“The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological.” (Howard Marks)

Investing has changed significantly over the past decade. What once required a stockbroker, paperwork, and significant capital can now be done in minutes from a smartphone. Millions of people, including South Africans, are investing independently through online platforms, low-cost ETFs, and offshore trading accounts.

In many ways, that’s a positive development. Lower barriers to entry have encouraged more people to take ownership of their financial futures. But accessibility doesn’t guarantee good investment decisions.

The uncomfortable truth is that while entering the investment market has got easier, managing wealth successfully over the long term remains surprisingly difficult. Not because markets are inaccessible, but because human behaviour is complex.

Information overload

One of the biggest risks facing DIY investors today is not a lack of information. It’s the overwhelming abundance of it.

Investors are constantly exposed to financial podcasts, TikTok commentary, YouTube “experts”, Reddit forums, and social media threads confidently predicting what markets will do next. The result is that many people feel highly informed while becoming progressively less disciplined.

There is a significant difference between consuming financial content and building a coherent long-term strategy.

This often leads to what behavioural economists call “herding”: following what appears to be successful without fully understanding the underlying risks. A fund or share that suits one investor’s circumstances may be entirely inappropriate for another’s risk tolerance, time horizon, or tax position.

Easy to buy, harder to build

DIY platforms themselves are not the problem. Many are excellent tools. The challenge is that the interface’s simplicity can be misleading. Buying an investment is easy. Constructing a resilient portfolio is considerably harder.

Many DIY investors unintentionally build portfolios around excitement rather than planning. They accumulate investments one idea at a time – a global ETF here, a technology share there, perhaps some offshore exposure after reading a bullish market article – without considering how the pieces all fit together.

The result can be overlapping holdings, excessive concentration in one sector or geography, duplicated risk, or portfolios that are poorly aligned with long-term financial objectives.

The emotional toll

One of the more subtle dangers of DIY investing is psychological. When investors manage their own portfolios, there is often a temptation to monitor markets constantly and react to every piece of news. Daily market movements begin to feel deeply personal. Activity creates the impression of progress, even when it may be quietly damaging long-term outcomes.

Ironically, some of the strongest investment results historically have come not from constant intervention, but from restraint.

This is where a good financial advisor can add significant value. Not necessarily through dramatic market predictions, but by preventing emotionally driven mistakes. Trying to time the market, panic-selling during volatility, or chasing fashionable investment themes can have a far greater impact on long-term wealth than many investors realise.

Beware the tax man

Tax is another area where DIY investing becomes more complex than many investors initially expect.

Frequent buying and selling may seem harmless, but if investment activity begins to resemble trading rather than long-term investing, the South African Revenue Service may tax profits as income rather than capital gains – potentially resulting in a significantly higher tax rate.

Offshore investing introduces additional complications. Investors who directly own US-listed shares may mistakenly expose their estates to US situs tax upon their death.

While all investors should utilise Tax Free Savings Accounts, many investors don’t understand that excess contributions can trigger considerable tax penalties.

Good advice is often invisible

Perhaps the biggest misconception surrounding financial advice is that its value lies purely in outperforming markets. In reality, much of good financial planning is about helping investors avoid costly mistakes and make better long-term decisions.

A qualified advisor may prevent a client from overexposing themselves to a fashionable investment theme, retiring too aggressively, giving away capital they may later need, or making emotional decisions during periods of uncertainty.

Successful investing is often less about brilliant decisions and more about avoiding damaging ones.

DIY investing can absolutely work for disciplined investors who have the time, temperament, and expertise to manage complexity over the long term. But successful investing requires far more than access to a platform and a few good investment ideas.

It requires patience, structure, emotional discipline, and an understanding that wealth is built not only through returns but through the avoidance of unnecessary mistakes.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.

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