As opposed to finding an advisor upfront, it may be less cumbersome to try to manage your own investment portfolio through a stock brokerage account or through making your own individual trades. However, it can take a significant toll on you in the long run and put you up for a lot more risk, unless you’re operating at the same level that a professional in finance would operate at.

There’s no denying the appeal of trying to manage your own investment portfolio — you get to choose the stocks that meet your values and risk tolerance, enjoy the fun of watching the market to see how your investments are faring, and of course, avoid fees associated with hiring a professional to do the job for you. 

With that being said, there’s a steep learning curve associated with successfully managing your own investments, and you stand to lose a lot simply because of what you don’t know. 

Sure, there are plenty of apps like Robinhood, Etrade, Vanguard, Webull and Acorns - that make it easy to get started with investing. But when it comes to your money, you want to make sure you’re investing wisely. You don’t want to gamble blindly with your future security. 

You need to make informed decisions, which means learning all you can about the market and the financial products best suited to your needs and preferences. 

Leonard Kim at AdvisorCheck, reinstates this fact. He says, “When I was in my early 20s, I invested into preferred shares for a company that trades on the Over The Counter: Bulletin Board (OTCBB) stock exchange. The thousands I spent are currently worth less than the price of a meal at McDonalds.” Leonard continued, “I also invested into MoviePass, thinking that their idea was brilliant. That yielded a total loss for my investment, so investing on your own is difficult and the downside risk often is not worth the risk. Find someone to help you instead.” 

While there are many downsides to managing a portfolio on your own, there are some ways to succeed as well. Charles Krause, managing director and investment manager at Fairfield, Bush and Co., gave a checklist of things to do to build a solid portfolio: 

1. Start small but start now. 

2. Keep at it. 

3. Work with someone you like. 

4. Keep putting money into the account. 

5. Don't give up. 

6. Look around you and improve. 

“I have learned many lessons by investing over the years,” Charles stated. “While I believe that these lessons learned help me avoid many mistakes today, these lessons are my own and may not resonate for other investors or people looking to start investing.  While I often mentor young people and my clients do often come to me for coaching and encouragement in how to stay invested during volatile times, the best advice I can give to someone trying to build a successful portfolio is to stay at it and develop your own methods for keeping invested and learning to improve your investment style,” Charles Continued.  
 

It’s a lot to take on if you don’t have any background in finance or investing, especially since it’s your finances at stake. Before you jump into the stock market or start dabbling in crypto, here are a few potential challenges you should know about. 

Understanding Industry Jargon 

As with any industry, the financial world is rife with terminology and concepts you need to understand if you want to make wise decisions. 

For example, do you know the difference between stocks, bonds, ETFs, options, and mutual funds? You should know not only what these things are but the potential benefits they offer and the level of risk they entail. A site like Investopedia can be a great resource to learn more finance jargon. 

Similarly, what’s the difference between a bear and a bull market, and how will each impact your investment strategies? What is diversification, and why is it so important? If you don’t have the time or inclination to learn the basics, you may not be prepared to effectively manage your investment portfolio without professional help.

“You can understand all these things and they may not even bolster your own confidence in the subject matter of investing. I have a deep understanding of how all these things work, but aside from investing in four separate ETFs that my former chief operating officer told me to, I wouldn’t risk putting my money into any type of stock in the market on my own; even the blue chips,” says Leonard Kim, who is also the author of a book with McGraw-Hill Business. 

Educating Yourself About Your Options 

Once you understand the terms and concepts involved in the financial market, it’s time to learn about potential investment vehicles. There’s a range of options to consider, from stocks and bonds to commodities, index funds, retirement accounts, real estate, and more. 

In fact, one major hurdle for individual investors is having too many choices. There are plenty of free resources you can use to educate yourself, but you need to find reliable sources of information, and sifting through the wealth of available material can be overwhelming, to say the least. 

It can be tough to narrow your search and zoom in on the information that’s relevant to you. Early on, you may face confusion, frustration, and an inability to make informed choices, but with time and effort, you’ll expand your knowledge base and develop preferences, making research easier. 

“It’s okay if you feel uncomfortable with understanding all the various options to consider. A few people who worked under my purview at the last financial company I worked at could probably only describe 20 percent of the options above, as the others are foreign to them,” says Leonard Kim.

