduciary standard is much more nuanced, requiring background research about licenses and company ownership. Fee-only services are a less committed way to get help. 

Many fee-only advisors tend to be fiduciaries. But remember who has your best interests in mind (you). Always ask questions and never work with anyone who isn’t 100% transparent with fees. 

Vanguard, Fidelity, Schwab

These large financial services companies provide advisement services for less than 1%.

Vanguard stands out. Customers with more than $500,000 of assets with Vanguard qualify for the Personal Advisor Select program. Eligible participants pay just 0.30% annually to have access to a human Vanguard financial advisor who can help with portfolio allocation Vanguard fund selection. 

They can also help with financial planning questions and complex life decisions. 

My in-laws use this service and are very happy with it. You can’t beat the price. The annual fee for a $1 million portfolio is just $3,000, whereas the average all-in AUM advisor would charge $16,500. 

Fidelity Go is a robo-advisor service that provides financial advice based on customers’ answers to questions about risk tolerance, investment horizons, and financial goals.

There is no advisory fee for balances under $25,000 and a 0.35% advisory fee for balances of $25,000+.

Once accounts hit $25,000, clients qualify for unlimited one-on-one coaching calls with an advisor who can answer questions about budgeting, personal finance, retirement planning, and more. 

Schwab has a similar robo-advisory option called Schwab Intelligent Portfolios and access to human services via Schwab Wealth Advisory. The Schwab Wealth Advisory services require a $500,000 balance.

Management fees start at 0.80% and decrease at higher asset levels. Monitor expense ratios to get an all-in cost. 

Other Robo-Advisors

Betterment and Wealthfront popularized robo-advisor services about a decade ago. Betterment now offers DIY options and human financial advisors along with robo-products. Wealthfront remains a pure robo advisory. 

These are the providers I’m most familiar with. Others may have similar services that are more or less expensive or offer hybrid products of varying quality. Understand every penny of fees before signing up. 

Many large brokers have access to some kind of robo-advisory solution for a reasonable fee. There are also target retirement date funds and ETFs that can provide age and risk-appropriate investment portfolios if you know where to look.

Some non-DIY investors may appreciate affordable options and be comfortable putting their faith in an algorithm. In many ways, robo-advisors eliminate the behavioral risks associated with DIY and financial advisors.

Deciding what’s best for you depends on many factors. I plan to continue managing my money for many decades, simplifying my portfolio along the way to reduce the amount of work required.

But if circumstances change, I won’t rule out hiring help in my later years.

Featured photo via DepositPhotos is used under license.

Favorite tools and investment services right now:

Sure Dividend — A reliable stock newsletter for DIY retirement investors. (review)

Fundrise — Simple real estate and venture capital investing for as little as $10. (review)

NewRetirement — Spreadsheets are insufficient. Get serious about planning for retirement. (review)

M1 Finance — A top online broker for long-term investors and dividend reinvestment. (review)

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