No Nonsense Reasons To Hire An Investment Advisor Now!!
April 15, 2020 | 15370 Views
Whether you are an experienced investor or are relatively new to the equity markets, you are bound to have considered hiring a professional investment adviser at some point in your life. If not, you might as well consider it right now.
In a country like India, where the balance in the financial culture tips more towards savings, rather than investments, it is not surprising that only a small percentage of the Indian population is active in the equity markets. It can be due to multiple factors, such as fear of losses, lack of knowledge, lack of patience and skills & even a lack of financial literacy. However, many retail investors start their investment journey without any reliable professional guidance and hence wind up making rookie mistakes which inevitably leads to considerable loss of capital.
Only a small percentage of such investors retain themselves in the markets and the majority shut off their portfolios, vowing to never return ever again! We all have heard stories from that one friend or relative who says - 'It's just pure luck! A friend of mine made lots of money & I ended up losing a lot of money overnight! Only gamblers can make money in stocks!..' & yet, we hear success stories in the television, or read about famous investors in the newspapers who swear by their 'Investment strategies'. It is also not uncommon to hear about a neighbor who lives two blocks away making a living out of investing in the stock market. It can be confusing and overwhelming to decide whether or not to invest in the equities. And if yes, then in which stocks and at what price?? This is where professional investment advisors come in!
One can also be a seasoned investor and still benefit from hiring professionals. Also, it is advisable to stay clear of the noise in the market and not take any baseless advice from random sources. We do not ask our friends and relatives for medical advice when we fall sick, then why is it that we ask for their advice instead of hiring the right people who will most assuredly maintain the health of your portfolio?
Following are some of the valid, no-nonsense reasons, why everyone can benefit from hiring a trusted advisor:
1. Understanding of Risk:
A quick google search can tell you that equity markets are full of risks such as volatility risk, liquidity risk, credit risk, currency risk, commodity risk, etc. But how do you understand what is your risk appetite? In other words, what is your capacity to endure the market volatility and which securities are to be invested in, in accordance with your risk appetite? Even if you successfully establish your own risk appetite, which you can by filling out this simple risk profiling form by StockAxis, how can one ascertain the risk associated with the securities?
Since the share prices heavily depend on the businesses they belong to, any micro or macro changes that impact those businesses can alter the risk involved in dealing with those securities. For instance, Reliance, being a household name in India, enjoys a certain level of trust among investors. But even Anil Ambani owned Reliance communications went Bankrupt! It is not enough to just identify risk; it is equally important to realize when the risk level changes.
Often times, the risk involved in staying invested in a particular security increases beyond the risk appetite of the investor, with the investor himself being no wiser about it.
This is where a trusted investment advisor can help you save your capital. StockAxis constantly tracks not only the stock prices but all the changes in the valuations, financial reports, economic policies, industry or sector-specific news etc to stay ahead of everyone.
2. Balance in allocation
It is a common saying that one must never put all his eggs in one basket. It is an implication that emphasizes on the importance of diversification. However, over-diversification will only end up eating your profits! Billionaire investor Warren Buffett famously stated that "Diversification is protection against ignorance. It makes little sense if you know what you are doing." Diversification does not assure a profit and does not protect against loss in declining markets. It is important to understand that Quality always wins over Quantity. Also, the devil lies in the details. What good can possibly come out of investing in 20 random companies? Even if 2-3 companies perform well, you will hardly be booking profit if the other stocks are making losses. Nonetheless, you will still end up bearing the opportunity cost, if not the actual loss of capital.
Professionals insist on quality. The research team at StockAxis strictly follows a wide number of criteria while choosing stocks out of the 4500 stocks listed in the Indian Equity market, enabling our privileged clients to avail the benefit of investing in selected quality stocks, which results in superior gains as opposed to investing in an overly diversified portfolio. We also make sure that you maintain a balanced and resilient portfolio at all times, which is neither over diversified nor under diversified.
