DIY Investing vs Managed Portfolios: What This First-Time Investor Is Choosing | Money Mind

About this video

• Video Title: DIY Investing vs Managed Portfolios: What This First-Time Investor Is Choosing | Money Mind
• Channel: CNA Insider
• Speakers: Tara (implied investor), Narrator
• Duration: 00:07:10

Overview

This video explores the decision a first-time investor, Tara, faces between managing her own investments (DIY) or opting for managed portfolios. It outlines the pros and cons of each approach, discusses their potential returns, and touches on tax planning strategies like CPF top-ups and SRS contributions, ultimately emphasizing the importance of consistent investing.

Key takeaways

• Investment Approaches: Two main options exist: a DIY approach using diversified portfolios of equities and bonds (e.g., 80% equities, 20% bonds) or managed portfolios selected and adjusted by experts.
• DIY Investing: Offers lower fees (primarily ETF expense ratios of 0.02%-0.2%) and full control but requires the investor to rebalance and manage risk adjustments.
• Managed Portfolios: Involve higher fees (0.2%-0.8%) for convenience and expert management, including automatic rebalancing and adjustments based on market conditions and risk levels. These portfolios often comprise more ETFs and bonds for diversification.
• Investment Goals & Strategy: Tara aims to grow funds for retirement and her daughter's education, necessitating long-term planning and consistent investing. A recurring monthly investment and dollar-cost averaging are recommended for discipline.
• Expected Returns: Managed portfolios might yield around 8% returns, while DIY broad-based global equity/bond portfolios could return 6-7%. The difference in returns after fees is often minimal, with convenience being a key differentiator for managed options.
• Tax Planning: Utilizing the Supplementary Retirement Scheme (SRS) and topping up CPF can reduce taxable income. SRS funds can also be invested for better returns, and CPF voluntary top-ups shield amounts from taxes.
• Early Investment: Investing early for a child, even using "ang bao" money, teaches compounding and builds a foundation for financial literacy.
• Consistency is Key: The ultimate takeaway is that the method (DIY or managed) is less important than building a consistent investing system.