Posted in:

Everything you need to know about DIY investing

DIY investing (or do-it-yourself) investing is the process of building and managing your own investment portfolio. DIY investors can be individual or retail investors who intend to keep control of their investments firmly in their own hands, rather than to pass it over to professionals.

Historically, DIY investing has been difficult and time-consuming. However, with technological advancements and the development of multiple online investment tools, it has become simpler for individuals to manage their investments on their own.

DIY investors are more inclined towards using discount brokerage firms and online investment platforms compared to professional money management firms or full-service brokers. They may either do it themselves completely, using self-directed discount brokerage platforms and paying commissions, or may take support from robo-advisors for automated algorithms to help them invest.

The process of DIY investing

DIY investing allows investors to manage their own portfolios for full control. However, it’s not an effortless process. Investors must follow a specific and pre-defined methodology towards DIY investing to achieve the expected returns and sufficiently lower risks.

Gathering relevant information

The process begins with developing strong financial acumen by learning everything about and around finances and investments. DIY investors must know all about financial instruments, markets, and strategies before they begin their DIY financial journey. They should concern themselves with the financial information ecosystem, investor documentation, and how to select the appropriate discount brokerage firm. Knowledge about portfolio management, including documentation, asset allocation, investment strategies, investment products, fees, and investment accounts, is also highly critical.

Defining needs and objectives

The next step in the process of DIY investing is to define one’s objectives and plans. Investors should visit their short-term, medium-term, and long-term plans to understand their financial needs, the time horizon for investments, risk tolerance, and other commitments, and define specific and realistic goals. The purpose of financial planning is to ensure that adequate capital is available to fund the needs, and there is a reasonable balance between inflows and outflows of funds. Investors should also consider uncertainties before they allocate capital towards DIY investing.

Constructing plans and strategies

After the investors have gathered and analysed enough information about the financial markets and their own financial status, the next move is to develop ideas, plans, and strategies in line with their goals. The plans include how much to invest each month, selection of financial instruments to invest in, tax considerations, and developing an investment management strategy. The strategies can either be focused on growth, value, income, or a combination of all based on individual needs and priorities.

Implementing and monitoring plans and strategies

The plans and strategies are then implemented in the most practical manner possible. DIY investors might need to try various strategies before settling for one. Even after implementation, it is necessary to keep monitoring and evaluating the investment strategies and make changes as and when needed.

Pros and Cons of DIY Investing

DIY investing has several advantages for new investors, the most prominent of which being independence. However, it also lacks some of the perks that come with receiving professional advice from experienced money managers. Therefore, both the pros and cons of DIY investing should be considered before deciding if it is the right path for you.

Advantages of DIY investing

Lower costs

DIY investing can help investors save a modest amount in fees. They build and manage their investment portfolios themselves, bypassing any professional charges. The fees charged by money managers can reduce the real returns on investments for investors, thereby bringing the value and wealth of individuals down. 

Thus, DIY investing enables investors to eliminate all the middlemen expenses and reap the complete benefits of their investments and returns. It should be noted, however, that trading costs can add up when shouldered by individual investors. 

Unlimited choice

DIY investors have access to almost all the financial products that are available to professional financial advisors and portfolio managers. They have an unlimited basket of securities to choose from, including ETFs, stocks, bonds, commodities, currencies, and much more. DIY investors can also invest in non-traditional investment options, like futures and options, without getting impacted by the managers’ bias towards specific products.

We make money simple for over 80,000 investors

Find your ideal ISA today

Start now

Independence and control

The most persuasive feature of DIY investing is the independence associated with it. DIY investors get to make their own investment choices, on their own terms, based on their own values and goals, and in their own comfort zone. No one knows you as you do and DIY investing makes you the boss of your decisions.

Investors have all the control over the products they want to invest in, according to their preferred risk tolerance levels, short-term and long-term goals, time horizon, and priorities. You can decide when you can go for more, or you have had enough without communicating through a professional money manager who may have beliefs of his own that could clash with your choices.

