After raising four children, Ann Telma feels she is more than equipped to handle her own investments.
“We like to do our own research,” Telma, 58, says of her investment strategy with her husband, Tomasz. “We focus on diversifying our investments, including into individual stocks, bonds,ETFs (exchange-traded funds), real estate, and different sectors including energy, utilities, health care and insurance. We use readily available online portfolio tools through Schwab and Morningstar.”
Telma is one of the millions of people – retirees, college students, and working Americans – who are engaged in do-it-yourself investing. Online brokerages now allow people to push the button, literally, on their own investment decisions.
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Do-it-yourself investing – also known as self-directed investing – refers to a strategy and technique in which individual, retail investors manage and build their own portfolios. These investors use retail discount brokerages and other investment account platforms instead of a professional money manager and a full-service brokerage firm.
Managing one’s own investments is nothing new, of course. For decades, books like “The Millionaire Next Door” have chronicled how regular Americans have eschewed professional financial advice and chosen instead to take charge of their own finances. But several trends have led to a sharp increase in this phenomenon. They include a rise in discount brokerages and an explosion of online investing tools that have made it easier for people to control their own finances.
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An array of online trading platforms allows investors to manage their own portfolios. Some are run by traditional brokerages like Schwab, Fidelity and E-Trade. But Robinhood a no-frills, no-commission, and no-account-minimum trading app that launched in 2013 attracted many do-it-yourself investors during the pandemic.
The app appealed to users because it was particularly easy to use on a smartphone. Other trading platforms appeared clunky by comparison. Robinhood also attracted investors during the pandemic by offering free cash and even shares of stock.
“It used to be that you needed to be in a particular financial circle to get financial information and data,’’ said Stephanie Guild, Robinhood’s head of investment strategy. ”And now, because of the internet and social media, you have access to a lot of information."
But no matter the platform, the appeal of do-it-yourself investing rests on the common desire people have to control their own money and avoid fees.
“The thing with delegating your investments to an adviser is that you lose control over it, and you are paying a premium,” says Warren Elterman, a 77-year-old retired attorney. “If you can do it yourself, you should, and as a retiree, I can. I have the time to do it.”
Elterman says he spends about three hours a day on his investing, and it has become almost an avocation for him at this point. “I can research my own stocks and I can look at the macro-economics of the economy as well as the intrinsics of the companies,” he says. “So I have the ability to keep tabs on it myself.”
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Are self-directed investors totally going solo?
To be sure, do-it-yourself investors are not completely on their own, says Laura Varas, CEO of Hearts & Wallets, a financial analysis firm.
"Most Americans say they are do-it-yourself investors, and that's especially true for younger, less affluent households,” she says. “DIY doesn't mean going solo. It means they take the lead in making decisions about their investments. But they also tap into other sources of information and advice, including, surprisingly, financial professionals."
In fact, a new report by the organization found that 60% of do-it-yourself investors also use financial professionals. It also found that 84% of millennials with $100,000 or more in assets use seven or more sources.
In addition, the report found that family is the primary source of investing information and advice for 1 in 7 Gen Z and millennial households but rarely for older households.
Telma acknowledges relying somewhat on outside advisers. And as part of her family’s diversification process, she has put some of her resources into funds managed by wealth advisers at larger banks.
But “we have generally been disappointed with the results,” she says. “Mostly, we have lost some money which may be attributable to timing, but in the end, if we are going to lose money, there is no reason to additionally pay fees to a manager.”
This article originally appeared on USA TODAY: Invest without a pro? How to DIY with Fidelity, Robinhood, Schwab