Should you hire the services of a personal finance advisor?

Are we capable enough to make our own personal finance decisions? The answer is both “Yes” and “No” depending on our understanding of finance and how it works to create wealth. For the inexperienced and newcomers, securing the services of a professional personal finance advisor will help.

There is so much debate about hiring a personal consultant on social media platforms. Many argue how these advisers charge exorbitant fees while others insist on their necessary participation in all investment decisions. While all investors want to create wealth, much depends on their financial goals and risk appetite. However, what is important is their perseverance and their ability to evaluate the market. The latter is not possible without the necessary guidance, which is only possible with the expertise and experience of personal financial advisors. Even the best financial specialists seek advice and recommendations from advisors before putting their money into investments.

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You can call personal finance advisors by any name you want. This is because they not only help you with investment decisions; they are also for managing your emotions, dealing with market cycles, and helping you choose the right fund. According to research by the Association of Mutual Funds in India (AMFI), solo investors are more likely to lose their portfolios than investors who are guided by a financial strategist.

Understand why having a financial guide/advisor is a necessity rather than a luxury.

Performance diversity

You can choose funds according to their capitalization or their investment portfolios, but this does not guarantee similar performance. The performance of equity funds within the same or different categories varies widely. This implies that parking money blindly in funds based on their return or market cap will do more harm than good. A professional adviser will assess many variables before advising you on the right choice of funds.

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Prior performance

Choosing the best funds in retrospect didn’t help. Fundraising based on one and three year historical performance is not enough. Many people make the mistake of not looking beyond the profit and expense ratio. Poor quarterly performance has caused many people to liquidate their investments. Financial advisors make sure to hold hands when their clients are nervous. They steer them in the right direction by explaining facts more relevant to mutual fund purchase decisions.

Be firm with your investment decisions

Divide your investments into three categories: growth/quality MFs, sector rotation MFs, and economy-facing/dominant mutual funds. You can change the allocation among these three categories depending on the market scenario, so you can end up with a higher large-cap allocation or a higher mid-cap and small-cap allocation – so be dynamic in nature. Keep 70-80 percent in a strategic portfolio and the rest in a tactical portfolio to capitalize on any opportunities that arise in between.

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Never take investment advice from family members, friends, or social influences. Identify your own risk profile, invest in a combination of equity and debt-based risk profile output, and stick with it until your investment horizon or objectives are met, but remember to review the portfolio every six months or a year.

Personal financial advisors are in fact the doctors of wealth creation, helping many new investors to manage market cycles and hold their nerve during growth spurts. market.

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