I am very much a forged handyman. I enjoy tinkering, fixing, and building various things around my house as well as for any unsuspecting friend that asks for my assistance. I believe it started when I was younger when I was moving items from one room to another. I was carrying our beloved VCR to its new station when it slipped from my hands and broke. I don’t know if my dad was trying to punish me or teach me a lesson, but I do know that he told me it was my job to fix it.
I did indeed fix it. You might’ve had to press the record button to eject the tape, but it did its primary job of playing videos rented from Blockbuster without eating them. Now with Google and YouTube, I’m able to spot when I’m in over my head much faster (unlike the time I tried to replace a timing belt in a car, which is a story for another day).
Robinhood’s Do-It-Yourself Attitude
There has been a new trend of people who have begun to look into stocks on their Robinhood account, telling me all about their latest stock picks. Sometimes the news comes in confession form, as they feel guilty for not putting the account in with me. Honestly, I can appreciate the do-it-yourself attitude, and most of the time with a small account size (a couple of thousand dollars) it’s more cost-effective through a site like Robinhood or Schwab. On the other hand, as a financial advisor, I see something wonderful bubbling below the surface: its active curiosity.
The Curiosity In Stocks
I spoke about the trend of stock curiosity with our portfolio manager Chris Hammond on our radio program/podcast. This active curiosity is driving people to open accounts and learn things about the markets that they’ve never known. I believe that as a society we are so fraught with cash that we understand the need and importance of money, but don’t involve ourselves with basic economics.
By researching different companies and experiencing market cycles, I see people getting more involved in their investments. It gives them a sharper eye and keeps them more involved in their investments. In this way, I believe that an educated investor is rarely a negative thing.
Often, I hope that these small trading accounts have the same result that fantasy football had with the NFL. It brought people from the fringe to be an enthusiast. People who saw a quarterback as cash register action can now name the current starter for every team. On the other hand, unlike fantasy football, the market comes with lasting risks and is not a binary outcome.
Market Volatility and DIY Investing
Markets fall as easily as they rise, and money can be lost in investments. That statement seems elementary, but emotions get in the way when money is involved. I would encourage any investor to understand what they are investing in. Is this a company that you truly believe in and understand what they do?
The market saw a big pop earlier this year on several companies as they were going bankrupt. Hopefully, we don’t see a long-term future for a company that will soon have no value. This same encouragement would stand for investments off the beaten path.
When oil prices crashed earlier this year there were many investors that rushed out to buy oil futures ETFs thinking that they were buying actual oil. This backfired because there was a lack of understanding of what was actually being sold. Investments like this were never meant to be a long-term hold and many investment professionals don’t fully understand the metrics involved in pricing this asset.
Understanding the Investment
DIY investors often forget that there is a difference between an investment and a lottery ticket. So when venturing out to DIY a portion of your portfolio, ask yourself if the goal is to “get rich quick” or to invest in a worthwhile asset in hopes of a return. Do research, ask questions, and keep a watchful eye for opportunities and risks.
Hopefully, it’s evident that I believe in the value of an advisor to keep the plan and the primary source of investments on track. Nonetheless, I think that we should be on-the-learn all of the time. This means reaching out to professionals for financial advice as it is a way of teaching that DIY reading and hearing just can’t do. If you’re my client (or would like to be) I’m here to help and serve.
January 2021
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
No strategy assures success or protects against loss. Investing involves risk including loss of principal.
ETFs trade like stocks, are subject to investment risk, fluctuate in market value, and may trade at prices above or below the ETF’s net asset value (NAV). Upon redemption, the value of fund shares may be worth more or less than their original cost. ETFs carry additional risks such as not being diversified, possible trading halts, and index tracking errors.
Robinhood and Schwab are not affiliated with or endorsed by Allen & Co or LPL Financial.
