The risks of DIY investing
Chris Broome – Chartered Financial Planner
Do-it-yourself (DIY) investing can be a cost-effective and empowering way to manage your finances, but it also comes with certain risks.
Here are some of the risks associated with DIY investing:
1. Lack of professional expertise: DIY investors may not have the same level of knowledge and expertise as professional investors. This can lead to poor investment decisions and a lack of diversification in their portfolio.
2. Emotional bias: DIY investors may make decisions based on emotions rather than objective analysis. This can lead to impulsive buying and selling, which can result in financial losses.
3. Lack of diversification: DIY investors may be more likely to focus on individual stocks rather than diversifying their portfolio. This can lead to increased risk as an entire portfolio can be affected by the performance of one stock.
4. Overconfidence: DIY investors may be more likely to overestimate their ability to predict market trends and select winning investments. This can lead to overinvestment in a particular stock or market sector.
5. Lack of a long-term strategy: DIY investors may be more likely to focus on short-term gains rather than developing a long-term investment strategy. This can lead to missed opportunities for long-term growth.
6. Lack of proper research: DIY investors may not conduct proper research before making investment decisions. This can lead to poor investment decisions and financial losses.
7. Ignorance of tax implications: DIY investors may not be aware of tax implications of their investment decisions, and this can lead to unexpected tax bills.
8. Lack of discipline: DIY investors may be less disciplined with their investments, which can lead to impulsive buying and selling, and not sticking to a long-term investment strategy.
Overall, DIY investing can be a cost-effective and empowering way to manage your finances, but it also comes with certain risks.
It is important for DIY investors to be aware of these risks, conduct proper research, and seek professional advice if necessary.
Next steps
If you have any questions about any of the above, or wish to discuss your risk profile and investment portfolio with us, please get in touch. Contact us
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
