Should You DIY or Let the Professionals Do It for You?

By Ho Kok Mun

If you have decided to invest in stocks, should you buy them yourself, or should you let the professionals do it for you via mutual funds? 

A mutual fund (also known as unit trust) is a financial intermediary that allows a group of investors to pool their money together under a fund house with a predetermined investment objective. The fund house uses the money to purchase stocks. Some invest in growing companies; some invest in defensive stocks; some buy banking stocks; some trade in foreign markets. 

The following are the 3 main points you must be aware of when you buy mutual funds or unit trusts:

1. The fund houses will decide what stock to buy or to sell. They are supposed to do the research and analysis. They are managing money belonging to others apart from yours. They do not do it for free. That is the reason you pay entry fee (5% to 6% in Malaysia) and indirect fees (about 2% for annual management fee, trustee fee or financial planning fee). Thus, to make money for you, the fund manager must get a return higher than his fees charged to you. 

2. Your fund managers will attend Annual General Meeting (AGM) held by the company, not you. 

3. The fund house will receive dividends directly from the company in which your funds are invested. 

Then the key difference between doing the investing yourself and letting others invest for you depends on your motivation and risk tolerance. If you are motivated to control your own destiny, you should have a higher risk tolerance. You should also have the motivation to learn to invest. 

In fact, if you prefer someone else doing it for you, then you can consider investing via mutual funds.  

However, you should never complain if that fund does not give you the returns you have been expecting and you should not complain if others make more money than you from the stock market directly. 

Do not pay “stock guru” monthly fee to let his tips influence your decision. Do not pay “stock investment guru” for software subscription fee and let the software make decision for you. Control your own destiny.

Learn yourself rather than giving your money to somebody else to invest for you.

Learn yourself rather than giving your money to somebody else to invest for you. If you are passive, you may need to wait at least 10 years to know whether the mutual fund or your advisor has done a good job for you. By then, you have lost 10 years. 

How to Make Money From Your Stock Investment Even In A Falling Market:

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