Self-Directed Investing vs. Using a Professional Money Manager

Two strategies of investing—self-directed investing and using a money manager—have benefits and downsides. Investors may want to consider these and other factors to determine which way is best for their own financial situations. your own investing, or watching a conductor?
5 min read
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Key Takeaways

  • Some investors want to make investment choices on their own to have more control 
  • Self-directed investors have access to real-time financial information that can help them make decisions

  • Professional money managers can provide a sounding board for investment decisions

When it comes to developing a portfolio, every investor has a different approach. Some prefer to tackle investment decisions fully on their own, while others feel better with some professional guidance. Some investors even like a mix of self-directed investing and using a professional money manager.

There’s no right or wrong way to go about finding investments for you and your goals, but each strategy has advantages and disadvantages. When it comes to your own portfolio, weigh your choices carefully to determine which method of investing might fit with your financial life.

What Is Self-Directed Investing?

Self-directed investing is when an investor makes his or her own decisions as to which securities to buy and sell, and when to buy and sell them. Someone who is self-directing a portfolio may rely on a broker or online trading platform to execute trades but not necessarily rely on others to help with trading decisions.

Building a portfolio on your own is no easy feat, but many investors choose self-directed investing for a number of reasons. First, creating your own portfolio allows for maximum customization because you can buy whichever securities, options, bonds, or commodities you want. You’re not locked into a fund that may be supervised by a money manager, and you’re not influenced by outside opinions.

Another potential advantage to self-directed investing is that you can save money from the fees and commissions you’d pay a professional manager. On the other hand, this method requires a significant amount of time and effort to research your investing decisions. Some investors may be knowledgeable about the markets and enjoy keeping up to date on financial news.

These days, there’s a bounty of information at your fingertips and the average person often has access to the same real-time information that Wall Street traders use. So self-directed brokerage accounts offer investors the advantage of being able to follow the market on their own and setting their own alerts, whether to monitor the news or changes in their portfolio. Many of today's platforms offer tools to help investors construct and review portfolios, as well as screen for potential trade candidates.

Relying on a Money Manager

Although building a portfolio may be rewarding to some investors, others who are less experienced with the markets may prefer the offerings of a professional money manager.

With a professional money manager, investors still have a say in their investing goals and can set their own risk tolerance levels. They may work with an advisor on a strategy toward pursuing those goals but executing the strategy within a portfolio is the responsibility of the money manager.

A professional money manager can provide convenience by saving an investor the time required to stay in touch with the market and research trades.

Managed portfolios, including a suite of managed portfolios available through TD Ameritrade Investment Management, LLC, are not necessarily one size fits all. Investors have a range of managed portfolios for their asset levels and time horizons, whether it’s for longer-term savings or to provide income during retirement. Minimum investment levels and fees may vary, depending on the managed portfolio you select.

Combining Forces with a Hybrid Approach

Some investors want to have an active role in their portfolio, but they may not want to make decisions completely on their own. In that case, a hybrid strategy of both self-directing and hiring a professional money manager for guidance may be ideal.

With a hybrid approach, investors can feel the empowerment of developing their own trading decisions while also getting the benefit of professional knowledge and experience. They may stay on top of the daily financial news cycle and carefully monitor their portfolio but may want a second opinion on whether their trading ideas fit with their investment goals.

Determining the Best Choice for You

Again, each investor’s situation is unique, and the ideal solution varies from individual to individual.

If you’re considering hiring a financial advisor for portfolio management or any other financial need, TD Ameritrade’s AdvisorDirect® referral program may be a good starting point. Or if you’re a TD Ameritrade client set on maintaining a self-directed portfolio, make sure you know all the choices available to you—trading platforms, research tools, and freely accessible investment education.


Key Takeaways

  • Some investors want to make investment choices on their own to have more control 
  • Self-directed investors have access to real-time financial information that can help them make decisions

  • Professional money managers can provide a sounding board for investment decisions

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