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  • What is execution only investing – THIS IS WHAT YOU NEED TO KNOW!
  • What is execution only investing – THIS IS WHAT YOU NEED TO KNOW!

What is execution only investing – THIS IS WHAT YOU NEED TO KNOW!

Execution only investing: what is it?

Execution only investing is a popular form of investing today . It means that you invest ‘on your own’ without advice from third parties. This saves considerably on costs, but entails the necessary risks. Is it as attractive as it seems at first? In the article below you will find out whether execution only investing is something for you.

Three ways of investing

When someone indicates that they are investing, you can interpret this in three ways. Someone can invest via an asset manager, invest with advice from someone else or invest entirely execution only. But what are the differences?

  • Asset management. If you invest through an asset manager, you completely hand over the reins. Someone else then invests with your money. Of course, you first discuss what your goal is and what risk profile you want to use. Asset management is in almost all cases the most expensive way of investing.
  • Investing with advice. This is the middle way. In principle, you invest entirely yourself, but you are guided by advice from an expert. Following advice is entirely without obligation. You generally pay less costs than with an asset manager, now that you only pay for the advice.
  • Execution only investing. You retain full control over your investment portfolio . You do not use advice, but (often) only generally available information. Because you do everything yourself, the costs are often very low – provided you choose a cheap (and reliable) broker.

Execution only what for you?

Execution only is quickly seen as the ‘normal’ way of investing these days. On the one hand, this is good, as it shows that investing has become increasingly accessible. However, you should also be aware of the fact that investing can be quite risky. Execution only can be the cheapest in terms of costs; but if you subsequently make a lot of losses, you will not benefit from this.

When you choose execution-only investing, you should be aware of the risks involved in investing. Always familiarize yourself with the type of investment product you want to invest in. In addition, you should be prepared to manage your portfolio yourself and therefore regularly follow stock market news. If you want to know whether execution-only investing suits you, you can always create a demo account with a broker . You can then practice with fictitious (fake) money.

If you want to invest with a broker yourself, you will have to fill in a mandatory questionnaire before you can start. This briefly tests your knowledge of investing and then judges whether you are ‘suitable’ for execution only. Ultimately, it is advice, so you do not necessarily have to follow it. It is a good test to find out where you stand.

Investing never brings guarantees

If you are afraid of the risks associated with investing yourself and therefore prefer to opt for asset management or investing with advice, you should realize that these methods are not without risk. Investing  always  involves risks, even if someone else does it for you. If you cannot afford to lose money, then no method of investing will really be suitable.

If an asset manager or investment advisor causes your portfolio to decrease in value, they will in principle not be responsible for this decrease in value. So if you (partly) outsource the investment, this does not mean that you are also outsourcing the risk. This will remain with you.

Execution only investing in funds

If you want to invest yourself, but do not have sufficient knowledge of the  stock market  to respond tactically to all developments, you can  consider investing in funds  . These are, as it were, baskets of shares (or bonds). The advantage of this is that your risks are often well spread and you do not have to manage your portfolio ultra-actively.

However, realize that investing in funds does not guarantee profit. Always invest with money that you can afford to lose and try to switch off your emotions when investing. A rational investor who is aware of the risks and has an eye for diversification will often win over the less thoughtful ‘freestyle’ investor.

Are you opting for execution-only investing? Then it is important to  choose a good broker . This way you will make fewer costs and benefit from maximum user-friendliness.

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