Benefits of Self Directed Investing for the Individual Investor

by KenFaulkenberry

in Portfolio Management

Individual Investor
Individual Investor and Self Directed Investing

The benefits of self directed investing is causing the individual investor to examine a more hands on approach and deciding it makes sense for them. Allowing others to manage their portfolios hasn’t worked well for the individual investor. That means a critical look at the old model would be a wise exercise for every investor.

Having others manage your portfolio leaves you susceptible to fraud, high expenses, poor performance, undefined risk(s), and group thinking. Most investors don’t really understand the risk in their portfolios. In addition, many don’t examine their portfolio performance until the quarterly report arrives; often too late to do anything about it.

Benefits of Self Directed Investing

Stay in Control of Your Own Assets

An individual investor who chooses self-directed investing can stay in control of his own assets. With con artists and Triple A institutions requiring bailouts it is wise to keep your assets safe. Managing your own money keeps you purposely involved in your most important financial undertaking.

Increase Investment Returns

The past 12 years have been a perfect example of how a tactical asset allocation strategy can increase investment returns, versus a buy and hold strategy which ignores valuation. A value investing strategy that avoids over valued assets can outperform the vast majority of mutual funds with considerably less risk.

Reduce Investment Expenses

Mutual funds, and investment advisors who charge percentage fees based on assets, can be very expensive. Investors typically pay from 0.75% to 2.0% (and up) in annual fees for managed funds and similar fees for an investment advisor. In addition, the overall track record as a group is dismal. While these fees may not be obvious they reduce investment returns by a staggering amount over many years. Purchasing individual stocks and ETFs can reduce your investment expenses.

Help You Understand Your Risk

In recent years many investors did not understand how much risk their portfolios were exposed to until it was too late. If you do it yourself you will have a better understanding of your portfolio risk and asset allocation at any given time.

Avoid Following the Crowd

Most mutual funds and fund managers follow the crowd and “group learn” strategies that result in sub-par performance. With individual control of your portfolio you can avoid following the crowd.

Easier Than Ever Before

There have never been more choices of inexpensive products to choose from with the explosion of Exchange Traded Funds (ETFs). Technology has made self-directed investing easier than anytime in history. You can open a brokerage account on your computer and manage your portfolio from your own home. Services such as the AAAMP Blog or an asset allocation guide are readily available to assist and educate investors in almost any subject desired.

Individual Investor Investing

The individual investor has never before had all the benefits of self-directed investing that are available today. The benefits are increasing investment returns, reducing investment expenses, avoiding following the crowd, staying in control of your assets, and investing in an era when it’s never been easier to manage your own money. After examining the benefits, many individual investors are choosing self directed investing.

Related Reading:

Benefits of Using the AAAMP Value Investing Guide

Investment Portfolio Management Basics: Risk, Asset Allocation, & Investing Strategies

Written by KenFaulkenberry

KenFaulkenberry

AAAMP Blog by Ken Faulkenberry
Ken Faulkenberry earned an MBA from the University of Southern California (USC) Marshall School of Business with an emphasis in investments. Ken has 25 years of investment experience and is dedicated to helping people with self-directed investment management through the Arbor Investment Planner. His asset allocation strategies have an outstanding performance record.
Subscription Information

  • Share/Bookmark

{ 1 comment }

Ravi Ahuja

Self Directed Investing is what most of the individual investor do but when you are managing your investment then you should give some time to it on research mainly.

People spend lot of time on choosing cloth but don’t give much time on investment research. If individual investor start focusing on there investment strategy then they can save lot of money and can make lot of money too.

Comments on this entry are closed.

{ 1 trackback }

Previous post:

Next post: