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Self-Directed Investing

What is self-directed investing? 

Self directed or do-it-yourself (DIY) investing is a method of investing that puts you in full control of what you invest in and how you manage your investments. DIY investors are responsible for making their own investment plan, researching and placing trades, and monitoring and updating their portfolios without the help of an investment advisor. 

While there may be benefits to self-directed investing (such as the potential to pay lower fees), investing on your own requires careful planning and research. DIY investors must assume full responsibility for their investment choices and the outcomes of those decisions – good or bad.

Is DIY investing right for you?

DIY investing is better suited for individuals who have:

  • significant investment knowledge, 
  • strong self-discipline and emotional control, and 
  • the ability and willingness to put in the time needed to research the markets, products and companies.

Investors who underestimate the time and skills needed could be at risk of making ill-informed or impulsive decisions. 

If you are considering opening a self-directed investment account, here are some questions you should ask yourself: 

What is my level of investment knowledge? DIY investors must be comfortable evaluating investment products and managing their portfolio. Do you have the financial knowledge and experience to make an informed decision? Carefully consider the source of information you are given to make sure it’s reputable and not based on speculation. A suitable investment for one person may not be so for another. Protect yourself by taking time to understand the investment you are considering, the risk associated with it, and your goals.  

Do I understand my investing needs and goals? DIY investors must have a clear investment plan tailored to their personal and financial situation. Investing is not meant to be a “get rich quick” game and it’s not gambling. Investing involves understanding your needs and having a plan. Often investing is done with future goals in mind; they may be short-, medium- or long-term goals. Depending on your situation, goals could include saving for retirement, raising capital for a business, or preserving what you already have saved.  Having a solid understanding of your goals and your current financial situation will help you build a portfolio of investment products that are right for you. It can also help you stay on track when feeling tempted to make impulsive decisions based solely on trends. Each investing decision you make should be informed by your goals. Without a strong plan to guide you, you may find yourself making rash decisions or being influenced by friends or social media, letting your emotions get the better of you. 

Do I have enough time to research? DIY investors should do their own research into the investment products they buy as well as which discount brokerage, website or app to use. When buying shares of a company, a DIY investor should also research information about the company they’re considering investing in, such as the company’s financial position, performance, and risk exposure. When doing research, DIY investors should consider the credibility of the sources of information and avoid making investment decisions based only on hype. They should also take time to understand whether an investment suits their risk tolerance and beware of frauds and scams that seem too good to be true. 

What is my risk tolerance?  DIY investors should be disciplined and able to tolerate market ups and downs without making rash or emotional decisions. If you find yourself letting emotions take over during stressful or turbulent times, DIY investing may not be a good fit. Knowledge, time, resources, risk and emotions should all be considered when choosing to manage your own investments. Markets can be volatile, and many factors can impact the level of risk an investor is willing to take on. Learn more about types of investment risk you may be exposed to as an investor.

Am I just jumping on the latest investment trend? DIY Investing is gaining popularity – so before you jump in, make sure you’re choosing this approach for the right reasons, not because you’re feeling pressure or FOMO to jump in on a trend. Managing your own investments can have its advantages, such as the potential for lower fees, the opportunity for hands-on experience and the chance to invest in businesses that interest you. However, it’s not the right approach for everyone. Without the proper knowledge, you may find yourself in a situation you weren’t prepared for – financially or emotionally. 

Getting Started with DIY accounts 

If you decide DIY investing is right for you, you will need to open an account. Online brokerages and financial institutions offer options for opening a self-directed investing account. You can open a registered account – such as a TFSA, RRSP, RESP, or RDSP – or an unregistered account. 

Working with an Advisor 

If, after careful consideration, you don’t think DIY investing is right for you, you can turn to professionals who can help you plan and manage your investment portfolio. Investment advisors can help you set financial goals, build a long-term plan, choose suitable investments, track progress, and adjust your investment plan when needed. If you prefer an online approach, online investment advisors (also called robo-advisors) are a hybrid model combining human advisors and automated online platforms that provide investment advice based on algorithms and information you provide about your financial situation and goals. Learn more about​​​​​​​ Working with an Advisor and Robo-Advisors