Grow your own?

[Taggart]

Grow your own?

High management fees have some experts recommending do-it-yourself investing

DON MACDONALD, The Gazette

Published: Saturday, June 02, 2007

[Shakespeare]

Thanks for the article and the webring link, Don.

Many of the other people Don interviewed seem more optimistic about the proportion of people that can successfully DIY than I am.

[Bylo Selhi]

"If you want to do it and think you can do it, then you probably can do it," said Warren MacKenzie, author of the book The Unbiased Advisor...

"Most people think it's beyond them. It isn't necessarily, but they think it is, and that makes it beyond them," said Betty, [author of "an extensive do-it-yourself investing primer"]

[Shakespeare]

The two positions are not inconsistent: I make the information available recognizing that most will be unable to use it but a few will.

[uhoh]

great article

thanks for telling us about it - and everything else!

[Taggart]

great article

thanks for telling us about it - and everything else!

I received the article in my gmail which was originally given to me by Bylo. Google alert picked up Tom Connolly's name, so you can see how it's all inter-related.

Before I saw the article, I was doing a bit of reading at Travis Morien's site (downunder), and I thought part of a quote from Buffett applied very well here.

"I don't think I have any original ideas. So I've gotten a lot of ideas myself from reading. You can learn a lot from other people. In fact, I think if you learn basically from other people, you don't have to get too many new ideas on your own. You can just apply the best of what you see."

[graemediesel]

Thanks for the article and the webring link, Don.

Many of the other people Don interviewed seem more optimistic about the proportion of people that can successfully DIY than I am.

I think most people can, but most won't. It's the same as for cooking your own meals, and doing your own basic mechanical repairs, and a lot of other DIY activities. You can save a bunch of money and if your mindset is right, enjoy yourself doing it. The things stopping people are most often lack of ambition and fear of doing something wrong.

The biggest difference between changing your own oil and handling their own investments is that the investing is likely to save a lot more money over the long term.

[ukridge]

Nice article, thanks. For me, the bit that resonated was this:

Years ago, he realized he wasn't going to make his fortune by chasing stock recommendations from a broker or from a collection of high-priced, in-house mutual funds another adviser set him up with.

For the last 12 years, he has been investing his own money through a large discount brokerage firm. Instead of going after the latest hot stock or fund, he keeps his eye on the one thing he can control - the fees and commissions he's charged.

"If you're not careful with your own money, no one else will be," he said in an interview.

Re: graemediesel's anology, I agree that the primary motivation for most for DIY investing is saving money. In my case, it wasn't. I had just lost faith in advisors and bank "specialists" after a series of bad experiences.

The reason that I pay others for repairs and changing oil was that I could easily find mechanics with verifiable degree of competence and (to a lesser extent) integrity. The financial industry, unfortunately has worked intself into an arrangement of commissions and collusions that it's hard for an outsider to rule out vested interests before committing to an advisor.

In my case, I started with full-service firms, and later moved to the DIY route without knowing whether I'd enjoy it or not. Was pushed to that route due to my perceptions on the competence and motivations of advisors. I did think there were good advisors out there, but it felt like it was easier to learn basic investing than to find them.

Years later, thanks to some folks in this forum and elsewhere, the realization is that it's not that hard to do it all yourself. I'd have never tried it if I had a good advisor along the way.

- ukridge.

[Wallace]

Years later, thanks to some folks in this forum and elsewhere, the realization is that it's not that hard to do it all yourself. I'd have never tried it if I had a good advisor along the way.

That's a very interesting comment. I'm sure that the members of the forum are a very self-selected group, so their comments on financial advisors may not be reflective of the opinions of the public as a whole.

Among my peers I'm considered a bit of a renegade investing on my own. Most of my colleagues leave everything to their advisors or just put everything in mutual funds. And they seem quite happy doing that. Who am I to tell them that they could make more by going alone? Particularly after the errors that I made in my early investing years.

