Do-it-yourself versus Taking Professional Help
- M Manohar Rao
- Jul 8
- 4 min read
Tags: Wealth Management, Investment Lesson, Mutual Funds, Mutual Fund Basics, Stock market, Budget, Finance, Investing, Personal Finance, Investment, ETFs, SIP, Multi cap
As discussed earlier, investors need to invest money from time to time. These investments can be made in various financial instruments ranging from Government sponsored schemes to bank fixed deposits to company debentures to shares of companies or real estate properties of even precious metals like gold or silver.
One option is to manage the investments oneself. That would involve finding the right investments and carrying out the related research and administration work. The other option is to outsource the entire job to a professional or a company engaged in such a business.
A mutual fund is that second option – it is managed by a team of professionals, known as the asset management company. This is what really needs to be understood. By choosing to invest through mutual funds, one is not investing in alternative investment options, but only changing the way of investing money. The entire job of investing is outsourced to a professional firm.
So, the next logical question is: “Which of the two choices is better – investing oneself or taking professional help to manage my investments?”
This question should be broken down into three components:
1. Can one do the job oneself?
2. Does one want to do it?
3. Can one afford to outsource?
Can one do the job oneself?
This is the question about ability. In order to do a good job, there are a few requirements, viz., ability to do the job and the availability of time required for the same. There are tasks where one may not have the skills and knowledge, e.g., a history teacher may not be able to help her daughter to study Mathematics in the higher classes. At the same time, one may not have enough time required for the job.
In either case, one is unable to do manage money oneself and should consider outsourcing it.
Does one want to do it?
Even when one has the required skills and knowledge to manage one’s money, it is very likely that one may not enjoy money management–either the research and analysis or administration or accounting. At the same time, one may want to spend time on one’s main profession or on certain other activities, e.g., spending time with family and friends, pursuing hobbies, etc. That also means that one needs help in managing investments.
Can one afford to outsource?
There is some cost associated with mutual funds since the agencies involved need to be paid their professional fees. It is important to mention here that SEBI (the securities markets regulator) has issued guidelines on the maximum amount that can be charged to the fund.
Most people make the mistake of comparing these fees with zero cost of managing one’s own money oneself. By this comparison, the cost of a mutual fund always looks higher between the two options.
What is missed out in this comparison is the hidden costs of doing the investment management job on one’s own. This hidden cost comes in the form of one’s time and the potential mistakes that an individual investor is likely to make.
First, let us look at the cost of one’s time. Let us assume that a person generates the same investment returns as what a fund manager would have generated before the costs. Let us also assume that the cost of fund management is 2 percent p.a. This means if one is able to generate 12 percent p.a. by investing oneself, the mutual fund scheme would return 10 percent p.a. net of the fund management charges. On a portfolio of Rs. 10 lakhs, this amounts to a saving of roughly Rs. 20,000 for the year. Is it worth spending the amount of time one is required to spend for this saving? Please consider the amount of research one has to put in as well as the administration and accounting work. Someone may start thinking that this means investors with smaller portfolios should invest through mutual funds, but the bigger ones should not. This is where the concept of the value of time should be looked at. The value of time may be higher in the case of people with more wealth.
The second hidden cost comes in the form of the mistakes one is likely to make given the emotional attachment with one’s own finances.
For most investors, a mutual fund would turn out to be a better option than to build the portfolio oneself.
Disclaimer:
The information set out above is included for general information purposes only and is not exhaustive and does not constitute legal or tax advice. All complaints regarding Mutual Fund can be directed towards visit www.scores.gov.in (SEBI SCORES portal). Readers are requested to make informed investment decisions and consult Chaitanya Financial Consultants – 9000628943 / mfd.mmr@gmail.com to determine the financial implications with respect to investing in Mutual Funds.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Join WhatsApp group for better and personalised communication regarding investment lessons, advice and help.
Note: Members of our WhatsApp group will enjoy lifetime free investment advice and will not be charged any consultation fee for mutual fund investments.
Support My Mission – Your Small Contribution Matters!
I am passionate about sharing financial knowledge and guiding people toward financial independence. Through my articles, I strive to provide valuable insights that can help you make smarter investment decisions and secure your future.
If my work has added value to your financial journey, I would truly appreciate your support. A small contribution from you—whatever amount you feel is right—will go a long way in motivating me to continue creating high-quality content.
💰 You can support me via:
✔ Paytm / Google Pay / Amazon Pay: 9000628943
✔ PayPal: manomatt@rediffmail.com
Every small payment is not just financial support—it’s an encouragement that fuels my passion for educating and empowering others. Thank you for being a part of this journey! 🙏
Here’s your chance to earn extra money effortlessly. Simply refer someone to invest in any mutual fund scheme, and as soon as they invest, you'll receive ₹100 - ₹200 instantly in your bank account via Paytm or PhonePay. Start referring and start earning today!
Comments