With the ability to trade ETFs cheaply and efficiently, a growing number of investors are weighing the pros and cons of managing their own wealth. Does it make sense to hire a portfolio manager to manage all or a portion of your ETF portfolio? Or is this something you can successfully manage by yourself?
We undertook an in-depth analysis on this trend before publishing an eBook, The ETF Investing Revolution, which explores three approaches to ETF portfolio management.
What leads investors to consider self-directing or professional investment management?
Factors can range from financial to personal.
Cost is a major consideration for the self-directed investor, whether passive or active. They wonder whether it’s worth paying a fee for professional management, because it could potentially lower their rate of return.
Additionally, self-directed passive investors often have no desire for outside assistance and the “noise” that investment management can create.
At the other end of the spectrum, investors seeking professional investment management may want to remove themselves from the day-to-day involvement in financial decision-making. It is a major act of faith placing your confidence and capital with a professional investment manager and be assured that the manager is acting in your best interests.
Here are 10 essential steps that will help you make the decision:
* Step 1:Identify your investor type
* Step 2:Evaluate your ability to manage risk
* Step 3:Establish your income and growth goals
* Step 4:Design an investment strategy
* Step 5:Manage the ongoing risk in your portfolio
* Step 6:Confirm your investment management style
* Step 7:Select specific ETFs for your portfolio
* Step 8:Ensure your portfolio is diversified
* Step 9:Monitor your ongoing portfolio
* Step 10:Measure the cost and benefit of self-directed versus professional management
Before you decide whether you have what it takes to manage your own ETF portfolio or whether it makes more sense to have a professional advisor do this for you, we recommend that you perform due diligence on your own investment skills. Do you have both the hard and soft skills to manage wealth that was hard earned and of vital importance to your well being?
Courtesy Fundata Canada Inc. ©2015. Tim Morton and James Morton are Investment Advisors and Portfolio Managers with CIBC Wood Gundy in Toronto. The Morton Group provides private wealth management for high net worth Canadian investors, trusts, IPPs and endowments. This article first appeared in the Spring 2014 issue of Your Guide to ETF Investing, published by Brights Roberts Inc. Reprinted with permission. This article is not intended as personalized advice.
