It’s the battle between darkness and light, between knowledge and ignorance. When you meet someone at a party and conversation moves to “what do you do” once you explain you are an advisor they sometimes say: “I don’t use an advisor because I invest on my own.” Do you see this as throwing down the gauntlet? There are other ways to approach this situation.
Eleven Good Questions To Ask The DIY Investor
This can be a learning opportunity. You are an investment professional. Treat them as a peer. Ask good questions to draw them out.
1. Are we talking the stock market here? It would be wrong to automatically assume investing means the stock market. They could be a real estate investor. They could be into Forex, gold or alternative investments. Hopefully, they say they are invested in the stock market.
2. Do you go the index fund route or do you pick individual stocks? Yes, I know we’ve taken mutual funds and professional money management off the table. They might back up and say they use funds. Hopefully, this draws them out, mentioning they buy individual stocks or they use both approaches.
3. Where do you get your ideas? You are curious how they do their research. Some people invest from personal experience. If they can’t find a parking space at a store on Saturday, they assume that company is doing well. Others follow high profile market strategists. They might subscribe to a service. They might watch financial news programs on cable TV. Perhaps they devour the WSJ and Barrons.
4. Do you have favorite people you follow? This expands on the previous question. Warren Buffett is arguably America’s most famous investor. Many people like his common sense approach. Others prefer splashier TV personalities, assuming they will tell them what to buy and when to get out.
5. What’s the greatest win you’ve ever had? People love to talk about their wins. You are properly amazed. It tells you a bit about how they make their investment decisions. They might have several wins to tell you about.
6. Where do you see the stock market headed? No one knows, but it’s interesting to learn their thinking and the rationale behind it. It’s a good opportunity for you to share your own thoughts.
7. How do you keep track of the tax liabilities? This can be a problem, having the IRS as your silent partner. You take the risks. They share in the rewards. Do they enthusiastically trade throughout the year? Then let their accountant tell them the bad news. Do they keep track of realized and unrealized gains and losses?
8. Are you a trader or a buy and hold investor? There are both out there. A self-directed friend casually shared the details of an enormous capital gain he realized when a stock he held for a decade or so was bought out. It was only one of many holdings.