Scoring Breakdown
Are you really a good DIY Investor?
Personality and Opportunity Cost Edition
1. Do you love investing and do you find it to be an enjoyable hobby, or do you DIY invest to save fees?
A. Yes. 30 Points
If you do not enjoy investing, or find it stressful, then you should consider paying someone to do it on your behalf.
2. Would you honestly say that you find investing and trading to be addictive? Be honest, this is super important.
A. Yes, you find it addictive. –30 points
If you find it addictive, you probably need to stop and hire someone. There is a good chance you are trading too much, and investing for the high, not as a hobby.
3. Are you proactive? Do you do everything that you are supposed to do from a financial planning perspective?
A. Yes, you are proactive. 20 points
It is absolutely crucial to handle everything you need to right away, and pay yourself first. If you procrastinate on your savings goals, you should hire someone to help you with this.
4. Do you feel that you understand the Canadian Tax system well?
A. you understand the tax system well. 20 points
If you don’t understand how RRSPs, TFSAs, RESPs work etc. you will never do a better job than a CFP. The exception is very small accounts that don’t need strategic tax shelter management. For instance, you are low income and you just have a TFSA. In this case, give yourself 10 points.
5. Do you work in a job with variable pay? In other words, if you work harder, do you have a chance to make more money/commissions, collect a higher bonus, or have a better chance for promotion?
A. No, I don’t have variable pay. 20 points
B. Yes, I have variable pay. –10 points for personal income over $200k, –20 points for income over $200k. If you have an income over $500k a year, you need to love investing for it to make sense. All the other questions are moot, besides 1 and 5.
The more money you make per hour, and the more variable your pay is, the less the investor will gain from a DIY approach. If you make $300/hr, and spend 20 hours a year on your investment plan (and could work those extra hours making money), you are foregoing $6000 to manage your investment/financial plan. This is assuming, of course, that you will manage your plan perfectly and proactively, like a proper financial planning team would.