Putting in the Time 

Is it possible to formulate an investment strategy, plug in funds, and leave your portfolio to its own devices? Yes. But will this approach allow you to get the most from your money? Definitely not. 

For one thing, the market is constantly changing. Fluctuations could be to your benefit, but if you’re not paying attention, you won’t know, and you won’t be able to capitalize or pivot as needed to avoid losses. 

Not only should you be willing and able to track the market to learn about trends to take advantage of those in line with your strategy, but you must also regularly monitor and review your investments to ensure they’re performing and delivering anticipated returns. 

A certain level of diligence and routine is baked into managing your own investments, so if you’re too busy, going it alone might not be the right choice to grow your money. 

“I’ve spent a lot of time watching people do this. While my former employer was able to create watchlists on the daily from the top 20 performing stocks on the market, then look at the price range of a stock, market cap, float and trading volume to make a handful of successful trades each month, there are very few people in the world who have that level of expertise where they have studied the market relentlessly to understand how a stock will perform based on the movements it is making in a chart on their own. Not to mention, many of the strategies you find online do not have the same success rate percentages that are posted, especially when they are put through rigorous sets of backtesting,” says Leonard.

Sifting Through Advertising 

One issue with investing is that you don’t know what you don’t know, which is to say that you can’t research potentially beneficial financial products if you don’t know they exist in the first place. Advertisements can serve as a handy source of information about the options available to you, particularly regarding new financial products. 

Even so, not every product is right for every customer. 

You don’t necessarily want to buy into the promise and hype of advertising without performing your own research to confirm that an investment opportunity is right for you and your personal goals. Advertising can be helpful as a tool for discovery, but it comes with a caveat: you must exercise due diligence. 

“As a consumer, you have to understand that the main reason someone is paying for advertising is to bring more clients to their business,” Leonard Kim stated. “This means you have to take their messaging with a grain of salt to ensure that you truly do want to work with the products that are offered and the people who are offering them, as some things may be more sugarcoated in the messaging than how they work in real life,” Leonard continued. 

Keeping Up with the Marketplace 

“Managing” implies ongoing efforts, and when it comes to your investment portfolio, that effort can take two forms. 

You must keep up with the marketplace to ensure that your money is in the right place based on current conditions, but you must also perform routine check-ins that balance your investment strategies and goals against your situation. 

For example, your goals, strategies, and risk tolerance could shift significantly due to major life events like marriage or the addition of children to your household or financial changes like switching jobs, losing a job, or retiring. We will discuss more about these important life changes and how they impact the financial journey one experiences in a later post.

At the very least, you’ll need to perform an annual assessment of your current situation. Even a small windfall like a year-end bonus could cause you to shift investments around. More frequent monitoring is ideal, though, whether you do monthly assessments or even weekly or daily check-ins. 

Understanding New Financial Products 

Investments shouldn’t be a static affair. Even retirement accounts like a 401K or Roth IRA require monitoring so you can adjust your contributions to enjoy the greatest potential advantages from one year to the next. For example, in 2023 the new contribution limits have changed dramatically from 2022.  

In addition to changing your investment allocations based on market fluctuations, you must be aware of new financial products that could better serve your needs. 

You may feel comfortable with a choice you made a few years ago, and there’s nothing wrong with sticking with an investment for the long haul. However, if you’re not making an effort to learn about new investment opportunities, you could be missing out on greater gains. 

In this respect, flexibility is one of the most important aspects of managing a successful portfolio. 

Teaming Up with the Right Financial Advisor 

Managing your investment portfolio to the greatest possible advantage takes time, effort, and knowledge, and experience can provide a big leg up. While a financial advisor comes with a cost, one of these professionals will have the kind of expertise you’re looking for. 

A qualified financial advisor can explain the various options, advise you of new products, help you set goals and create a personalized financial strategy, and guide you toward wise investment decisions. All you have to do is find one you can trust to help you make solid investment choices that will serve you both now and in the future.  

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Written by: Billy Quirk

Disclosure  

The information provided in this article was written by the research and analysis team at AdvisorCheck.com to help all consumers in their financial journeys, by providing the resources and the insights to help improve one’s financial health, make it through recessionary and inflationary periods of time, and save their earnings to use them towards building a secure financial future. 

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