This week many of us have paid
respects to our teachers on the occasion of teacher’s day. Most of us will
agree that teachers are very important in everyone’s life. Many of us will also
agree that whatever we are today, our teachers have played a great role on
this. Even in sports also every player thanks his/her coach after winning. Similarly
our parents and elders have advised us on various stages of our lives since our
childhood and many people also have gurus or mentors who have given a direction
to their lives.
In this age of internet and
especially the Google, anything and everything is available on a click of a
button. So whether we want to buy something or invest or even want to cure for
a disease it is just a click away. But is it really workable; think about this—can
we cure ourselves by googling except may be a basic problem like cold and will
that be right? Similarly, for investing, while we may have an idea about the
type of investment to own, most of us lack insight and expertise.
Let us understand the reasons why
we should have financial advisors:
1.
Investment products are becoming more dynamic
and complex. Two decades back we use to have few products like Bank FDs, PPF
and Post Office Saving products etc. That time the investment decision revolved
mainly around comfort with the bank, rate of return and tenor of the
investment. However, now there are so many options that selecting the right
option itself is a tedious job. For example in mutual funds there are equity-Large,
Multicap , Mid cap, small caps, thematic, tax savings etc, hybrid, dynamic
asset allocation, arbitrage funds, debt funds- liquid, duration , credit risk
funds etc. Further there are different PMS products, derivatives, direct
equity, insurance, Alternate Investment Funds etc. So what is right for one person
may not be suitable for the other. Just by googling it may not give you what
actually fits in your specific requirements.
2. Another important point which we should always keep
in mind is that investing is not just about making money but also about
avoiding mistakes. While taking investment decisions we often get influenced by
emotions, past experiences, advice from friends/relatives and our own attitudes
etc. During negative markets, most common cognitive bias of investors are loss
aversion, panic sell, and herd mentality. Many of us have heard how people were
crazy in equity market investing during 2007 and early 2008 and then the panic
sale in late 2008. People have invested in real estate market in 2010-13 with
the hope of 2005-10 kind of bull return but actually landed up in no return
assets. An advisor can actually help the investors in those times to see beyond
the current hype and help him to take a rational decision.
3. We should understand that investment is not one
time decision but a lifelong process and is different for every individual. A
person stars investing when he/she starts working i.e. generally in mid 20s, and
keeps on investing till he stops working i.e. retirement. As a person keeps on
investing for his entire working life similarly he needs constant advice and
different strategies for different life-stages. Every individual have different
income/expenses/requirements, risk appetite and cash flows and accordingly his
investing requirements also differ and needs to be customized base on his own
specific need rather than a general solution.
4.
A Financial advisor not just helps an investor
to take right decision about where to invest, when to invest, how much to
invest and how long to invest but also performs various other things. Like keeping
track of performance, analysing the funds doing asset allocation and
rebalancing, risk profiling etc. He also helps in providing consolidated
picture of investments, taxation and capital gain calculations and to keep the
record in proper and systematic way.
Every profession needs its own expertise and no one
other understands their roles & responsibilities better than the one who is
in charge of the respective role. Hence It will always be better if we spent
more of our time in our primary roles rather than getting into some serious
trouble by trying to save some money.
And lastly remember the youdh of Manabharata
was won by Pandavs despite Kauravs have the biggest army and great warriors and
this happen because they have the great advisor Shri Krishna.
No comments:
Post a Comment