In this week’s episode of Retire in Texas, Darryl Lyons, CEO and Co-Founder of PAX Financial Group, shares a cautionary tale about the hidden costs of do-it-yourself investing. With relatable personal stories and real client experiences, Darryl explores the traps that DIY investors often fall into – missed opportunities, tax missteps, and emotionally driven decisions – and explains why having a trusted advisor can make all the difference.
Whether you’re confident in your own financial abilities or know someone who insists on doing it alone, this episode offers a practical, grounded look at why experience, emotional discipline, and guidance matter when navigating your financial future.
Show highlights include:
- What happened when a client chose DIY over working with an advisor.
- Three qualities a successful DIY investor must have.
- Common (and costly) DIY mistakes Darryl has seen firsthand.
- Why advisors act more like copilots and river guides than stock-pickers.
- A powerful reminder about the role of compounding and proper strategy at any age.
For more insights or to connect with a PAX Financial Group advisor, visit http://www.PAXFinancialGroup.com.
Like what you heard? Share this episode with a friend!
Transcript:
Hey, this is Darryl Lyons, CEO and Co-Founder of PAX Financial Group. And you’re listening to Retire in Texas. This is information that’s not intended to provide specific investment, tax, or legal advice. Visit PAXFinancialGroup.com for more information. So, years ago I had a client. It was 2013. They came in and they had $2 million. They gave me $1 million to invest and then they wanted to, I call it DIY, do it yourself investing.
And so, a really good relationship. We did some really good planning, some strategies to help them retire. The annual checkup came around and I was a little nervous that I might get fired. The reason I was nervous is because in 2013, the stock market represented by the S&P 500 was up 30%. It seems to me I don’t have this debt on accurately, but it seems to me that the portfolio was up about 20% that year.
So, if the standard of our relationship was the stock market, we were, let’s say, did 20%, and the market did 32%. And the reason is, is that we had bonds and other things that diversified. And so, I wasn’t necessarily disappointed with the results, but just the like, how am I going to be judged specifically when he has this other set of money out there that he very likely just put in the stock market altogether and made 30% or maybe even more?
If he was, I guess, got lucky. So, the checkup came around again. Good relationship, but I was a little nervous that, you know, I might get fired. Because I didn’t know what his expectations were. And so, I asked him how he did on his do-it-yourself portfolio, thinking I was going to have to substantiate why we got 20 and the market did 30.
And he said, I didn’t invest it. I said, what do you mean you didn’t invest it? He goes, well, you know, I didn’t know if we were in a bubble. There was, you know, this fiscal cliff, a government shutdown, Affordable Care Act was happening. It was just a lot going on. I was really nervous. So let me understand this straight.
I didn’t tell him this. I didn’t have to. You wanted to save the annual fee? We had 1% on that fee. You wanted to save 1%, right? Yeah. Again, I’m role playing in my head. You wanted to save 1% and you missed out on a 20% return. That’s what happens when we DIY, do it yourself and invest or financial planning.
I get DIY stuff all the time. I mean, I have fixed toilets. Granted, I’ve had to run a Lowe’s five times because I didn’t have what I needed. I’ve tried to fiddle with the fireplace issue I have right now. I’ve YouTubed it many times. Some of the projects I’ve done, some of it I failed, in my DIY experience, I bought a really nice tree that I did kill.
I probably should have had a company called Millberger’s, do it instead. I wanted to save some money. I don’t know if my wife came on here. If you asked her. Am I good at DIY? She’d probably go. Eh, sometimes my patience is tested. I know that for years, in our old house.
The shower, what was hot was cold. And what was cold was hot. You know? I mean, it’s just, you just don’t do it all the time. So maybe my second or third iteration of whatever I was trying to fix would have been better than the first, but that’s the problem with DIY. And it’s fine, I get it.
I want to save money and so do all of us. But when it comes to our money, in our retirement and our future, in our nest egg, the mistakes. We just can’t afford to make mistakes. They’re not like $10 or $20 or even $100. They could be hundreds of thousands of dollars over your lifetime.
I guess some people could DIY their investments. Let me kind of give you the profile of that type of person. Even then, I think we would be subject to being skeptical. Let me give you three profiles or three attributes of the DIY investor. One is they have time, and they have consistent time. We’re under the assumption that their health would be good in perpetuity.