Investors often hesitate while hiring an Investment advisor due to additional costs, However, opting to hire an advisor can actually help you save money rather than splurge it. Weird as it may sound, Lack of confidence in a particular investment or any kind of uncertainty just leads to frequent and frankly, unwanted transactions, resulting in the piling up of brokerage and other costs associated with the transactions.
It is smarter to pay a one-time fee and sit assured with faith in your investments rather than constantly switching positions and paying unnecessary brokerage fees, Not to mention the opportunity cost or profit one might miss out on because of the constant churning. Also, you fail to capture the benefit of the compounding effect! Is it not simply wiser to calm your nerves AND actually be making sensible investment decisions?
4. The Golden Ingredient of Experience:
It is also not uncommon to witness an advance in the stock price just after you have exited your position. It sure is a pinch to the heart to miss out on an incredible rally after staying invested for long periods of time due to wavering confidence or uncertainty. Also, have you not noticed at times, how the markets shoot out in exactly the opposite direction than anticipated during Mega events such as Elections or Union Budgets? At times like these, the market movements might seem senseless, but not to the professional eye!
When the golden ingredient of experience is combined with an ability to conduct an intense fundamental and technical study, the chances of making accurate decisions increase exponentially, which is exactly why the professionals are able to read between the lines. The StockAxis Research Team boasts of considerable and fitting experience and has witnessed major market events for years, hence bringing conviction to our stock recommendations.
5. Emotions in Investment decisions:
Simply put, emotion is the enemy of investment! You remember the old saying, buy low and sell big. But apply logic to that for a moment: to do so successfully means buying when the herd is selling (driving prices lower) and selling when the herd is buying (driving prices higher). It's easier said than done. Humans, as herd animals, represent the sentiment of the crowd.
Three key feelings adversely affect the returns: fear, greed, and frustration or impatience. One must always stay calm in investment and business. As long as the underlying reasons for your investments have not changed, your emotions should not change either. Professionals bring logic to investment decisions rather than let emotions take over. Which is why they are able to maintain disciple and patience. Also, reassurance from the professionals often brings balance to the agitated minds of the investors and stops them from making irrational decisions. Read more about how market sentiments can affect your investments here.
6. Investment Philosophy and Research:
Most Research analysts, after being active in the markets for years and learning from experience as well as gaining advanced certifications, develop their own Investment philosophies and strategies. This is directly reflected in their work but is otherwise unavailable to analyze, study or even have a glimpse at. If you are one of the 'curious and eager to learn' type of investors, then being associated with a professional investment advisor can greatly work in your favour! By studying whatever material, you are provided by your advisor, you can improve your understanding of the markets and observe the strategies your advisor puts emphasis on.
StockAxis regularly publishes research reports for its clients and also shares timely updates with regards to market movements. StockAxis privileged clients are also allotted exclusive equity advisors who are always eager to solve market-related queries. Moreover, they have the opportunity to have discussions with our research analysts with regards to our recommendations so as they can gain an insight into the reasoning behind the recommendations.
7. Constant Tracking and Timely Decisions:
When asked the question 'Can you maintain a constant track of your portfolio and make timely decisions so as to lock in your profit rather than lose track and end up losing the unrealized gains?' , Most Investors might respond in affirmative. Theoretically, Yes, they can. But practically? No! The fact that most long-term investors adopt a 'Buy and Hold' strategy, only to have their investments soar high up and come back down to the initial levels prove it. What good are unrealized profits if you fail to book them at the right time? Our schedules are busy. Having a look at the Nifty and Sensex levels once in a blue moon is not enough. Professionals maintain constant track and help you book those profits at the right time so that you can reinvest again at opportune levels. Isn't that exactly how one can make use of the compounding factor and market volatility?
We rest our case! It is clear what a huge difference in hiring an investment advisor can make for your portfolio. However, it is important to make sure that you hire a trusted advisor who is SEBI Registered. Be sure to check the past performance of the investment advisor in order to make sure that your portfolio is in quality hands. [Check StockAxis Performance here]. Happy Investing!