Deciding To Manage Your Own Stock Portfolio

There was a point in time (back in college) when I thought that in order to invest successfully and really build wealth; you had to be a professional. I was convinced, as you might be right now, that the guys who made real money in the markets were the ones that understood everything about these companies. Those guys would dissect a company and try to find hidden value. They would study the business practices of a corporation to see where their competitive advantage exists. That is what every mutual fund advertised and that is what I believed.

This was my primary reason for investing solely in mutual funds for so many years. I figured that financial portfolio management was better left to professionals with a college degree in finance, accounting or an MBA. Since then, I have discovered this to be complete bullshit. The fat cats on Wall Street want us all to believe that there is some kind of secret knowledge you need to become a successful investor. It is in their best interest to have you believe that.

If you think you are incapable of managing your own investments, you will willingly pay some fund manager hundreds or even thousands of dollars every year to manage that money for you. That’s all fine and dandy if that is what you choose to believe. I choose to believe in my own ability. Over the years, I have kept my eyes open constantly looking for new profitable business opportunities that I can buy into so I can grow that fragile nest egg.

What I discovered is that there are very few other business opportunities in life that return more compound interest than teaching yourself about managing your own money. Think about it. Think about all the money you earn every year in interest in your accounts now. What if you could boost your returns by another 3 or 4 or 5 percent? How much more money would you make every year? What if that extra money was in a retirement account that grows tax free or tax deferred? Now how much extra would you be making?

Anyone who has as little as $10,000 invested for retirement should really spend the time necessary to educate themselves about finances and investments. Not doing so is almost criminally lazy in my opinion. There is just way too much extra money you could be making. After you have really studied it, if you feel you would rather trust someone else to manage it for you, then go ahead. At least at that point you have consciously decided to forgo the extra returns just to relieve the responsibility of building wealth for yourself.

Investing your whole nest egg by yourself does take some guts. It takes a few years before you really learn what emotional triggers to watch out for. It is easy to imagine being good at it, but there is nothing like actually doing it with real money. I suggest you start with a small percentage of your portfolio. Once you feel adequately educated, build your self confidence slowly over time by investing that money yourself. You can open a brokerage account online with Scottrade, Etrade or Ameritrade. They all charge much lower commissions than a typical full service broker you will find locally.

Study what other successful investors have done. I firmly believe that as educated individual investor can outperform 80% of professional managers. That’s not because you know more than they do. It is because you’ll be managing a much smaller account than those guys do. It is a lot easier to manage an account less than a billion dollars. They guy who manages a billion dollars moves the market himself when he buys and sells. When one stock starts to go against him, it is not easy for him to get out. For you, it will be very easy. Just sell it all at once. The fund manager can’t always do that. If he tried to do that, he would single handedly drive the price way down and suffer even greater losses.

You don’t need to be the next Warren Buffet in order to be an extremely successful investor. There are plenty of us out there that can’t hold a candle to him but still do just fine. Everything is relative. It depends on what goals you set for yourself. It depends much more on your determination and willingness to study the material enough. Enough studying and application of your learned knowledge will virtually guarantee you success.

Don’t believe all the bullshit you hear from so called professionals. If you’ve got a set of balls and some common sense, you can be a successful investor. You don’t need to pay ridiculous commissions to do it either.