There is a reason why professionals are labelled as such:
They have taken the time to study, pass exams and practice their profession for many years.
I remember the first time I tried to install a new shower valve myself:
12 hours and 3 spools of solder later, I called the emergency plumber, who quite cynically quipped that he had attended school for 2 years to learn his trade.
As will always be the case, there are some who may take advantage of their superior education and training to over charge and under serve their respective clientele.
This prompts a number of folks to decide to try it on their own.
In the investment industry, the advance of ETF's (Exchange Traded Funds) in recent years has offered the DIYer's an opportunity to get low cost broad exposure to create balanced and diversified portfolios.
When the equity markets are rising in price (as they have been since 2009) it is easy to persuade yourself that you are good at this investing thing.
The S&P 500 (total return) is up approx. 21% annualized over that 6 year period.
The SPY (low cost ETF ) is up just a little less that that.
The EFA (non-North America) ETF is up approximately 14% per year on average over the same period.
The broadly diverse World Equity Index ETF (ACWI) is up approx. 17.5% .
Not even the housing market in Toronto or Vancouver has given off this kind of return.
Of course you had to have bought in at the bottom in March, 2009 and held on through the stomach churning "is it 2008 all over again" period in 2011.
And then you had to resist the urge to take your profit along the way (and perhaps re-enter at higher levels).
Of course, all of the DIYer's that I talk to have done this and then some.
It's been a great run.
But what comes next?
What happens if volatility spikes (few have confessed to being "unnerved" by last October's steep drop) again?
How will you protect that handsome return?
Is it worth it to pay an additional 1% per year to get an expert to help you re-balance and to ensure you keep all that hard-earned return?
Oh, and good luck with this....
Need help (not with the car engine or plumbing though)?
Let me know.
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist