Investment articles

Should you invest on your own or use a professional?
Here are the pros and cons of each method

Today, investors have easier access to investments and market information. With just a few simple clicks of your mouse, you can invest into almost any asset class or retrieve real-time information on the market to monitor your portfolio and assess your investment decisions. This makes it easy to think that everyone can, and should, be investing on their own. The truth is that while everyone can be investing on their own, not everyone does it well. To successfully invest on your own, you need to have interest in the topic to continue building knowledge, time to monitor and adjust your portfolio as well as not be swayed by emotions during downturns and be able to rebalance your portfolio at appropriate intervals. To help you decide whether you should be investing on your own or use a professional, we list down some of the pros and cons of each method.

Investing on your own

By doing it on your own, you may be able to save some money as you forgo the expertise, which usually comes with a management fee of a professional manager. You will also be more empowered in your investment knowledge, knowing exactly where your money is and how it is growing or being affected by market conditions.

However, on the flipside, you have to consider your time horizon in staying invested. Dalbar’s Quantitative Analysis of Investors Behaviour (QAIB), which was released in 2015, suggested that an average equity mutual fund investor tend to be invested in funds for only 4.1 years. They also underperformed when compared to the returns of passive investments achieved through investing in indexes, such as the Standard and Poors 500 (S&P 500).¹

The reason for this can be simple, seeing your investment holdings plunge in value during downturns can be nerve-wracking and this causes you to make decisions that can adversely impact your financial well-being. Similarly, seeing healthy gains in your investment may cause you to limit your financial well-being as you rush to take profits too soon.

One other emotional response is blindly following news reports or friends and family into the next hot technology stock, such strategies do not work as this herd mentality usually gathers pace when bubbles are forming, causing you to make poor judgements in your investment decisions.²

Investing with a professional manager

If you are the type of person who is unlikely to pay attention to your investments or may even completely neglect retirement planning, then it will make sense to hire a professional manager to help you with this.

Professional managers spend a great deal of their time studying the markets to gain key insights and information to beat regular investors. By leveraging on their expertise and knowledge, you can take a hands-off approach in building your wealth. However, this also means you have to fork out a management fee for their services.

One thing to note is that even investors who believe they can invest on their own can leverage on the knowledge of professional managers. As an average investor, you may not have the capacity to understand the full spectrum of managing your money.

Even if you are confident of investing on your own, you may require some help in diversifying your investments into different investment instruments. You can either use a professional manager to invest in these areas or start gaining knowledge by first investing through them, and later, if you are confident enough, to invest on your own.

Using Regular Savings Plan

One way to get started is with dollarDEX’s Regular Savings Plan (RSP) and regularly contribute a sum of money towards an investment. This way, you will be protected from large swings in the market right after you have invested. In addition, you will also be taking away the need for market timing, which takes the approach of investing when the market conditions are right.

By continuing this strategy on a long-term basis, you will essentially be embarking on a dollar-cost averaging investment strategy. This means that you will be buying more of an investment when prices are depressed (in bad times) and less when prices are high (in good times). This will enable you to ride out market volatility over the long-term.

Using Value Averaging Plan

dollarDEX also offers a newer method of embarking on a similar strategy targeting growth rate at the start of the plan and contributing a variable amount (rather than a fixed amount in the previous strategy) to achieve the final target sum.

Termed Value Averaging Plan (VAP), it works by getting you to contribute more in months when markets do badly, and less when markets do well. This way, you are ensured to stay on course towards achieving your final target sum. This method, also works well when you have a set timeline and target sum to achieve.

With access to over 700 professionally-managed funds across diversified investment instruments, dollarDEX enables investors to put their money into various asset classes and achieve diversification through its online platform. Investing as little as $100 a month, investors can ensure they get started at a comfortable level that allows them to utilise dollar-cost averaging to build their portfolio.

Additionally, experienced investors who need to outsource part of their investment requirements – especially into other asset classes – can also benefit by leveraging on dollarDEX’s affordable investing approach which has a 0% sales charge and absolutely no switching and platform fees.

Your investment. Your rules.

With access to over 700 professionally-managed funds across diversified investment instruments, dollarDEX enables investors to put their money into various asset classes and achieve diversification through its online platform. Investing as little as $100 a month, investors can ensure they get started at a comfortable level that allows them to utilise dollar-cost averaging to build their portfolio.

Additionally, experienced investors who need to outsource part of their investment requirements – especially into other asset classes – can also benefit by leveraging on dollarDEX’s affordable investing approach which has a 0% sales charge and absolutely no switching and platform fees.

Start your investment journey with dollarDEX today!