Q: Why do you think DIY investing has become so popular?
Kapil Joshi: Technology has made investing more accessible than ever. Younger generations are curious about saving and investing, and certain platforms now offer a seamless experience similar to that of online shopping. This ease of access has driven a rise in DIY investing, which I believe is positive because it helps people get started on their financial journey.
Q: Is DIY investing always a good idea?
Kapil Joshi: It’s a great way to begin, but it comes with risks. Chasing market performance or speculative assets, such as Bitcoin, can lead to poor outcomes. DIY investing works well for simple products, such as tax-free investments (also known as tax-free savings accounts or TFSAs), where a handful of funds could typically be sufficient. However, as your life becomes more complex, with marriage, children, and retirement planning, the investment universe expands dramatically. At that point, professional advice becomes essential.
Q: What role does a financial adviser play?
Kapil Joshi: Think of an adviser as a coach. They help you avoid bad behaviour, such as switching too often or chasing trends. They also ensure your plan is holistic, covering estate planning, retirement, and risk management. A recent Momentum study showed clients with advisers have 9.5 times more investment value than those without. That’s a tangible benefit.
Q: How should investors approach DIY investing responsibly?
Kapil Joshi: Start with a budget. Many South Africans don’t have one, and that’s a big gap. Allocate a portion for your ‘hobby investing’ while ensuring your core financial plan is intact. Engage with credible content, not just TikTok influencers. Remember, what works for one person may not be suitable for your circumstances. Your risk profile and your tolerance for investment risk matter.
Q: What should people look for when choosing an adviser?
Kapil Joshi: Four things, namely trust, context, expertise, and fit. Ultimately, you need to like and trust the person. Word of mouth is typically how advisers are matched to clients, especially given the important trust element.
Q: How does Momentum Wealth support advisers and clients?
Kapil Joshi: The Momentum Wealth platform is a one-stop shop for all your investment needs. Clients can choose from the broadest suite of local and global investment components and instruments available. From basic unit trusts and personalised model portfolios to exchange-traded funds, direct shares and personal share portfolios, as well as other specialised investment products.
With our comprehensive range of tax wrappers, financial advisers can help clients structure their personal investment portfolios for optimal tax efficiency and craft them to suit their unique circumstances and goals. The platform also offers consolidated reporting and features, such as family aggregation on our offshore platform for further fee reductions. It’s about simplifying complexity and adding value.
Q: Fees are often a concern. How do you address that?
Kapil Joshi: Fees should be viewed through the lens of value. Platforms provide consolidated reporting, efficient administration, and access to global investments. Combined with advice, these services help clients achieve long-term goals. The cost is small compared to the value and peace of mind delivered.
DIY investing can be rewarding, but having guardrails in place is crucial for success. Start small, learn, and enjoy the process. However, as complexity grows, professional advice becomes critical in building lasting wealth.
We offer diverse wealth-building investment and retirement solutions, with access to local and global investment markets. For a personalised investment solution to support your clients on their journey to financial success, visit our website here: https://www.momentum.co.za/momentum/personal/wealth
This article is based on a podcast with the Finance Ghost. Listen to it here: https://www.ghostmail.co.za/ghost-stories-85-why-diy-investing-and-advice-belong-together/
Momentum Wealth is part of Momentum Investments and Momentum Group Limited. Momentum Wealth (Pty) Ltd is an authorised financial services provider (registration number 1995/008800/07, FSP number 657). Momentum Metropolitan Life Limited is an authorised financial services and credit provider (registration number 1904/002186/06, FSP number 6406).
