The cost of DIY investing every attorney should know

The DIY (do-it-yourself) trend is nothing new. Whether it’s wedding décor, home improvement, or teacher appreciation gifts, DIY projects can provide money-saving satisfaction.

However, certain aspects of life shouldn’t be handled as a DIY project. You could end up with disastrous results that cost far more than you save. Investing is one great example of a project you can’t afford to DIY.

Don’t Wealth Management Services Cost Money?

Saving money is one of the top reasons that lawyers turn to DIY investing. However, as with any single investment, you have to put in the capital to earn more money. Of course, professional wealth management services cost money, but viewing this as an investment rather than an expense can clarify what you’re getting out of working with a professional. You are paying cash upfront or an ongoing fee in order to have a greater potential for reward and simultaneously minimizing your risk.

Investment Options

Most people know that savings accounts, money market accounts, brokerage accounts, and 401(k)s are options for investing. Many DIYers use these accounts. They can make money doing so, but are they making as much as they could be if they were using the services of a wealth management professional? For most, the answer is a resounding no. There are dozens of other options that you can use to grow your investments, but if you don’t know about them or how they work, you’re missing out.

Missed Investment Opportunities

With DIY investing, you could also miss out on many excellent opportunities simply because you don’t know about them. Wealth management professionals stay abreast of changes in investments and unique opportunities that might help their clients. When it comes to DIY investing, what you don’t know can hurt you.

Potential Tangible Losses

Common mistakes made by DIY investors lead to tangible losses, some of them significant. They could be avoided by hiring wealth management professionals. Consider the recent pandemic and other world events outside of your control. Having a trusted person to turn to can make things much easier in the midst of a crisis.

What Happens if You Have Too Much or Too Little in Your Savings Account?

When you keep funds in a savings account — even a high-yield account, over time, you will miss out on earning better returns on your funds and growing it by investing. Additionally, if you exceed the $250,000 limit set by the Federal Deposit Insurance Corporation (FDIC), there’s a risk you could lose some of it.

Typical savings accounts are insured up to $250,000 per account holder for each account. Still, any amounts above that aren’t guaranteed to be reimbursed if something happens like a bank collapse. By keeping too much money in a savings account, not only are you missing other investment opportunities, but you could also be at risk of losing some of your money.

If you keep only a small amount of money in your savings account:

• You won’t have money to draw from in emergencies—experts recommend keeping 3-6 months’ worth of expenses in a savings account for easy access.
• You could be charged banking fees by not meeting the minimum balance requirements/

Are You Prepared for the Inevitable Market Corrections?

It’s impossible to know when market corrections will occur. However, it’s essential to be prepared for them. The best thing you can do to prepare is to have a comprehensive financial plan, which includes a properly diversified investment portfolio. Such a portfolio will help mitigate temporary asset changes. Wealth management companies can help you do this.

What if You Make Investment Decisions Based on Fads?

There are always fads and “hot stocks” that people are talking about. If you’re a DIYer, how do you know if what you are being offered is something of value or just a passing trend? Without a financial advisor, it can be tough to tell. Many times, making investment decisions on the latest fads ends up costing money.

What if You Fail to Consider Future Taxes and Changing Tax Laws?

The federal government has many tax laws that investors must abide by, and they are constantly changing. If you don’t have a plan to pay future taxes or stay up to date with tax laws and adjust your investments accordingly, you could lose money.

What if You Don’t Account for Cost-of-Living Adjustments?

As the cost of living increases, your investment returns won’t go as far. For example, suppose a high-yield savings account nets a one percent return and inflation averages near three percent. In that case, you’re not keeping up with the cost of living (inflation). Over time, your cash loses its purchasing power and value. By working with a financial advisor, you can avoid investments that are risky as inflation occurs.

Hire a Wealth Management Service

As a professional, you work hard for your money, but it’s also your job to make your money work for you. Avoid DIY investing and hire a wealth management service to maximize your investment returns. In the long run, working with professionals will cost you less than going it alone.

Mark Candler and Dave Owens of Maia Wealth are go-to wealth advisers for lawyers and law firms in Colorado. Specializing in debt reduction, investment management, retirement efficiency, and legacy planning, Mark Candler and Dave Owens are trusted professionals for attorney-focused wealth management strategies in the Denver metro area.