But suppose somebody’s 65. They have time at the time that they retire, but then they have a stroke, and they’re checked out for six months. You know, time is peculiar because we could have it now but tomorrow could be lost in terms of our attention span. So that’s a tricky one. But if you have a lot of time, and no hiccups in life, which is really, I don’t know anybody that lives in that world, that would be one attribute of being able to DIY it.
Two, if you have the tools I’m telling you today versus even 30 years ago, there’s more tools on investing in financial planning out there than ever. Blogs and YouTube videos and all kinds of tools. The challenge is it’s like a chainsaw. If you don’t use it properly, you could really get hurt. And some of the tools can be problematic because the assumptions that are used that are embedded in the tools, you know, inflation factors or assume rate of returns or even back testing can mislead and mess up our judgment.
The third attribute that you would have to have if you DIY is emotional fortitude. I think we overstate our ability to navigate some very scary times and, me included, I want to be humble enough to say that, you know, I’ve trained myself over the years and we’ve created systems and processes, but I’m still subject to concerns that happen in our, you know, geopolitical world that we live in today.
And so I’ve, you know, doing this over 20 years. And I recognize that I can be emotionally triggered. I can’t imagine that if somebody were doing it on their own, how that might impact their decision making. So those three things, you’d have to assume that are rock solid the time, the tools and the emotional fortitude. Let me give you some mistakes that people make when they DIY their investments.
That I think are just examples of just mistakes that happen. Let’s assume that you retire and you start taking distributions from your investments and the market goes down. If you’re taking distributions and withdraws from your investments while the market’s going down, you’re eating your seed. So, if the market goes back up you won’t recover as well.
So that’s one, two, overlooking tax strategies. You know if you miss your RMD it’s subject to a pretty hefty penalty. If you don’t think about your Medicare surcharges, you could be paying more in Medicare. Those are some things that you have to consider. Number three, I think, you know, you could mess up, I’ve seen it where, what I’m trying to say is the tax efficiency of portfolios.
So, like, it’s better to have municipal bond funds in your nontaxable account. So those are little things, but it makes it to where your tax return is, prettier. I did talk about emotional fortitude and, you know, selling at the wrong times, buying it at the wrong times. And then another fifth example, I will say, is just not being able to navigate through some of the Roth conversion stuff or maybe even, you know, properly utilizing health savings accounts.
[00:07:28]:19 – [00:07:57]:15
Unknown
Those are some things as an examples of do it yourself investing in financial planning, individuals often misstep or overlook, and an advisor who’s competent, who’s engaged should be able to navigate through those things. This is just tricky. You know, this idea of navigating your entire life savings. It’s hard.
It really is. I mean, we spend every single moment of our days, I would say literally. But, you know, that’s not true, but very much thinking deeply about this while you, and rightfully so, should be thinking about your kids and your grandkids. And so, I feel like we get to carry as advisors this emotional backpack, this burden.
So that way people can do life, and I mean, it’s still your money and it’s still your responsibility. But I do feel that we can carry that burden quite a bit. There is a need when you’re paying an advisor to manage expectations. I had somebody tell me a long time ago that I just want you to make me rich, and that’s not necessarily my role.
And, you know, I think compounding, let me say it differently. I don’t think compounding works. I know compounding works not only because the math is legit, but I’ve seen it over time. But and by the way, compounding works if you’re 30 and if you’re 60. So don’t say that. Oh, I’m 60 or 70 and I can’t get compounding returns.
That’s not true. I mean, your legacy can be amplified if you think about compounding and leverage it at any age. So please don’t discount compounding despite your age. It’s time horizon, so I’m not going to make you, an advisor, frankly, is not going to make you rich. The compounding will very likely help. But the main thing is, they’re just going to help you keep it, grow it, and hopefully pass it on wisely.
So that’s kind of defining the expectation of what somebody is paying for. And so, I’ll have people come in who did do it yourself. And over the years just trying to think about some of those things that we’ve had to kind of fix, maybe bad haircuts, so to speak. We’ve had to fix some, I would say unoptimized withdrawals like, hey, you should be taking out of your investments.
You should be taking out money from your Roth, not your traditional, you know, because you have different buckets of money. And the question is, which one should you be taking out of, and mapping that out long term? So those are things that we’ll have to fix again, bad haircuts kind of thing. Lack of diversification, maybe too much concentration in a specific investment class that, maybe not enough in another.
And oftentimes do it yourself investors get lost when they drift into like the international space or small cap stocks or, you know, alternative investments. And so, a lot of times when I see do it yourself investors, they fail to have a, you know, proper allocation to those types of investments. Third, another like, I guess, a bad haircut we might have to fix.