No unnecessary noise

Investment professionals are exposed to limitless investment information, making them biased. They are compelled to pay attention to temporary phases of volatility which impact their reactions and behaviour. The professional money managers tend to use strategies that are popular but risky rather than what seems suitable for investors, owing to peer pressure and professional expectations. On the contrary, DIY investors enjoy the luxury of tuning out the unnecessary noise as and when they like. They can form a long-term strategy, assimilate only as much market information as they feel comfortable with, and turn a deaf ear to the surrounding noise.

Drawbacks of DIY Investing

Lack of research and professional advice

DIY investing may seem appealing, but the knowledge and experience of professional wealth managers cannot and should not be ignored. Professional portfolio managers have decades of experience with financial markets, a variety of securities, strategies, and risk management. DIY investors lack the research and professional knowledge of professionals and may fall short of the required skills at multiple instances. All of this absent knowledge and dedication can cost investors over the long run. 

It’s complicated

Most of us will agree that investments and related financial instruments can represent something of an uphill task. They become even more complicated without the support of professionals. Therefore, DIY investing can quickly become a complex and arduous process when you go it alone. DIY investors will need to do everything from building a diverse investment portfolio, managing it, and restructuring it from time to time to paying trading fees and other associated costs. It’s not to be taken lightly.

Needs a lot of time

DIY investing demands extensive and continuous research. The process is usually extremely time-consuming, and DIY investors are required to spend at least a few hours a day understanding and researching the market to give themselves any chance of success. To top it all off, the amount of research required keeps going up as your portfolio becomes more complex with time.

Fear and greed

The impact of emotions on investment decisions is a critical drawback of DIY investing. DIY investors are dealing with their own money; hence, they tend to get more affected by emotions like fear and greed and may take hasty and biased decisions. On the other hand, traditional portfolio managers learn to deal with the ups and downs of the market with time and are less influenced by emotions.


Mismanagement is a monumental drawback of DIY investing. DIY investors tend to manage returns and can forget to manage their risks. As a result, DIY investing can become more stressful, less rewarding, and overwhelmingly complex. Instead of paying less money in terms of fees, the mismanaged DIY investors might end up missing out on opportunities and losing more than gaining.

Is DIY Investing the Right Choice for you?

DIY investing has become increasingly popular in recent years, especially among young and new investors. It has a few advantages for investors, like skipping management fees, having greater control over investment decisions, and accessing more personalised decision-making. However, DIY investing also lacks the support provided by professionals who have been working in the profession for decades. DIY investors need to put in a lot of energy, time, and research to build and manage their investment portfolio and generate good returns and value.

Thus, it is critical to understand your financial status, financial goals, risk tolerance, and time commitments before choosing DIY investing as your preferred method of investing. Remember that everyone can be a DIY investor, but not everyone will succeed. DIY investing can be the right choice for you if you have the time, dedication, and discipline to gather enough learning and experience to succeed in investing.

DIY investing is complicated at times, but it’s not impossible. DIY investors following a holistic approach and goal-based investing are more likely to end up successful. The learning curve for DIY investors is steep, but once you overcome the initial hurdles with patience, emotional control, and perseverance, the rest of the journey becomes simpler. It is also important for DIY investors to never stop learning. You must keep gaining more and more knowledge, apply it, learn from your mistakes, and realign your strategies with the need of the hour for DIY investing to work for you.

Match with a portfolio and start investing today

Simple, efficient and low cost, Moneyfarm helps you protect and grow your money over time.

Sign up with Moneyfarm today to match with an investment portfolio that’s built and managed to help you achieve your financial goals.

Make your money work harder for you, without breaking a sweat.

Get started

As with all investing, your capital is at risk. The value of your portfolio with Moneyfarm can go down as well as up and you may get back less than you invest.