4 sensible reasons to invest in quality research for your equity portfolio’s growth
November 16, 2021 | 64767 Views
When it comes to spending money, we all try to curb our expenses and are generous in our savings and investments. Although a good strategy to manage money efficiently, we can sometimes end up spending more in the long term in our efforts to save in the short term.
One of the few places where this is especially true is when it comes to managing your portfolio. Investment advisors and Research analysts can be hired at a cost, but it’s usually a no brainer for most of us when it comes to ‘fee’ & ‘free’. However, We must all remember that there are no free lunches in the world & we get what we pay for.
Here are the top 4 reasons why you need a professional to manage your equity portfolio. & guess what? These reasons make perfect sense!
#1 Investing without any expertise
When it comes to decision making, our decisions can be based on various factors. Such as our instincts, our emotions, our knowledge or maybe hard facts and statistics. Which one of these factors would you rather employ when it comes to making decisions for your equity investments?
People often tend to make decisions based on how they ‘feel’ rather than based on what they ‘know’. This often leads to inefficient decisions made on euphoria or confusion causing them to either sell off their most profitable investments early on or let their losses run free. The truth is that feelings don’t matter at all when it comes to investments. Data & facts do.
In any case, what you ‘know’ also needs to be evaluated as incomplete knowledge can often prove to be dangerous. For instance, we all know that an increase in sales and profitability is a good sign. One can assume that a 20% increase in sales & a 10% increase in profit is good news! However, only an expert can read between the lines and evaluate why the entirety of the sales has not been reflected in the profits. After all, Where did the remnant 10% go? Is it a healthy and profitable transaction? Is this reason company-specific or industry-specific? And so on.
#2 Losing sight of the bigger picture
How much time can an average equity investor spend on handling their investments? Feel free to also include all the time spent on acquiring knowledge, learning new strategies and staying updated. Is that all one needs to utilize the real potential of the stock markets and build multifold wealth?
Research analysts and investment advisors spend all their time evaluating the stocks, their behaviour, market trends, industry-specific trends and whatnot. Every day, they spend hours trying to obtain the latest information available and form strategies and investments methods based on their experience that is unique to them.
It’s a financial advisor’s full-time job to understand a broad spectrum of market dynamics and their implications before they even start working on a client’s portfolio. So when they get to yours, they’ll already be able to see the big picture. They’ll know all the strategies and which ones can work well for you and your goals.
Simply put, by hiring a professional you greatly improve the quality of your investment decisions and can easily capitalize on various hidden market opportunities at the right time. Hence whatever you spend on the fees, is magnified and reflected in your portfolio’s profitability. Think of your advisor as an experienced tour guide on the path to financial security. This path can be easy, short and stress-free if you want.
#3 Gambling with your future
People and the news always discuss whatever is the new investment fad. Be it the highly volatile cryptocurrency or that one commodity that seems to be fluctuating every day. You are bombarded with various options such as whether you should be an intraday trader or utilise various derivative specific strategies. You are told to invest in that one booming penny stock one day and are asked to capture the latest trending stock the next. Every day there is a new golden opportunity and it’s always just the right time to enter the rally. All this couldn’t be further away from the truth. No one truly knows how all these latest fads will work out. It’s mostly a plain gamble.
However, the stock market is no casino and your financial future is definitely not something you can gamble with. Any professional can tell you that what you really need is a vision with a concrete plan and strategy in place followed by the right decision making at the right time. That’s how you can witness your financial objectives turn into reality. Although the stock market is full of risks, the said risks can be managed efficiently and your returns can be maximised if you were to make use of a savvy advisor and their quality research.
#4 Procrastinating while inflation wins
There is something that a common man does not take into account when it comes to investing but institutions always do. It’s called the opportunity cost. In simple words, it’s the profit that you lose out on by not investing at the right time. It’s the gain that you could have booked had you invested in the right opportunity when it presented itself.
Apart from the opportunity cost that arises, you also have inflation that eats up the purchasing power of your money. Let’s look at an example, suppose you put aside Rs. 50,000 in cash 10 years ago as savings for your future. Is the value of Rs 50,000 today the same as it was back then? Of course not! You can no longer consider 50,000 to be a life-changing amount. This is due to the diminished purchasing power as a result of inflation.
The money that you haven’t invested loses purchasing power every day. Even if you’re putting off the decision of whether or where to invest, in the eyes of the market you are still making a choice! Working with a professional advisor can not only bring you expertise, but also accountability. Not only are they going to make sure that you are making the right investment decisions for your financial future, but they are also going to ensure that you stay invested and profit from the various investment opportunities present in the stock market and do not incur any major opportunity cost.
Your time is precious
Today, technology has made it possible for anyone to learn and explore anything from the convenience of their home. You can learn almost all the DIYs from Instagram, Youtube or Facebook. We at StockAxis agree that today, you can learn how to do pretty much anything by yourself. Given enough research, tools, and time, we know you could probably manage your money just fine on your own.
Multiple comparisons conducted at various investment firms have found that the client’s portfolio returns actually outperform the fees they pay. So while you may pay your stock advisor now, consider it an investment by itself in your own financial future.