Thursday, 27 January 2011

Why DIY?

Why should you Do It Yourself?
If you have any doubts about the DIY approach, ask yourself the following questions:
  • Who do I trust most?
  • Who is going to act in my best interest?
  • How does a Financial Advisor / Investment Broker / Insurance Salesman (etc.) make his money?

 Enough said?
If you still need convincing - the level of commissions paid on all sorts of financial product is a scandal. Plus the level of advice given can be atrocious. For example, you can't always trust wealth managers as much as you should.

OK - you may not be 100% confident or even fully know how to go about things - but this can be resolved with the right information and some of your time and effort. I can guarantee that it will be time well spent.

The starting point is to find your level of expertise and comfort zone. I'll assume that everyone has (at least) a traditional current bank account and a computer linked to the internet which has some basic spreadsheet software. 

The 'stepping stones' to becoming a DIY Income Investor are as follows:
  • an online bank current account: the basic step up to managing your money more efficiently
  • an online savings account/accounts (it doesn't actually have to be 'on-line' but it makes things easier to manage)
  • an online low-cost brokerage account or retirement savings account

The 'products' that I'll cover are pretty simple (I'll be posting more about these later):
  • savings accounts, including 'easy access' as well as no-access, fixed-rate savings bonds
  • Exchange Traded Funds or ETFs
  • government bonds or 'gilts'
  • company shares (we'll be sticking with the biggest - and hopefully safest - companies)
  • corporate bonds and other fixed-income securities
And that's it. I'll be covering all these topics in more detail in later blogs.

Update: if you still believe the advertising hype of the financial industry, read this article by This is Money. And this on the hidden fees charged by the fund managers - The Daily Telegraph found in 2010 that £7.3 billion was being “skimmed off” annually by City bankers and fund managers in hidden fees. 

I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top to ensure that it's right for your specific circumstances.


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