And some of these things are just unfixable because if you trigger Social Security, I won’t say it’s impossible, but it’s generally impossible to unwind it. But, you know, just the timing of strategies and the timing of when you get Social Security, those are things that we have to at least address. Some other bad haircuts that we’ve had to fix is, like I said, health care savings accounts.
An interesting one is and this is tough because if somebody had one and they didn’t fund it in the past because, you know, they just didn’t think about it, you can’t go back and fund these things. We can just fund them going forward. So those are just things that it’s like a bummer that we can’t do anything about it, but we can try to fix it going forward.
But last one, as an example of, you know, bad haircuts we might fix is somebody giving money to a charity. And they might be better, if they did it through donor advised fund. To be able to manage the tax benefits in a specific calendar year. So those are all kind of like bad haircut things that I think about when somebody has DIY’d their investments.
Let me give you an example, an analogy. I went out years ago. I went kayaking down the Devil’s River, which is really cool. And that’s near Del Rio for those that don’t know who aren’t in Texas, it’s very rural, but beautiful. I mean, absolutely breathtaking. And I actually camped overnight tonight on like, a little island and then on the side of a cliff.
Just a very awesome experience. But a guide on a river is a good example of how this relationship with that advisor works. And, you know, if you have a good guide, they’re going to help kind of anticipate things, so to speak. Maybe waterfalls, kind of read the water. Honestly manage your energy. You know, you need to row harder here.
You can relax there. There’s some danger here. Watch out for snakes. You know, those kind of things. And you know, what is the cost of a guide? I mean, there’s a cost to hire a guide. What’s the cost of capsizing a raft or a kayak? I mean, it’s a lot more expensive.
So that’s, I think the idea of a guide is a good way to look at your advisor relationship. And you’re paying for a guide. And it’s sometimes hard to prove a negative in a relationship. But the advisor, generally speaking, should. And there’s enough research here that supports this. You can look at, if you need to like Vanguard’s advisor. Alpha studies are good ones that they’re able to guide you appropriately and help navigate some of these troubled waters in our economy.
One more example. At the risk of over analogizing, let’s say you have this private jet, and we’ll call it Retirement One. And it’s fast, it’s sleek. And the problem is, you can fly it, but landing it, is still not really good, you know, especially under certain conditions.
You know, if the weather changes, or let’s, you know, kind of keep with this analogy. The markets are, you know, volatile because tax law changes, inflation always changing, right? Just like the weather. And so, you’re trying to learn about how to land this in real time. And obviously you’re very nervous as you should be, but you have a copilot, right?
And that copilot has, you know, has the ability to review the gauges, kind of look at the controls, the dials. Corresponding with the towers, making sure you don’t run out of fuel. You know that the copilot is there to guide you along that journey, specifically when it’s, you know, the consequences are extremely high.
Now, an advisor does not fly the plane for you. Still your plane, but you’re the pilot, but you’re not. What I don’t want you to do is, YouTubing how to land a plane at, you know, 600 miles an hour. Or I don’t want you to YouTube how to navigate or ChatGPT, I should say how to navigate your investment portfolio real time.
I want, in my professional opinion, I want you to have a very, very good copilot along this journey with you. I want to finish with this and close this out with this. Again, we always want to save money. I’ve just, over the years, have seen this with a high degree of conviction.
We can’t mess around with the lifetime that we have in the money required to support the lifestyle we want. This is this is not, this is not fixing toilets. This is, this is really, really serious. And we take it seriously at PAX. This is your life. We acknowledge and respect. There’s a fee associated with that, and we want to earn every bit of it.
You know, obviously, within our control, there’s certain things that we can’t control. But we want to make sure that your raft, your kayak doesn’t tip. And we want to make sure you can land the plane or it doesn’t crash. We want to make sure that your legacy doesn’t get mismanaged. So many of our listeners may be in a position where they’re like, but that’s, you know, do it yourself investing would never cross my mind.
But you have family members that believe that they can do it. And I want to encourage you to have them just check with an advisor to get a second opinion. Because they may be doing it fine now, but in a moment of panic or chaos, it could destroy their future.
And yes, I’ve seen it over the years. And so that’s why we do what we do, and we take it very seriously. So, thank you again for listening. And I appreciate your attention. And I want to remind you that you think different when you think long term. Have a great day.
Listen on:
