Self-investment, also known as ‘Do It Yourself’ (DIY) Investing, is a way of trading in which you make all the decisions about what to buy and sell and when to do it. In other words, you don’t have to rely on someone else’s opinion or expertise, which can be good, as you’re in control of your investments. But it also means you’re solely responsible for any losses you might incur.
What are the benefits of self-investment?
There are many benefits to self-investing, including but not limited to the below:
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Save money on fees
The most apparent benefit of self-investment is that you can save money on fees. Those fees can eat into your profits if you’re paying someone else to manage your investments. With DIY investing, there are no management fees.
Tailored investment strategy
Another benefit of self-investing is that you can tailor your trading strategies to suit your goals and risk tolerance. If you like to be in control when trading, DIY investing may be right for you.
High liquidity
High liquidity is not inherent in all self-investments, but as someone who is in complete charge of your own investments, you can choose to only invest in products and asset classes that are very liquid. An example is forex trading—traders with full control of their own portfolios can only trade major currency pairs, for example.
Sense of achievement
Finally, self-investing can provide satisfaction and achievement from knowing that you’re solely responsible for your investment success (or failure). When you do well, no one else can share the glory. But when things go wrong, at least you know it was your own decision – and you can learn from it.
What are the risks of self-investment?
There are also several risks associated with self-investing. The most obvious is that you could lose money if your investment decisions are unsuccessful. Another risk is that you may not have access to the same level of research and information as professional investors, which means you could make bad decisions simply because you don’t have all the facts, institutional support, or professional exposure.
Another risk is that you could become too emotionally attached to your investments, leading to irrational decision-making, such as holding onto a losing investment for too long in the hope that it will recover.
Strategies for self-investments
If you’re thinking of self-investing, there are a few things you should do first. Firstly, make sure you understand all the risks involved. Remember that you could lose money, so don’t invest more than you can afford to lose.
Secondly, always do your research. Ensure you understand the investment products you’re interested in and the companies behind them. Use reliable sources of information, such as annual reports, official company websites, and news articles from reputable media outlets when you make trading decisions.
Finally, develop a well-thought-out investment strategy considering your goals, risk tolerance and time frame. And be sure to review your strategy regularly to ensure it’s still on track.
Self-investment considerations across asset classes
The most important thing is to be aware of the differences between asset classes when self-investing.
For example, when trading stocks, you need to take note of unique trading times around the world, and the fact that some stocks are only listed and therefore available for trading on certain exchanges.
When trading the foreign exchange market, or forex, investors can also self-invest their trades. The forex market is a decentralised global marketplace where all world’s currencies trade, and the leading players are large international banks.
Financial institutions and central banks play an essential role, but many commercial companies, hedge funds, and other investors are interested in forex trading. Individual investors can trade through brokers who provide access to the interbank market.
The bottom line
Is self-investing right for you? There’s no easy answer to this question. It depends on your circumstances and goals. If you’re comfortable making your investment and trading decisions and are willing to accept the risks, then self-investing could be a good option. But if you’re unsure about taking on that responsibility or don’t have the time to research your investment choices, then it might be better to leave it to the professionals like Saxo Bank.
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