Anyone who is self employed and does not participate in a company retirement plan will be setting up a self directed retirement plan. Self directed retirement plans are very popular with many people. They feel that they can do a better job than many financial advisers who are just interested in generating more commissions.
The reality is that it is very difficult to do well. Advisers are well schooled in risk analysis, reading financial reports etc.. They cannot predict how the market is going to react any better than anyone else.. The vast majority of advisers are order takers. They promote diversity and re-balancing of your plan to ensure that your risk profile is maintained. These are good things to do, make no mistake. However they are not something that the average investor cannot follow as well.
Self-directed retirement plans – Get Involved
This investor feels that consumers should take the best of both situations. Use an adviser and listen to what they have to say and recommend. Do your own analysis and make your own decisions and be wary of advisers who are pushing a lot of sales so they can generate more commissions. I once had an adviser who admitted to me that he needed a few more sales to achieve a bonus level that would allow him to go on a trip paid for by his company. This was such a turnoff for me that I almost walked out of his office. Needless to say I did not initiate any sales that day.
I also had an adviser that could not recall my name and was surprised when I moved my investments elsewhere. The message is to take control of your investments and make your own decisions. Ask for advice and seek out various opinions before you make and implement your decisions. At the end of the day you’re the only one who will pay the price of a bad decision. Even if you rely on an adviser 100%, it is not their money that they are risking. It is your money and that is why it is so important to be involved and be informed.
Managing Your Own Investments
Managing your own self directed retirement plans takes time and effort. You need to read a lot, you need to understand what the market is doing and most important you need to have a strategy that you review and update every year based on how your investments are doing and also your personal needs. Our previous post talked about a simple retirement plan strategy which we have followed for our own retirement plan. Keep your costs down, be conservative, and go with high quality stocks that pay dividends on a regular basis.