Self Investing vs. Automated Investing

Are you torn between managing your investments yourself or letting automation take the wheel? In the world of finance, the debate between self-investing and automated investing rages on, each approach boasting its own set of merits and drawbacks. Self-investing vs. automated investing is not just a choice between two strategies; it’s a decision that can impact your financial future. This article delves into the nuances of both methods, exploring their pros and cons to help you determine which one aligns best with your investment goals and preferences. Whether you’re a hands-on investor seeking control or prefer the convenience of automated solutions, understanding the differences between these approaches is crucial in making informed decisions about your finances.

What is Self Investing?

Self-investing, also known as DIY investing or individual investing, involves managing one’s investment portfolio without relying on the assistance of financial advisors or automated tools. It puts the onus on the investor to research, analyze, and select securities or assets for their portfolio based on their own judgment, expertise, and risk tolerance. Self-investors typically take a hands-on approach, actively monitoring their investments, making buy and sell decisions, and adjusting their portfolio allocations as needed. While self-investing offers autonomy and control over investment decisions, it requires a significant amount of time, effort, and knowledge to navigate the complexities of the financial markets effectively. It’s a strategy favored by individuals who enjoy the process of investing and are confident in their ability to make informed decisions.

Pros and Cons of Self Investing

Self-investing offers autonomy and control over investment decisions, but it requires time, effort, and expertise. Here are the pros and cons to consider before embarking on a self-directed investment journey.

Pros πŸ‘

  • Autonomy: Self-investing gives you complete control over your investment decisions, allowing you to tailor your portfolio to your specific goals and risk tolerance.
  • Flexibility: You have the freedom to adjust your investment strategy at any time based on market conditions or personal preferences, without being bound by predetermined algorithms.
  • Learning Opportunity: Managing your own investments can be an educational experience, helping you to develop a deeper understanding of financial markets and investment strategies.
  • Cost Savings: By bypassing management fees associated with automated services or financial advisors, self-investing can potentially save you money over the long term.
  • Potential Higher Returns: With diligent research and strategic decision-making, self-investors may have the opportunity to achieve higher returns compared to passive or automated investing approaches.

Cons πŸ‘Ž

  • Time Commitment: Self-investing requires significant time and effort to research investments, monitor the market, and make informed decisions, which may not be feasible for everyone.
  • Emotional Bias: Without the discipline of an automated system, self-investors may be susceptible to emotional decision-making, leading to impulsive actions during market volatility.
  • Lack of Diversification: Individual investors may struggle to achieve proper diversification across asset classes and sectors, increasing the risk of portfolio concentration.
  • Skill and Knowledge Requirement: Successful self-investing demands a solid understanding of financial markets, investment principles, and risk management techniques, which can be daunting for inexperienced investors.
  • Potential for Underperformance: Inexperienced investors may lack the expertise to consistently outperform the market, leading to subpar investment returns compared to passive or professionally managed portfolios.

Pros and Cons of Automated Investing

Automated investing offers convenience and efficiency but comes with its own set of drawbacks. Let’s explore the advantages and disadvantages of automated investing to understand its impact on financial success.

Pros πŸ‘

  • Diversification: Automated investing platforms typically offer diversified portfolios, spreading investments across various assets and sectors to minimize risk.
  • Convenience: Automated investing eliminates the need for constant monitoring and decision-making, saving time and effort for busy investors.
  • Cost-Effectiveness: Many automated platforms have lower fees compared to traditional financial advisors, making investing more accessible to a wider range of individuals.
  • Emotional Discipline: By removing emotional biases from investment decisions, automated investing helps investors avoid reactionary behaviors driven by market volatility.
  • Rebalancing: Automated platforms automatically rebalance portfolios to maintain target asset allocations, ensuring investments stay aligned with long-term financial goals.
  • Access to Expertise: Some automated platforms utilize algorithms developed by financial experts, providing access to professional investment strategies and insights.
  • Transparency: Automated investing platforms often offer transparent reporting and tracking tools, allowing investors to monitor performance and understand their investment strategies better.

