PETE THE PLANNER: Think carefully before deciding to invest without an adviser

Dear Pete,

You seem to always mention the importance of having an investment adviser. Can I assume you’re against people investing on their own? I’m on the fence as to whether I should keep managing my own investments or hire someone to help me. I’m struggling to justify the cost of paying someone to do something I can happily do myself.

—Brandon, Carmel

Thanks to YouTube, I’ve replaced a float valve in a toilet, fixed a vacuum cleaner, changed out a car battery and swapped out a flame sensor on my furnace. I have not performed surgery, made a souffle, sharpened my lawn mower blades or replaced my brake pads. I know my limits and, even if I didn’t, Mrs. Planner is right there by my side reinforcing my limits.

The operative questions are, “Do I have the skills to complete this task despite never having completed it before, and, if not, do the costs of hiring a professional to do the job outweigh the risks?”

When it comes to investing, not only do too many people misconstrue knowledge for skill, but beyond that, people tend to make a series of predictable mistakes brought on by inexperience. Therefore, even if you find yourself in the “I know what I’m doing” camp, you might not have the rest of what it takes to succeed long term.

I’ve always felt an investment adviser’s job is to prevent his or her clients from making avoidable mistakes. If you can avoid the classic giant mistakes amateur investors make, feel free to do it on your own.

Mistake 1: No diversification

If holding some of a particular investment is good, acquiring more of that good investment must be better, right? No. It doesn’t work that way. I love spicy brown mustard on my pastrami, but if I douse the sandwich in spicy brown mustard, I’ll ruin the whole thing. It’s all about balance. Amateur investors often find themselves with unbalanced portfolios that don’t withstand rocky markets the way a properly diversified portfolio would.

Mistake 2: Attempts at timing

I feel like the first five years of my investment management career (a function I no longer perform) primarily consisted of learning all the ways we’re naturally predisposed to try to time the market. Distilled down to its essence, even if a person sells at the right time, buying back at the right time is nearly impossible.

Mistake 3: Emotional investing

A financial adviser provides a barrier between your money and your emotions. If you don’t have an adviser, you don’t have a barrier. Wild market swings and the media, which stokes the emotional fires, are nearly impossible to ignore.

Mistake 4: Relying on superficial knowledge

There’s a commercial airing on television that encourages investors to do it on their own with the simple justification, “We’ve got all the tools you need to do it on your own.” Hand me a tray of surgical tools and try that line on me. Good investment advisers are valuable because they’ve seen hundreds, if not thousands, of financial lives and can use all that knowledge to give you better advice. If you’re a DIY investor, your experience is limited.

You might not realize it, but there are four possible paths. If you’re in the “know what I’m doing” camp, you can either do it yourself or hire an investment adviser. Even if you know exactly how to construct and maintain a portfolio, you might find value in having someone else keep a watchful eye on it. I don’t find that wasteful; I find it prudent. And if you’re in the “don’t know what I’m doing” camp, you can either get some help or inexplicably do it on your own, anyway.

It’s also important to examine best- and worst-case scenarios of both hiring an adviser and doing it yourself. If you hire an adviser and it goes well, you’ve just made much more money than you would have on your own. The worst-case scenario of that choice is, your adviser does an average job and the fees don’t justify his or her involvement. Best-case scenario when you manage your investments is for you to do an average job, and you don’t have to part with roughly 1 percent of your returns each year to pay an adviser. The worst-case scenario of that choice is, well, truly awful—you lose a tremendous amount of money.•


Dunn is CEO of Your Money Line powered by Pete the Planner, an employee-benefit organization focused on solving employees’ financial challenges. Email your financial questions to

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