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The dangers of DIY finance

 Independent financial advice can end up saving you more than it costs, as managing your own money takes time and effort, and the market can be ruthless for the untrained In the internet age, financial literacy is an option for anyone.

This makes DIY finance – organising your own investments, savings and pension – a tempting prospect. Be warned, however, that a little knowledge is a dangerous thing. Online guidance is not meant to replace professional financial advice, and could do more harm than good. That said, if you’re still tempted to give DIY finance a try, there are a few things to think about before taking the plunge.

Thinking vs feeling

Emotional investment patterns are a real danger when managing your own finances. The sunk cost fallacy means you’re unlikely to abandon bad investments quickly enough, while impulsive investments and panic selling are difficult to avoid when there’s a fear of missing out. Professional advisors know how to read the market to make efficient decisions.

Three heads are better than one

For couples, equal knowledge is another consideration. A financial advisor can keep both partners abridged of their financial situation, and can support one partner should the other one die. When it comes to DIY finance, however, one partner is typically more involved, creating a risk of confusion should the other be left widowed.

The value of time

One of the most important considerations is how much you value your time. You’ll save money by not hiring a financial advisor, but you’ll have to put in significant hours researching and managing your finances by yourself. Everyone’s time is worth something, so make sure DIY finance doesn’t end up costing you more than professional advice ever could.  


Reader’s Digest have partnered with pension and investment experts Flying Colours to help provide you with the most appropriate advice for your circumstances.

Have a question?

Flying Colours is committed to making advice more accessible and understandable for UK investors, and CEO Guy Myles answers your general advice questions in his reader newsletter - the Advice Guy @ FlyingColours.

Have a question for Guy? Email: AdviceGuy@flyingcolourswealth.com; or Call 0333 241 9919. To learn more about our pensions experts, please visit Flyingcolourswealth.com.


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