Cons πŸ‘Ž

  • Limited Customization: Automated investing may offer limited flexibility for investors who prefer to tailor their portfolios to specific preferences or beliefs.
  • Lack of Personalization: Automated platforms may not account for individual circumstances or goals, leading to a one-size-fits-all approach that may not suit every investor’s needs.
  • Overreliance on Algorithms: Automated investing relies heavily on algorithms and historical data, which may not always accurately predict future market trends or unforeseen events.
  • Potential for Technical Glitches: Automated platforms are susceptible to technical errors or glitches, which could disrupt investment strategies or lead to unintended consequences.
  • Difficulty in Adjusting Strategies: Investors may find it challenging to adjust or customize investment strategies within automated platforms, particularly during periods of market volatility or significant life changes.
  • Limited Human Oversight: Automated platforms may lack the human touch and personalized guidance provided by traditional financial advisors, leading to a sense of detachment or disconnection for some investors.

Differences between Self-investing and Automated Investing

Control and Decision-Making: With self-investing, individuals have full control over their investment decisions. They research, select, and manage their investments independently. Meanwhile, automated investing relies on algorithms and pre-set rules to make investment decisions. Investors relinquish some control over the decision-making process to automated systems or robo-advisors.

Time and Effort: Self-investing requires significant time and effort for research, analysis, and portfolio management. Investors must stay informed about market trends, company performance, and economic indicators to make informed decisions. However, automated investing minimizes the time and effort required for investment management. Investors delegate tasks such as asset allocation, rebalancing, and portfolio optimization to automated systems, freeing up time for other pursuits.

Emotional Bias: Self-Investing: Self-investors may be susceptible to emotional biases such as fear, greed, and overconfidence, which can influence investment decisions and lead to suboptimal outcomes. Β Automated systems, on the other hand, remove emotional biases from the investment process, relying instead on data-driven analysis and predefined rules to make objective decisions.

Diversification: Achieving diversification can be challenging for self-investors, particularly those with limited resources or expertise. Building a well-diversified portfolio requires careful selection of assets across different sectors, industries, and asset classes. But automated investing platforms typically offer diversified portfolios constructed using modern portfolio theory. Robo-advisors use algorithms to allocate investments across a range of asset classes, optimizing diversification and risk management.

Cost: Self-Investing: Self-investors may incur lower costs by bypassing management fees associated with automated investing platforms. However, they may incur trading fees and other expenses associated with self-directed investing. Meanwhile, automated investing platforms often charge management fees, typically lower than those of traditional financial advisors. While there are costs associated with automated investing, the convenience and potential for cost-effective diversification may outweigh these expenses.

Self Investing vs. Automated Investing: Which should you choose?

Choosing between self-investing and automated investing depends on individual preferences and circumstances. Self-investing offers full control over investment decisions, allowing investors to learn and make decisions based on research and intuition. It provides flexibility and fosters a deeper emotional connection with investments. On the other hand, automated investing offers convenience by automating the investment process, saving time and effort. It enforces discipline and consistency by executing trades based on predefined rules or algorithms. Automated investing also often incorporates diversification strategies to mitigate risk.

Ultimately, the choice depends on factors such as time availability, investment knowledge, risk tolerance, and personal investment goals. Some investors may prefer the hands-on approach of self-investing, while others may appreciate the convenience and discipline of automated investing. It’s essential to consider individual circumstances and objectives when deciding which approach to pursue.


In conclusion, whether one opts for self-investing or automated investing hinges on personal preferences, objectives, and circumstances. Both approaches have their merits and drawbacks. Self-investing offers control, flexibility, and a deeper connection with investments, while automated investing provides convenience, discipline, and often incorporates diversification strategies. The decision ultimately boils down to individual factors such as time availability, investment knowledge, risk tolerance, and investment goals. Regardless of the chosen approach, it’s crucial to stay informed, continuously learn, and adapt to market changes. By carefully considering one’s situation and objectives, investors can make an informed decision that aligns with their financial goals and aspirations.



Updated on: February 27, 2024