DIY or do-it-yourself is common for home improvement, (some) car maintenance, and lawn care. It is not so common for surgery, legal matters, or dentistry. Why? The skills needed for the former are far easier to develop than the skills for the latter activities. In last week’s blog, I discussed a book that tells Millennials how to be their own investment advisors. If one can follow all of the steps in Dr. Bernstein’s book, and does all of his “homework” assignments, one may have the knowledge to manage their own retirement plan. The big question after that is: Do you have the emotional temperament to manage your own investments? Many people do not.
When you look at how successfully people manage their retirement investments, Dr. Bernstein’s claim that you can be a successful DIY financial advisor doesn’t stand up to reality. Most people are ill-equipped to manage their own investments and save for a comfortable retirement without professional guidance. What is the value of that guidance? In a recent article by Anne Tergesen she notes that “Between 2006 and 2012, participants in 401(k) plans who paid extra for advice earned an average of 3.32 percentage points more per year, after fees, than those taking do-it-yourself approach. If continued over 20 years, that annual performance edge would boost retirement wealth by 79%…”