Source/Contribution by : NJ Publications
Ask yourself this question:
Do I have expert knowledge on financial planning and the ability to choose the best option for me from the wide range of investment products available? Do I have the time to review my Portfolio from time to time and make necessary adjustments to maintain the optimum.
If the answer to the above is No, then you need financial advice.
Often, investors don't feel the need to have a financial advisor. Many investors prefer taking the direct route for exploring equities, for they want to experience the thrill first hand. And to these investors' aid, there is plethora of literature available on the internet, newspapers, magazines, etc., on investing tips and tricks, popular products, what are the good bets. There are financial experts on all business channels talking about the hot stocks and sectors, the impact of oil prices on the economy and the markets, the direction the markets are going to take, etc. Then we also have our friends, relatives and acquaintances sharing investment tips, narrating their victory episodes, the products which they invested in and made handsome bucks.
The investors try to encapsulate all the information coming in and apply the same to their investment decisions, and eventually end up burning their fingers. This is what has happened in the past, whenever most stocks are in the green line, there is positive sentiment in the markets, there are buy signals all around, investors take the plunge when equities are at higher valuations. Subsequently, when the markets correct, investors worst nightmares come true, their investments come tottering down, resulting in huge losses for them. This happens because the investment decisions are triggered by market movements, sentiments, tips and not investment needs.
Now, coming to the point, why do you need financial advice. You don't need advice for financial know-how, there is no dearth of the same.
Rather,
> You need advice for choosing the best product for you from among the universe of products available in the market. Remember, the cousin or friend who invested in a particular product, it may be suitable for him, your needs and goals are not the same as your cousin's or your friend's. So, you need to invest in options which meet your unique needs, which are in line with your risk taking capacity and which are ideal for your goals' horizon.
> You need advice on asset allocation, how much should you expose yourself to equity, debt, real estate or gold, what should be the percentage allocation to each of these asset classes, considering your risk profile and goals. And what should be the right asset allocation as you move from one stage in life to another. You need your advisor to hold you back when you go overboard with respect to your portfolio's exposure to a particular asset class.
> You need advice in turbulent times. You need someone to hold your hand, calm you down and restore your conviction in your choice. Your investments are for your goals which are far away, a fall in oil prices, or a new American president, can bring temporary upheavals in the markets which may reflect in your investments, but these tremors are momentary, over the long term, your investments will only grow to help you actualize your goals.
> You need advice in time so that you can capitalize on the market opportunities when they arrive.
> You need someone to guide you through making the right financial decisions over your life. Someone who can help you in regularly reviewing your portfolio and taking appropriate steps to incorporate any changes/upgrades in your goals, or making the necessary adjustments on the happening of certain events in your life, like your goals will change on the occurrence of events like your marriage, divorce, birth of a child, etc.
To conclude, you need a professional, who has the knowledge, experience and ability to guide you through the investing process, and who stands by you in all ups and downs as your financial partner for life. You need advice so that you do not commit mistakes, so that you do not seek advice from people who have no idea about your financial standing, financial products or markets whatsoever, so that you don't react to market movements, so that you don't make financial decisions on the basis of tips received from from TV anchors.
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