Do I really require an Investment Advisor

We do those thing ourselves which we think we are capable of but we leave some job to be well take care by some other either they are more capable ,better than us in terms knowledge skill or we are short of time . 

Investment is a subject which is off late many people think they can do as much better on their own as information are readily available through web.

Its very true that information are easily available but deciphering the information is more important before taking investment decision. If we have to take decision on our own money we become either biased or prejudiced , plagued by greed or fear , induced by what most are doing so it has been seen that our investment decision making behaviour is not so prudent or rational what it should be .

Few recent examples I can quote is mad rush for Gold investment or stopping SIP investment when markets were down . Lets analyse both decision making behaviour .

Yes Gold has given phenomenal return throughout last 20 years . Last 20 years return has been x% , 10 years – y 5, 5 years – z %  but last 2-3 years it has given almost 100% return .  Now how it has happened suddenly that investors are willing to buy at many more times than what they were going for earlier. Simple with equity cycle well beaten , rising inflation , gloomy global economic scenario led to this high rise. But all those who are buying today are they sure that these factors will remain say 3 years from now .So are we going to see a mad rush for liquidation of gold and then many will weap over losses .

Again SIP basic principal is NOT TO TIME the market and DO RUPPEE COST AVERAGING for a long time till one can invest . Its like building a corpus for retirement or for meeting very distant financial goal. If we buy same asset at lower price you buy more quantity and with price recovery will gain more . But most investors withdrew because their recent some investment where showing negative return  . Rather than being governed by rational  thought they were governed by emotional thought . How come long term investment plan becomes something of few months ? When I had thought of not timing the market , I have timed it by stopping SIP investment . What was a good opportunity for a big gain as many months of low NAVs if followed by some months of high NAV just before withdrawal you gain a lot .  To illustrate the above example let us see 3 situation (1) NAV being volatile due to market being volatile (2) NAV just moving up and up (3) NAV going down and down and then moves up , volatile and then is at lower value than what was when first time invested .

		Scenerio 1				Scenerio 2				Scenerio 3
	SIP		Lumpsum		SIP		Lumpsum		SIP		Lumpsum
Amount	10000		100000		10000		100000		10000		100000
Period	NAV	Units	NAV	Units			NAV	Units			NAV	Units
1	40	250	40	2500	40	250	40	2500	40	250	40	2500
2	38	263.16			43	232.56			37	270.27
3	34	294.12			46	217.39			36	277.78
4	31	322.58			48	208.33			33	303.03
5	33	303.03			52	192.31			32	312.5
6	29	344.83			54	185.19			31	322.58
7	26	384.62			56	178.57			28	357.14
8	28	357.14			59	169.49			25	400
9	25	400			61	163.93			21	476.19
10	29	344.83			62	161.29			19	526.32
11	26	384.62			65	153.85			17	588.24
12	29	344.83			67	149.25			14	714.29
13	33	303.03			68	147.06			16	625
14	28	357.14			70	142.86			18	555.56
15	34	294.12			72	138.89			15	500
16	27	370.37			74	135.14			20	416.67
17	24	416.67			75	133.33			24	400
18	28	357.14			76	131.58			25	370.37
19	31	322.58			78	128.21			27	333.33
20	35	285.71			81	123.46			30	312.5
21	37	270.27			82	121.95			32	294.12
22	39	256.41			84	119.05			34	294.12
Tot Units		7227.2				3583.7				8900
Tot Amt Recd on Rep	40	289088		100000	85	304612		212500	35	311500		87500
Tot Amt Invested		220000		100000		220000		100000		220000		100000
Profit / Loss		69088		0		84612		112500		91500		-12500
Money grew by times		1.314		1		1.3846		2.125		1.4159		0.875

Interesting finding is that in even if NAV grew more than double in 2^nd case still when redeemed money grew lesser than case 3 where in fact the end NAV is lesser than starting NAV . Also even when no return in case of lumpsum investment in case 1 still money grew by 1.314 times when done through SIP .

This is one of the many examples which can be given to shown that investors might think that they have taken right decision but may not be the case.

So here comes role of right investment advisors that guides an investors what to do and what not do in different market scenario . Investment is not all about return in a linear direction but it is also about taking decision keeping objective and past trend in  mind , analyse the present trend, performance , take corrective action only when required as it could be misleading also as shown above and above all is in line with what an investor really wants . All this can be done only when you have an well informed investment advisor with you .