And some are receiving great service. A friend of mine died recently and his widow has received incredible help and support from both her bank manager and her financial advisor. She can't speak highly enough of them, so there must be lots of people out there who are ethical and helpful. perhaps that's why, as ukridge noted, their clients aren't here.

[DenisD]

Most of my colleagues leave everything to their advisors or just put everything in mutual funds. And they seem quite happy doing that.

A survey by the Investment Funds Institute of Canada last year found 85 per cent of Canadians are satisfied with the advice they are getting from their financial advisers.

[ukridge]

MontrealGazette wrote:

A survey by the Investment Funds Institute of Canada last year found 85 per cent of Canadians are satisfied with the advice they are getting from their financial advisers.

What else do you expect a survey funded by trailer fees to say?

- ukridge.

[DenisD]

What else do you expect a survey funded by trailer fees to say?

Given the markets we've had for the past four years, I'm surprised it's only 85%!

[kcowan]

I guess this article and discussions raises the questions:
1) How many here are strictly DIY?
2) If you DIY primarily, did you start out that way, or were you driven there by inadequate experiences with full-service?
3) Do you DIY in other significant parts of your life?

For me, I DIY for about 70% of my portfolio. And I started DIY because I was unhappy with some of the returns I was getting after fees. Because we have always used multiple suppliers, we have kept the ones that we thought were adding enough value.

As an engineer by training, I fix stuff that breaks rather than replace it. Especially since retiring, I consider any savings as my pay. "A dollar saved is a dollar earned!" Gee inflation has even hit the old expressions.

I perform minor construction around the house. And do the painting. And gardening.

I also DIY in photography, outsourcing only the final selective printing. And we no longer use travel agents.

[AltaRed]

1) Upon return to Canada and retirement in 2006, I moved to 100% DIY investing.

2) Started out full service and graduated to partial DIY over time primarily because I came to intensely dislike high MERs and full service commissions, and partly because of some less than satisfactory results. Some desire to take care of my own destiny because of my 'hands on' style was also a strong motivator.

3) I do less DIY in the rest of my life than I used to do because I can afford to do so, because I've been there and done that on many things, and because back health issues limit my ability to do so.

In the past, I have built out multiple basements (framing, electrical, plumbing, lighting, flooring, painting but not drywalling), fencing, major landscaping and minor gardening, and a variety of car repairs.

More recently, I have limited myself more to minor repairs around the house, painting, washing vehicles and gardening...and minor other work as necessary around my recreational property.

[dakota]

kcowan wrote

I guess this article and discussions raises the questions:
1) How many here are strictly DIY?
2) If you DIY primarily, did you start out that way, or were you driven there by inadequate experiences with full-service?
3) Do you DIY in other significant parts of your life?

Strictly DIY

Driven there

Used to, not anymore.

[marty123]

I guess this article and discussions raises the questions:
1) How many here are strictly DIY?
2) If you DIY primarily, did you start out that way, or were you driven there by inadequate experiences with full-service?
3) Do you DIY in other significant parts of your life?

1) I am, except with:
a) FI being with PHN funds;
b) I just opened kids' RESP holding an expensive RBC index fund (just enough to get free banking) the rest is going to TD efunds. I had to sit with their in-house CFP for 30 minutes getting asset allocation advice though, and to hear her say several times that i'm undiversified and should be buying an RBC Select portfolio I just was too scared to tell them what this RESP is all about (free banking) and that it's not going to see subsequent deposit who instead will go into a efunds.
c) small RPP stuck with high-MER funds

If you mean DIY as "not getting advice", I'm 100% DIY. If you mean as "not paying high-MER & trailer fees", then I'm about 90% DIY because of the RPP.

I see my 25% allocation to PHN bond funds (especially HY) as being cheaper than bond picking (because of spread) and better than buying XSB/XBB, so I'm cheating a bit.

2) I was driven to it. I went from thinking years ago that I was buying from a MF sales person, to the realization that this person was also supposed to give me good advice instead of pushing house funds. Went DIY 3 years ago.

