Advised vs. Unadvised Returns Or Why DIY Investing Is the Financial Equivalent of Cutting Your Own Bangs

I generally like going to parties. I like to think I’m a fun addition to a party. Almost every time, I’m approached by someone (almost ALWAYS male) who proudly announces to me that they’ve “crushed the market” by buying a stock their cousin’s barber’s mechanic recommended. I usually pause to take a sip of my drink because they will, eventually, tell me exactly what stock it was, when they bought it, how much they bought it for, how much they sold it for, and neglect to talk about taxation or monies they’ve lost in other similar endeavours or panic-selling during temporary market dips. I listen if I can tolerate, then sneak away for a “bathroom break.”

Investing is not for the faint of heart and can be an emotional rollercoaster even WITH an advisor you know and trust. Investing without advice is the adult version of a Choose-Your-Own-Adventure novel, written by chaos. This often leads to buying high (because the group chat said “TO THE MOON”), selling low (because they panicked), holding stocks that have no business in their portfolio, and absolutely refusing to admit that the problem is personal and not market-based.

In theory, unadvised investors want to “beat the market.” In practice, they’re beating their portfolio like it owes them money. Unadvised investors typically underperform the market…not because they’re dumb, but because they’re human. Humans have emotions, markets don’t care.

Working with a financial advisor (I know, I know…fees) is basically like having a personal trainer for your money. We are there to help you plan, have accountability, and talk you out of panic-selling everything because the “Fed” said something on TV that you half-listened to while getting your kids out the door. We also tend to help clients stay invested through volatility, instead of reacting like a toddler (or Pomeranian) denied a snack. As a result, their returns are usually higher. Not because financial advisors are market wizards, but we can help clients from making anxiety-driven decisions that can self-destruct even the best-planned portfolios. Advised investing is basically, “Stop touching it, it’s fine.”

There’s an actual name for the difference between what the market returns and what the average DIY investor returns and it’s called the “Behaviour Gap.” It’s caused by impulsive decisions, fear, FOMO, bad timing and listening to Chad from the gym. Intuition is often an emotional reaction wrapped up in confidence, and best avoided. Advisors don’t eliminate RISK, they eliminate emotional decision-making, which is probably one of the biggest risks of all.

The worst part is that, if you ask unadvised investors how they’re doing, 97% will say, “I’m up huge!” Are they? We don’t know. They don’t track anything. They FEEL like they are up. Considerations around taxation, future projections for retirement planning, insurance, estate planning and the like are ignored. This is dangerous to your long-term financial future, much like cutting your own bangs is dangerous but in a completely different way, with much more long-term consequences.

In my 21 years of experience, unadvised investors tend to stress more, regret more, and have a portfolio that behaves like it needs therapy.

Advised returns are the result of discipline, structure, a long-term plan, and someone stopping you from YOLO’ing your entire portfolio into a semiconductor stock at its all-time high (if this comment hurts, it’s for you!).

In short, unadvised investing is entertainment. Advised investing is wealth. Pick your hobby wisely. To a good financial future!