Which type of investor are you?

Much like tackling a home renovation, the best way to approach your investments depends on how hands on you want to be.

DIY has become a bit of a thing in Australia. Driven by reality TV shows, anything seems possible – particularly if you have a can-do attitude and some time on your hands.

So what about investing? Do you try and make all your big financial decisions yourself? Or would you rather seek advice from a professional?

The best approach for you will come down to your level of experience, your desire to learn, and the amount of time you have to dedicate to the cause.

Here are the four main options.

1. Do it yourself

If you like to be personally in control of your finances, you may be very comfortable doing all of your own research and designing your investment strategy yourself.

If you are going down this path you will need to:

  • define what you want to achieve from your investments and what your timeframe is.
  • research the types of investments that will help meet your goals (eg cash, fixed interest, shares and property), taking into account their expected level of risk and return (see chart below and check out our article on asset classes for more information).
  • work out roughly how much you want to put into each type of investment.
  • pick the investments for each asset class that you’ve identified should be included in your investment strategy.
  • stay connected with market movements and economic updates and be prepared to act if required.


Asset classes - the risk and return trade off


A graph displaying the risk and return for specified asset classes

Source: ANZ Global Wealth 2014

2. One-off advice

If you essentially want to manage your own investments, but you’d like a hand getting started, you can get one-off advice from a financial planner or investment specialist.

They will usually start by helping you to define your goals and your attitude towards risk. They will then recommend a mix of investments that suits your needs. The one-off fee for this recommendation can vary from $220 - $1,650 for simple advice and up to around $4,400 for complex advice.

Getting one-off advice like this can be a good way to build your knowledge, understand your options and define a strategy to start you off.

After that, it’s up to you to keep an eye on things and make sure your investments continue to meet your goals.

3. Ongoing advice

If you want more support on an ongoing basis, you may want to enter an ongoing advice arrangement with a financial adviser.

Like one-off advice, this process starts with your adviser helping you define your goals and recommending a mix of investments that suit your needs.

The difference here is that you generally pay your adviser a regular service fee to monitor your investments, review your circumstances as they change and recommend adjustments to your investments if appropriate.

4. Portfolio management

If you’re comfortable allowing a trusted professional to make investment decisions for you, you could consider a portfolio management arrangement.

In this case, you and your portfolio manager agree on your goals and investment strategy, as you would with ongoing advice. The difference is that your portfolio manager makes day-to-day investment decisions on your behalf, based on your agreed approach.

This approach generally involves a larger number of transactions (e.g. buying and selling shares) than ongoing financial advice. As a result, fees and transaction costs may be higher with a portfolio manager.

Top 3 tips

  1. Establish your goals before you invest
  2. Make sure you understand and accept the risks
  3. Think of investing as a 5 to10 year proposition at least – the longer the better