3) I'll thoroughly research anything I buy, often to the extent that I'll often know more about the product I shop for than the junior rep who's trying to sell me. I know where to draw the line and call in the experts, but I'll also have done enough research to know if the experts are trying to fleece me. My wife thinks I'm paranoid about everyone - i just think that's how customers should be.

[bbsj]

I guess this article and discussions raises the questions:
1) How many here are strictly DIY?
2) If you DIY primarily, did you start out that way, or were you driven there by inadequate experiences with full-service?
3) Do you DIY in other significant parts of your life?

I am a 100% DIY investor. After few years with Investors Group mutual funds I realized the uselessness of mutual funds. So, I enrolled in the Canadian Securities course (not that I had intention of becoming a stock broker), passed it easily and started doing my own investing. It has been a pleasant experience with minimal effort and considerable benefit.

On the other hand, I do 100% outsourcing for other work like repairs, lawn mowing, snow shovelling, and house cleaning. I always remember a quote from John Galbraith about being born poor and hating manual labour, and I am just like that.

[graemediesel]

I guess this article and discussions raises the questions:
1) How many here are strictly DIY?
2) If you DIY primarily, did you start out that way, or were you driven there by inadequate experiences with full-service?
3) Do you DIY in other significant parts of your life?

For me, I DIY for about 70% of my portfolio. And I started DIY because I was unhappy with some of the returns I was getting after fees. Because we have always used multiple suppliers, we have kept the ones that we thought were adding enough value.

As an engineer by training, I fix stuff that breaks rather than replace it. Especially since retiring, I consider any savings as my pay. "A dollar saved is a dollar earned!" Gee inflation has even hit the old expressions.

I perform minor construction around the house. And do the painting. And gardening.

I also DIY in photography, outsourcing only the final selective printing. And we no longer use travel agents.

It depends how you classify DIY investing. Do you mean investing without an advisor, or buying your own stocks and bonds etc.? I have never had an advisor, but I am presently 100% in mutual funds. I spent considerable time on my own researching and picking them. Now I am in the process of reading about stock picking until I feel that I know enough about stock selection to do a competant job on my own. Then I plan to gradually start moving from mutual funds to stocks.

I do a lot of things myself where either I enjoy doing them or the money saved is enough that I feel I am well paid for the time. Gardening and cooking I enjoy, so I do them even though the savings are modest. Mechanical repair I do because I save quite a bit of money per hour.

I hire a travel agent because I have a good one who is usually able to match or beat the ticket prices I can find online. I hire a book keeper because I consider the cost quite reasonable compared to time and irritation of doing it myself.

[scomac]

I guess this article and discussions raises the questions:
1) How many here are strictly DIY?
2) If you DIY primarily, did you start out that way, or were you driven there by inadequate experiences with full-service?
3) Do you DIY in other significant parts of your life?

1) Not entirely, say 70% across total family assets. Our discount brokerage accounts are through the financial planning division of the bank and I have used those services from time-to-time. Wife's RRSP is still in indexed wrap fund-of-funds which continues to deliver acceptable returns vis-a-vis FPX balanced. Also this provides a link to an advisor whom my wife trusts and who would be capable of handling our portfolios should something happen to me.

2) Driven there by a terrible experience with a full-service broker and a genuine desire to learn how to do it myself.

3) Yup. Landscaping, gardening, light construction, electrical, plumbing, general household and small equipment repairs...even cooking.

Like marty, I tend to research potential purchases to death and often know more than the sales person. This tends to work as a pretty reliable BS detector and has many times determined where I would buy as much as what I would buy.

[blonde]

... this article and discussions raises the questions:
1) How many here are strictly DIY?
2) If you DIY primarily, did you start out that way, or were you driven there by inadequate experiences with full-service?
3) Do you DIY in other significant parts of your life?

