Why DIY Investors Earn Less!

Katie Smith | Sep 15, 2025

Summary:

According to Vanguard's "Advisor’s Alpha" study, a good financial advisor can add about 3% in net returns per year through behavioral coaching, asset allocation, rebalancing, and tax planning.

In this video, @Victoria with Vitality Investments and Erin Kennedy discuss, in detail, the reasons behind that performance gap.
DIY investors often underperform the market because they tend to react emotionally to market movement versus sticking to a risk appropriate financial plan.

A good financial advisor should provide concrete value to clients, beyond just portfolio returns. If you'd like to have a no obligation chat with Victoria to determine if you could benefit from having a personalized financial plan visit www.VitalityInvestments.org

Video Transcripts:

Erin Kennedy 0:06

Victoria, so good to see you. An important topic today. Why DIY investors earn less? According to Vanguard's advisors Alpha study, a good financial advisor can add about 3% in net returns per year. That bears repeating. It's incredible. Can you explain what you think is behind this performance gap?

Victoria Larson 0:26
Sure thing. Erin. Well, first of all, got to keep in mind that's 3% compounded each and every year, so that's pretty darn significant. I really attribute that to a combination of behavioral and strategic missteps. Some of the key drivers of that include emotional decision making. Typically, we see Do It Yourself investors buy when they feel safe and sell when they feel fear. So what are they really doing? They're buying at the high and selling at the low Another common mistake made is that some conservative investors are too conservative, and when they're too conservative, what they're realizing is only keeping up with inflation, or even perhaps not keeping up with inflation, so they're safely losing money. Another factor is taxation, there are some great opportunities through qualified charitable distributions or putting tax inefficient investments in the tax deferred or tax free accounts, these are opportunities that are often missed by Do It Yourself investors.

Erin Kennedy 1:39
I'm really glad you brought up emotional investing, because that is my next question for you. You're familiar with this. You live in this world, but according to DALBAR, DIY, investors often underperform the market because they are driven by emotions. One thing that always helps it makes sense for me, is this graph. Can you explain?

Victoria Larson 2:00
Well, there's three different types of emotional investing characteristics that come to mind. One is that fear of missing out. Yeah, so there's that euphoria about Bitcoin or Nvidia or even recently gold, and they hear everyone's getting it and like, I don't want to miss out, so they end up buying at the high and then riding out that decline, and then that fear sets in, and they jump in and out. Another one that's pretty painful to see, but yet understandable how that happens is individuals who have worked for the same company for years, they may have received stock options and acquired a significant amount of their wealth with one single stock, their employer stock, and that wealth got them there, or that stock got them to that wealth. And then changes happen with that company, and they just stay the course, and they write it down, and they have that hope that it's going to recover, and they're really missing out on opportunities for diversification. And the third one we saw earlier this year, I mean, the market took a pretty significant dip, and folks that were too aggressive in their portfolios got fear and jumped out, and then they locked in that loss. So those are three that we see that are pretty common, right?

Erin Kennedy 3:29
And of course, when we have a financial plan, we're less likely to make those knee jerk, emotional decisions. But as you know, Victoria, many DIY investors believe that they can save money by avoiding advisory fees. So how do you help clients understand the value you provide?

Victoria Larson 3:47
Yeah, well, first of all, I want to be clear that at vitality investments, we are very transparent in what our fees are, so you all know upfront what it costs to work with us. And unlike 401 K companies, it's very difficult to necessarily see what those costs are, but not the case with us. The second thing is, I can absolutely understand that perspective where advisory fees is an additional expense, but what's often overlooked is what folks are sacrificing by do it yourself financial planning, mistakes in tax planning, emotional missteps or even underestimating the need for long term care can cost significantly more at vitality investments, we do more than simply investment strategies. We take a holistic approach to your investment plans so that it provides measurable greater value, value that is often underestimated by Do It Yourself investors,

Erin Kennedy 4:56
Right? Yeah, you don't even know what you don't know in other ways Say it for someone who's thinking about hiring an advisor, what's the best way to start that conversation to determine if they should and what should they expect in that first meeting?

Victoria Larson 5:09
Yeah. Well, first of all, I would ask yourself some questions. Key Questions to ask are, are you at all concerned that you're going to run out of money in retirement? Yeah. Are you clear about all the different risk factors that can derail a retirement when the market took a decline earlier this year? Did you find yourself changing your lifestyle in any way? If any of those questions resonate with you, I encourage you to talk to a financial advisor. Now, if you come into vitality, what we're going to do on that first meeting is really listen to you. We're going to understand what it is you're trying to accomplish, what your fears or concerns are, as well as where your assets currently lie. And then we're going to build a custom plan that's designed for you to achieve your objectives.

Erin Kennedy 6:01
Clearly, there is no cookie cutter answer here, but sitting down and having that conversation to see if it's worthwhile for most people to realize what they might not be thinking about. So Victoria, if somebody wants to get a hold of you, what's the best way?

Erin Kennedy 6:14
Yeah, the best way is to email us at info@vitalityinvestments.org

Erin Kennedy 6:20
Victoria, thank you so much.

Victoria Larson 6:22
Thank you.

Victoria Larson, RICP® is an independent, fiduciary financial advisor and founder of Vitality Investments. With over 20 years of experience in the financial services industry, she specializes in holistic, retirement-focused planning. Her work helps clients protect, grow, and use their assets in ways that align with their goals and values. Victoria partners closely with individuals and families to build income security, minimize taxes, and prepare for life’s financial uncertainties.

^{Hypothetical examples used are for illustrative purposes only.}

^{Investment advisory services offered through Brookstone Wealth Advisors, LLC (BWA), a registered investment advisor and an affiliate of Brookstone Capital Management, LLC. BWA and Vitality Investments are independent of each other. Insurance products and services are not offered through BWA but are offered and sold through individually licensed and appointed agents. Index or fixed annuities are not designed for short term investments and may be subject to caps, restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer. Please refer to our firm brochure, the ADV 2A Item 4, for additional information. Registered Investment Advisors and Investment Advisor Representatives act as fiduciaries for all of our investment management clients. We have an obligation to act in the best interests of our clients and to make full disclosure of any conflicts of interests. Please refer to our firm brochure, the ADV 2A item 4, for additional information.}

Why DIY Investors Earn Less!