Do-It-Yourself Investing (2024)

Some investors decide to manage their own investments, without advice or support from an investment advisor. This is called self-directed or do-it-yourself (DIY) investing. Some Canadians are DIY investors and trade through discount brokerages in order to pay lower fees or to have more control over their investments. They usually, but not always, have more knowledge and investment experience. They also tend to have an interest in finances, enjoy reading financial news and tracking stock prices and financial information about companies.

If this is your preferred route, here are a few tips to keep in mind:

While lower fees are appealing, DIY investing is not for everyone.

Do-it-yourself investing is not for everyone. This is particularly true for people who have less investing experience or do not have time to do the research to identify the right investments. Less experienced investors may also take on too much risk without fully understanding the risks they are taking. They may also be influenced by unreliable online or social media sources or make decisions driven by emotions rather than based on longer-term investment goals.

It is important to remember that there is little that regulators can do to help a DIY investor when they suffer losses. Under Canada’s securities laws, an investment advisor must collect client information to determine your level of investment knowledge, experience, goals, and risk tolerance. But a discount broker is exempt from these requirements.

If you are thinking of managing your own investments, you should be aware of some of the pros and cons of doing it yourself.

Pros and cons of DIY investing

Pros

Lower cost – You tend to pay lower fees because you are not receiving advice.
Convenience – You can make investment decisions on your own schedule.
Control – You are in control of your own trading.

Cons

Reduced risk assessments – You won’t have the benefit of advice from an advisor on whether your trade is consistent with your risk tolerance and investment strategy.
Limited investor protections – Many investor protections apply only when you are using an advisor. These protections are not available to you as a DIY investor.
Trading on emotion – You may be at a higher risk of being influenced by social media hype or features built into DIY trading apps that encourage you to trade more often. When you trade on emotion, you are more likely to make poor choices.

Not sure if DIY investing is right for you?

While investing may seem simple, it is not easy. Take this quiz to assess your investor knowledge.

What kind of investor are you? Download the worksheet

Caution: Social media investment trends
More people are using social media for news and investment advice. Use caution when following social media investment trends, such as meme stocks, as they can be unpredictable and involve investing strategies that are not suitable for you.

Alternatives for DIY investors: Robo-advisors

Tech savvy investors who want to pay lower fees may also want to consider using a robo-advisor. Robo-advisors are online investment platforms that offer a combination of personalized and DIY investment services. The fees are generally lower because investment recommendations are often generated by a computer through an algorithm, though some platforms offer a hybrid model that also includes advice from real people.

Tips for investors working with robo-advisors:

Even though the fees are generally lower, it is important to research the fees you pay when working with a robo-advisor.
When working with a robo-advisor, the platform may not be required to get your specific approval before each trade.
Remember to check that any robo-advisor you are considering is registered. Visit AreTheyRegistered.ca