1) In our household WE do the 'Plan, Organize, Lead, Evaluate'. Some of our processes are interdependent with external processes in the System. Cost efficiency/effectiveness is a benchmark...

2) In my youngin years I was dependent on external processes...when I became shirt-less for a while I did learn it was time to Look After #1. After retirement, we did a pilot with an IC, with the aim to be more dependent on an external source...the experience and results reinforced the need to revert to being a DIYer with interdependent links...

3) ref 1) above...Our experience is that it is very difficult and not cost effective to be a DIYer totally independent...outsourcing has its merit/s...interdependence is 'key'...

There is a reason why many financial gurus focus on [s]brainwashing[/s] educating the client to be totally reliant on them...

Don't Trust Everybody.

BTW, trust me, believe me.

[soloman]

kcowan wrote:

I guess this article and discussions raises the questions:
1) How many here are strictly DIY?
2) If you DIY primarily, did you start out that way, or were you driven there by inadequate experiences with full-service?
3) Do you DIY in other significant parts of your life?

1. 100%, except for HY Bond Fund at PH&N

2. I have always been DIY from the beginning, about 30 years ago. Started with Mutual Funds, went to individual stocks, but couldn't devote enough time to them, so went back to mutual funds. Investigated a few bank and fund advisors at this stage and found they were mostly self-serving. Rescued a friend from an advisor. Went on a 9 month sailing sabbatical and left portfolios with a Bank Trust. Turned out they didn't know what capital preservation was during the 2001 debacle - they were selling our bonds to invest in high tech loser equities to keep up the 60:40 ratio of bonds:equities !! Retired in 2005 and hoped to escape financial management by giving portfolios to two different organizations: one being a large underwriting firm, the other a small fee based "portfolio management" firm. The first sold me firms they were underwriting, the second did nothing for months, then made big investments in only the O&G industry, and a mysterious investment in a small firm. Decided I had to take it all back into my own hands. By now, having got fed-up with mutual funds, and having stumbled across this forum, I went ETFs. Pretty satisfied so far, but still learning.

3. Yes. Car mechanics, general house additions and repairs, including electrical wiring installations, plumbing installations & repairs, etc. And of course, fixing the sailboat (engine, etc) continually ! (When your engine fails in the middle of Lake Ontario, it's handy if you can repair it yourself !!). Etc., etc., My daughter calls me Mr. Fixit !! Living out in the country for 10 years made me more self-reliant. Service firms are not keen to drive 30 miles out of town to repair the diswasher !

Unfortunately, IMHO, most people don't appreciate the biases of the advisors or are scared of the financial industry (as well they might be !!).

[kcowan]

Thanks for your responses. I am not surprised by the results so far, especially to question 2). I wanted to clarify question 1):

1) How many here are strictly DIY? If you use an advisor or full-service broker, then only the investments made through them are excluded from DIY. If you have used a fee-only financial planner, please mention it.

The 30% of my portfolio that is not DIY has only survived because I did a lot of shopping while working fulltime and finally found some good advisors. I am one of their most independent clients (according to them) because I take their recommendations only as input to my usual due diligence. But if I decide to invest in one of their recommendations, I always do it through them.

I often get access to IPOs and private placements from them and some of these have proven to be very good.

On question 3), if you would comment on any changes that have happened.
For example, I was very DIY around our houses before downsizing, but was strongly into outsourcing during the last 10 years of employment. Then renewed the hands-on approach since retirement has given me 60 hours a week back.

I am sympathetic to the responses about researching potential purchases. It is sometimes fun to deal with Future Shop salesmen and ask them leading questions after some research. I also participate in epinions, and have even been paid over US$100 for my research and subsequent buying experiences.

[AltaRed]

FWIW, I interpreted DIY investing to include actively managed funds. The difference is that I make the buy/sell decisions, not a paid advisor/salesperson.

I see nothing inherently wrong with actively managed funds in niches where I do not have the savy, interest, or perhaps time to do it on my own, e.g. Cdn small caps, PH&N HY Bond, etc.