There are probably a hundred different reasons why you would want to build your own ETF portfolio but I think there are 5 main benefits that by themselves are important enough for you to take action. A reminder, you can get a step by step action plan to set it up by subscribing to our email list, it is free!
Without further wait, here are the 5 main benefits:
#1-Savings – 1% annually or perhaps a bit more can sound insignificant but if you take into account the time period and compounding effect, it becomes an amount that will have a dramatic impact on the lifestyle that you will be able afford later on in life. A few more trips every year, less stress, more to give out to kids, etc. That all looks to me like it’s worth the time investment, no?
#2-Transparency – Would you be surprised if I told you that the vast majority of investors have no idea what they own, how market volatility impacts them, how much fees they are paying, etc! It’s amazing but true. One of the most important aspects of our lives that influences every other thing left out to a stranger. I think knowing what you own, what to expect, how world events impact your future lifestyle, etc. These are all critical things for every investor to know. Honestly, it’s not rocket science even though it might sometimes seem that way. What we preach is systematic, clear methods that will help you know exactly what is going on.
#3-Flexibility – If you work hard, save and invest money, shouldn’t you have the flexibility of doing whatever you want with that money? Most financial advisers put their client money in mutual funds which means that funds can be locked there for years (in order to avoid big penalties) which takes away alternatives for changes in asset allocation, or to withdraw money for any given reason (sickness, special project, etc). ETF’s make it easy to change within a blink of an eye. As well, being able to make changes without reaching your IA, discussing, etc will save you headaches. Of course, it also means that investors must be disciplined.
#4- Much Easier Than You Would Think: it seems like such a complex world but if you are systematic and use a simple method like the step by step method in our free newsletter. Almost everyone makes finances much more complex than it needs to be. Studies have shown that a simple portfolio with less than 10 ETF’s can be used as efficiently as almost any other portfolio. Remember that the goal is index/passive investing. It’s not sexy or complex but it works year after year, that’s the main thing right? You can trade once or twice per year initially and review things weekly or monthly, as you wish. Why does everyone like to make it look so complex? I think one big reason is that the more it looks that way, the less investors tend to get involved. Absent investors ask less questions, do not challenge as much and will not notice errors, high management fees or improper trading among other things. Everyone involved wins if that happens, everyone except the investor that is.
#5- Your Portfolio Becomes The Priority: No offense but I think it’s safe to say that your portfolio is probably not the biggest that your financial adviser works on. In fact, it’s one of thousands that he looks over. I understand that he has knowledge and skills but if you figure out how much time he can actually spend looking at each portfolio, you will quickly understand how little your portfolio “matters”. Great portfolio managers will be able to take a look quickly and figure out how things look but even those will not have enough time to truly see what is going on in your life, what adjustments need to be made, etc. I think that YOU are the best person to pay the proper amount of attention to your holdings, your projects and make adjustments as you go, instead of waiting for your annual meeting and hoping that your portfolio is actually properly reviewed according to your new circumstances.
There are many other benefits to building and managing your own ETF portfolio but I hope that even a few of these are enough to convince you. That being said, there are certainly downsides and you can read about them here.