I keep on meeting many people who
often quote me “I know a lot or everything about Mutual Funds and markets. I
have been doing this for so many years. In the end it’s a loss making
investment and I have lost a lot of money in this”. Then I get to know a lot of
explanations about why they only want to stick to the traditional FD’s, PPF and
NSC’s. At the end of this conversation I
always wonder that if somebody knows so much about Investment Products /
Markets then how come did he lose money.
The chances of a learned or properly guided investor to lose money in a
long run are negligible. As a person who has planned his investments will have
his goals and time frame in mind and shall select the product accordingly.
I am not against any product
whether it is traditional, market linked or exotic structured product. Traditional
investment products like PPF, NSC’s, PF etc are designed keeping all sections
of the society in mind and are still a favourite choice of investment. Whether
downturn or boom they have consistently given decent returns. However they may not serve all investor goals
depending on their inherent structure. On the other hand Property Investment requires
liquidity in Hand, Equity Investment requires a long horizon, Gold (Favourite
Investment for Indian’s) is more of a hedge etc etc.... Investment in every asset
calls requires a reason. Hence Financial Planning is required with a proper
asset allocation depending upon the timeframe or investor goals.
Financial Planning is a two way exercise.
Banks/Asset Management Companies/Insurance companies are doing a lot to educate
the investors. Awareness Programmes are organized by various organizations. Lot
of information is published in newspapers by organizations. Educational Mails
are a regular phenomenon. Steps are also taken by regulators to educate the
customers. Various campaigns are being rolled out via print and electronic
media. In short there is no dearth of information on Investment products.
Now it is the advisors job and
responsibility to guide the investor!! Agreed and also this advisory has to be
done from a long term view and not from a short term revenue perspective. Right
advisory without miss selling means a happy investor. This might lead
to lower revenues in short term but over a long term it helps in building a
trust, reputation, more no of customers and eventually shall translate into
higher revenues for the advisor.
With all this in place it is also
the investor’s responsibility to become proactive in planning his investments.
Most of the time we go by word of mouth in deciding our investments without even
evaluating the options. We avoid
investing in products which could be the best investment options without any
valid reason. This is where we tend to miss the bus. Many investors do not understand the nitty gritty
of the products because of which they form their opinions (mostly negative
especially about Equity and Equity MF’s) and further spread the same via word
of mouth. Hence choosing a right advisor becomes very important. At the same
time it is also the investor’s responsibility to at least have a look at where
he is investing and clarify all doubts.
Financial Planning being a two
way exercise hence Trust and Information Exchange has to be done from both the
ends.
