Amit, an investor, initially invested in real estate or fixed income. Of course, he was advised by parents and close friends/relatives. These investments did not deliver enough. He is disappointed. He now is watching the fabulous returns of equity and all his friends are over the moon singing the song.
He is all set to fly too. In fact, he wants to make up for all the lost years and the lost returns with this investment. It is almost like he wants to seek a revenge.
Ajay burnt his hands in direct equity investing, sorry punting, and now wants to make it up with equity mutual funds. He wants 30% annualised returns.
Neha relied on her banker, did not ask the right questions and got saddled with the endowments, ULIPs and other assured income insurance products.
Now she has been reading over the internet and trying to understand what to do. She refuses to see any one selling insurance.
All of the above succumbed to agents and brokers as they suspended rationality. They paid hidden fees and commissions, sometimes to the tune of lakhs of rupees.
No matter. Now they are looking for some help (read advisors).
The issue is when it comes to genuinely paying a good advisor out of their own pocket (no commissions from products), the investor pulls out the most advanced calculator to see if it makes sense. In fact that is the only time they come out not in evaluating financial products.
The alpha, beta, theta and gammas go s*** scared as they are finger punched.
It is funny that the lakhs went away unnoticed. But unseen lakhs in commissions is OKAY. The transparently asked for fees which is a half or one-third of the commissions charged directly is very PAINFUL.
No problem with that. After all, you need to find value for your money.
The problems that you need to truly resolve are elsewhere. Here are a few from those that talk to me.
- You are still thinking 3 to 5 years. You don’t realise it is the next 50 years or more that you have to get your money to work.
- You still get attracted to highest returns, totally ignoring any risk from the working.
- You invest money when the markets are raging and will pull it out or freeze when the tide turns.
- You are still watching shouting pundits and experts on TV and receiving emails and SMSs informing about the trade of the century.
- You still make random transactions based on the news and events. There is no direction in which you are moving. Or may be it is called the ‘unknown’ direction.
You should be ready to deal with the avalanche that this may bring along with the advisor, if you work with one.
Don’t make yourself the victim in the revenge you are seeking.
If you are hiring an advisor to help you take care of your investments and protect the money from YOUR whims and fancies, you have to find and work with the right person.
And you have to make it worth the time for him too.
Each step in your investment journey has to yield a compounded result over a period of time. And I mean positive compounding.