Over a period of more than 23 years into my career, I have seen or heard very few investors who are successful “Do it yourself”(DIY) investors. What I observed is that DIY investors generally have a much smaller portfolio and underperform their potential big time. On the other hand, investors who are doing it through an advisor develop a much larger portfolio and aim to achieve their important financial goals through disciplined investments.
Though I personally feel that investment is not a rocket science and little discipline can help you amass a huge portfolio, success still seems to elude most of the DIY investors.
Doing investment is like any other habit like going to gym or writing a blog regularly (which is what I have been doing for the last 3 months). Your chances of continuing to go to the gym are great if you have a gym buddy. In my case, there are few individuals like my wife and few office staff members who continuously make me accountable for writing regularly.
Similarly, the utility of an Advisor is not just to pick up funds or stocks for you. It is much more than that. Just look at the roles your advisor play-
1) Taking investment decisions on our own seems like a very stressful decision. Market looks always uncertain so investors are invariably wary of taking investment calls. Advisor helps them get out of that hesitation and make the decisions easier.
2) When the market goes down and the media all around uses the words like mayhem, bloodbath, collapse, end of the equity etc, then it becomes almost impossible not to get swayed by all this fear mongering. Every now and then such situations come to the fore at the stock market and a slide of 40-50% is not uncommon. In such a situation, cool and calm words of the advisor that ” don’t worry it will revive” act like a balm and make the investor not just accept such a situation but even take advantage of such opportunities in disguise.
3) Not just in case of investments, even in the event of redemptions, making calls seems difficult. In such instances also, advisors make investors’ tasks seamless.
4) With the advisor around, investors always feel relaxed about any service issues which are constantly associated with the act of investments.
5) Advisors generally pursue the investors to increase their systematic investments. With such persistent persuasion, investors keep on increasing their SIPs on a regular basis which results in a huge portfolio later. Without such coaxing, it is quite unlikely that investors on their own would regularly keep on shooting up their savings.
6) It is a psychological thing that you want to put across the best version of yourself. A good advisor understands this and makes the investor accountable for their saving goal. Investors generally reciprocate this by trying their best to achieve their saving goal and impress the advisor. This eventually benefits the investors and they go on to make a solid portfolio.
I have not even articulated the technical benefits like designing financial plan and portfolio, selection of fund/stocks, asset allocation, risk profiling, diversification etc. These are the fundamental part of any good investment advisory. But even without these, the above mentioned points are worthy enough to hire a good advisor.
Some exceptionally self-motivated, highly disciplined and cost conscious investors could still try the path of DIY but for the majority of investors, taking the service of an advisor is not only advisable but rather essential. An advisor will definitely cost you something but this cost is many times compensated by having immense investment success and an enjoyable financial journey.
Manoj Pandey
CFP
