In so many aspects of life, the internet has given us the tools to take matters into our own hands. Whether you’d like to find the love of your life or fix a leaky tap, the digital world might be the place to look. The same is true for personal finance.
The world of investment is no longer limited to a small group of cognoscenti. It’s undeniable that new technologies and platforms have levelled the investing playing field, enabling a saver who historically would have just kept cash in the bank to invest without consulting a financial adviser. So what’s attracting people to go down the self-directed route?
DIY investors typically create and manage their own investment portfolios, as opposed to going to a traditional broker or money manager. The barriers to entry are low, as many online investment platforms have a threshold of only £25 or £50 a month for people to start investing.
It’s not surprising the market of online investment platforms has doubled from £250 billion to £500 billion assets under administration between 2013 and 2017, with 2.2 million more customer accounts opened, according to the Financial Conduct Authority.
The two main reasons why people become DIY investors are cost and control. “As adviser commissions have been banned and replaced with more explicit fees, financial advice is increasingly a luxury for those with over £100,000,” says Holly Mackay of personal finance website Boring Money.
Financial advice can cost anything from £50 to £250 an hour. And if you leave your investment management to others, there is a charge, which is likely to be an initial fee of between 1 and 3 per cent and an ongoing charge of between 0.25 and 1 per cent of your assets invested, according to consumer association Which?
Those who go down the DIY route will often invest in funds or trusts, which are like baskets of shares managed by a professional, rather than the individual shares of companies. This makes investing much easier. It’s also…