Changing the Way Brokerage is Delivered
By - Dan Raju, Tradier CEO on
Oct 27, 2020 at 11:15:40 AM
It's a DIY world we're living in, and everyone's jumping on the bandwagon: house flippers, self-taught auto mechanics, crafters, and investors. Yes, now many investors indeed manage their financial portfolios and investments independently without a broker's help. Technology has facilitated this shift in investing methods, edging out traditional models for many modern traders.
In traditional investing, a qualified agent advises and manages the client's investments. The client and agent meet at intervals to discuss goals and directions; then, the agent takes over the client's portfolio for day-to-day management. The investors get a report on how well the portfolio of funds is performing.
If you're working with an agent, you're paying a commission on every trade. You're likely using older, more clunky software such as Thinkorswim. You're giving away the power and responsibility of investing your money to someone who may make different decisions than you would.
The Switch to DIY Investing
Today's investors want control of their funds. They trust their instincts and information more than an agent at a big brokerage firm that may represent particular funds. DIYers wish to make decisions, act quickly, and have access to their money without going through the brokerage.
Technological development continually offers advancements for DIY traders and investors. Investing this way puts you in the driver's seat. The DIYer can research software apps to find an app that works well, has the right features, and costs less to use than traditional investing. The DIY group can easily find investment and trading tools on the internet, and only a click away. TradeHawk, for example, a complete stock and options trading platform, charges a monthly subscription fee for trading. There are no per-contract commissions on trades at all, unlike traditional trading with legacy brokers. The monthly fee or subscription price is a lot less than paying a commission on each transaction.
Pros and Cons of DIY Investing
As with everything in life, DIY investing has its pros and cons. Let's look at the benefits first:
- Software and trading tools are widely available, easy to use, and at your fingertips.
- The ease of use and the broad availability of trading tools has significantly reduced nearly every investor's trading cost.
- Extensive sources of data are available as well, which helps individuals create trade generation.
- Many resources exist for learning how to invest. Mentors and coaches abound in the marketplace, and education leads to better decision-making.
- An honest, well-qualified expert could cost you extra money in fees but save you from making substantial investment errors.
- DIYers are known to get caught in what's called an overtrading trap. Some traders can trade too much, thinking they'll catch the market right every time and make more money. Without a solid trading plan and discipline, over trading can cost them money.
Discipline and good decisions rule the day if you are a self-directed trader.
The Future of Brokerage
We expect the growth of trading tool development to continue, and the number of DIY traders will grow with it. We also expect these trading tools to have better innovations, offering traders great quantitative information and advanced features. These innovations will help investors manage their portfolios smartly rather than relying on emotional decision-making. There's a bright financial future ahead for DIY investors who are willing to learn about investing and the markets, select great trading tools, and practice self-discipline.