Where Self-Serve Investments Fall Short - PRT

INVESTMENT STRATEGY

ECONOMIC & MARKET INSIGHTS

Where Self-Serve Investments Fall Short

Studies have shown that the value added as a percentage of return by a professional investment advisor over time can range from 3-4%, so why wouldn’t everyone want an advisor versus self-managing their portfolios? Individual circumstances are often too unique to make blanket statements that one method is more advantageous than another. Investors have to decide what is right for them based on personal financial goals, time horizon and tolerance for risk, which are in flux over time. An even easier yardstick: Do you honestly have the time, desire and knowledge to manage your own investments? “Even if you are a long-time do-it-yourselfer, we think it’s smart to get a second opinion with a portfolio evaluation,” said Commerce Trust Senior Financial Planner David Stubblefield, CFP ® , CDFA ® . “You might simply confirm you are doing a great job in meeting your goals, or you may discover an advisor might have added value over time. You gain valuable insight either way, just like getting a second opinion.” With the proliferation of low-cost robo-advisors to make investment decisions on what to buy and sell, and low-cost passive investments like exchange traded funds (ETFs), some argue that do-it-yourself investors have enough credible tools to manage their assets if they put in the time and effort. The issue for most do-it-yourself investors is whether they have the inclination over time to diligently apply five core staples of investment management: 1. Ongoing oversight and rebalancing of investment portfolio allocations 2. Getting sound “coaching” to avoid mistakes individual investors typically make 3. Evaluating the options and costs for basic investment-only management 4. Developing an overall financial plan at reasonable cost 5. Factoring tax-aware planning/investing into your mix ANNUAL REBALANCING – Advisors own a competitive advantage in that they can efficiently rebalance your portfolio holdings through their electronic trading platforms. For instance, if you haven’t readjusted your holdings since the Great Recession, your current asset allocation may skew toward a “growth” portfolio, exposing you to more downside risk than you might have first requested when you filled out your risk tolerance preferences in your investment policy statement. You may have selected a conservative strategy then, but you could now be more susceptible to big market swings if your holdings migrated toward highly aggressive growth stocks. It is also important to determine if your original asset allocation is still in line with your current situation and goals.

Wealth | Investments | Planning Commerce Trust Company

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