With The Right Financial Advisor, Mutual Funds Sahi Hai!

Many investors, especially first timers who are migrating from traditional investments, are walking down the treacherous path of investing in Mutual Fund schemes directly, without the assistance of a qualified Financial Advisor. For those who aren't aware, direct plans of Mutual Funds give you the option of invest "directly" into their schemes; in effect, saving you approximately 0.5 per cent per annum of your money in the process. In exchange, you’ll be giving up the support and advice of a Financial Advisor, and you’ll have to take your investment decisions unassisted.

While the cost saving certainly does warrant consideration, it's vital to weigh it side by side with what you'll be losing out on by taking the direct route. If you're a very savvy investor who can take rational, neatly evaluated investment decisions, direct plans would work nicely for you. If, on the other hand, you're a first-time investor or someone who doesn't understand equity and debt markets very well, they can be very dangerous indeed! With the support of a trustworthy and competent Advisor, your Mutual Fund investing journey can be relatively blemish-free. In other words, with the right Advisor, Mutual Funds Sahi Hai! Here are three critical functions that your Advisor plays in defining your Mutual Fund investing success.

Saving You from Your Worst Enemy

Greed and Fear are the two biggest scourges of long term wealth creation. Even seasoned investors often fall prey to their instincts, overcommitting moneys into risky assets when valuations are rich, or fence sitting indefinitely while bearish markets turn around and enter the stratosphere! A seasoned Financial Advisor can help safeguard you against these behavioral pitfalls, by correctly assessing your risk profile and designing your portfolio accordingly. Through regular counseling, a Financial Advisor can effectively hand hold you during the rough patches and ensure that you do not do anything rash. Additionally, a qualified Financial Planner can help you link your investments with your Financial Goals, thereby keeping you firmly on track even when markets go awry.

Doing the Homework – So That You Don’t Have To

Mutual Fund investment returns can be impacted by a plethora of global and local factors, ranging from the central bank’s monetary policy stance, to global interest rates, to industry capacity utilization, and sectoral trends. If you’re not from the financial services industry, it would be quite difficult for you to stay on top of these trends while managing your full-time job. Armed with a little bit of knowledge, you may in fact end up taking regrettable investment decisions, such as investing in a sectoral fund when it’s rally is nearing its end stages, or investing into NFO’s (New Fund Offers) based on hearsay. A competent Financial Advisor will do their homework and stay on top of trends that could affect your investment decisions and portfolio returns, thereby optimizing your portfolio performance in the long term.

Cutting Out the Clutter

Most unadvised investors tend to view Mutual Fund Investments as ‘commodities’, rather than basing their purchase decisions on well founded principles of portfolio management, such as asset allocation. Resultantly, they often end up making small investments into tens of different schemes – leading to an extremely cluttered and poorly organized portfolio in the long term. We’ve come across self-managing investors who have their portfolio spread across 40-50 schemes, or more! These investors rarely outperform broad markets. A qualified Financial Advisor will ensure that your portfolio is always neatly organized and clutter free, housing only a handful of potential outperformers instead of a whole bunch of losers.