We’re big fans of The Investment Answer by Daniel C. Goldie and Gordon S. Murray and thought it would be helpful to highlight some of their fantastic guidance chapter by chapter.  So here goes, chapter one: The Do-It-Yourself Decision.

According to The Investment Answer, Do-It-Yourself (DIY), is best done with a professional by your side.  As they wisely point out, most people would never make serious medical decisions without consulting a doctor and they think financial health should be treated the same way — with the appropriate professionals by your side.  A quick rundown of the chapter:

• the average stock fund investor barely beats inflation and the average bond investor barely grows their money at all

• the emotional cycle of investing undermines our best intentions (see our post from October 22 for more on emotional investing)

• many financial institutions still take far too big of a cut as you move your money from one hyped investment to another

• avoid retail brokers whose first duty is to their firm, not you, and every trade or stock top offered to you generates commissions for them

• independent, fee-only advisors are the best option; they are not on commission or compensated for moving your money back and forth between investments; rather, their fee is calculated as a percentage of the money they are managing for you

• an independent, fee-only advisor should use a third-party custodian (like Charles Schwab or Fidelity) to serve as the safe keepers of your investments

Questions?  Please email us.  For more about the book, go here.  And stay tuned for chapter two.