“Happy investors are not those who see their investments growing, but those who see their investments growing compared to others.” – unknown
Unknown
Do you agree?
Let me share a story with you. Sachin, a senior executive at an MNC, has been a dedicated mutual fund investor for the past 10 years. He carefully planned his asset allocation, balancing equity and debt, and included a mix of small, mid, and large caps. With a solid understanding of the risk-return profile, he intended to stay invested for the long term. His strategy paid off, and his portfolio delivered impressive double-digit returns over the years.
One day, Sachin was discussing his investment strategies with his colleague, Rahul. Rahul showed him a mobile app listing the top-performing funds, none of which were in Sachin’s portfolio. Disappointment set in. Sachin felt he had lost out on potential gains due to poor investment choices. He decided he needed to make changes immediately before it was too late. (Also read: – Why Simple is Better: Understanding Complexity Bias)
But that evening, while watching the T20 World Cup final with his family, he saw an advertisement claiming that investing in direct mutual funds could save up to 1% in commissions, translating to significant wealth over time. Sachin felt like a fool. How had he not known about direct mutual funds? His disappointment deepened, and he even missed the match-winning catch taken by Suryakumar Yadav.
The next day, Sachin informed his boss that he would be working from home and also planned to do some research on the best-performing mutual funds. He discovered active and passive funds, learning that active funds generally have higher expense ratios and often fail to outperform their benchmarks. He also learned that part of the expense ratio in regular active funds goes to banks and mutual fund distributors (MFDs), from where he has been doing his investments. His disappointment turned to anger. He felt misled by his MFD, believing they had recommended funds for their benefit, not his.
Determined to take control of his investments, Sachin decided to handle everything himself. He selected top-performing funds and switched many of his holdings without considering long-term capital gains taxes, reasoning that the cost was worth future gains.
Just as he started to feel in control and excited about his new strategy, he stumbled upon an article asking, “Did your mutual fund investment deliver a 100X return?” The article explained how staying longer in the investments have generated astonishing returns in the Mutual funds in the past years. The returns shown were all of the regular schemes, as direct funds didn’t have such a long history. The key was to stay invested to benefit from compounded returns.
Anxiety returned. Sachin realized he had redeemed his old, low-priced purchases, losing out on significant gains. Unsure of his next move, he received a call from his boss, summoning him to the office for an important meeting. He recognized that balancing his professional and financial life was impossible without professional help.
While surfing the internet, Sachin discovered SEBI-registered investment advisers. These advisers plan finances according to risk profiles and goals, review old investments, and suggest investment plans. They act as fiduciaries, offering transparent advice and only recommending direct mutual fund schemes, earning no commissions from product companies.
This sounded perfect to Sachin. He called an adviser listed on the SEBI website and had a detailed discussion about their fees and services. Convinced that a SEBI-registered adviser was the best choice, he appreciated the transparency, professionalism, and comprehensive guidance they offered, including taxes, loan management, and estate planning. The fee, based on portfolio value, seemed reasonable.
Relieved and hopeful, Sachin prepared for his important meeting. At the office, he shared his story and decision with Rahul, who listened patiently before asking, “Why pay the fee when you can get it for free?” Rahul showed Sachin the same app that had led to his confusion about top-performing funds. The app offered calculators, study material, and investment options in mutual funds, stocks, bonds, corporate FDs, and loans—all for free. (Explore more: The Real Cost of FREE Financial Advice)
And…
What do you think Sachin did? Yes, he downloaded the app, opened an account, and now spends considerable time on his phone, trading in the name of investing, and compromising with his Professional Life for Financial Investment gains. The portfolio performance, discipline and good money habits are now better known to him.
You may call it an Imaginary story, but this is how many investors nowadays are behaving with their investments and money life. Directionless, doing it themselves in the name of cost saving, compromising with their work, spending considerable time and energy on trading apps…and struggling to find answers to the below-mentioned questions
- Why my investments are not performing?
- Why my investments are not performing like my friends’?
- Why my investments are not performing like other investments? Am I in the Best Funds?
- Why pay a Fee to an advisor? when investments plus information plus execution and “advice” are available for free?
- Why to work with SEBI Registered Investment Advisers?
Let’s try to answer these pain points one by one.
1. Why are my investments not performing?
Investments can underperform for various reasons. It’s important to remember that market conditions, economic factors, and the specific performance of sectors and companies all play roles. In Sachin’s case, his portfolio was well-diversified and showed good returns over time. However, short-term performance fluctuations are normal. Long-term investments require patience, and comparing them to short-term performance metrics can often lead to unnecessary anxiety. Moreover, every strategy never performs every time. That’s why you should have a mix of different fund styles and strategies in the portfolio for optimum performance. You can never catch the best. (Learn More: Why Beating the Benchmark Isn’t Always the Best Investment Strategy)
2. Why are my investments not performing like my friends’?
Comparing your portfolio to your friends’ can be misleading. Each investor has different goals, risk tolerance, and time horizons. Never get distracted by other Portfolio performance. For instance, Sachin’s colleague Rahul may have a different risk appetite or investment strategy. It’s crucial to focus on your personalized investment plan, which is tailored to your specific financial situation and objectives. Remember, the grass often appears greener on the other side, but your strategy is designed for your unique needs.
3. Why are my investments not performing like other investments?
Different investments have varying levels of risk and return. For example, active and passive funds perform differently due to their investment strategies. Sachin learned that passive funds often have lower costs but may not always outperform active funds. Both Investments have their strengths. It’s essential to understand the characteristics and objectives of each investment. Your portfolio should align with your long-term goals rather than chasing short-term gains. (See Also: How many Investment Products should you have in your Portfolio?)
4. Am I in the best funds?
Determining whether you are in the “best” funds depends on your financial goals, risk tolerance, and investment strategy. What is best for one investor might not be suitable for another. Sachin realized that his long-term strategy was yielding good returns, but momentary distractions led him to doubt his choices. Reviewing your portfolio regularly with a financial advisor can help ensure your investments remain aligned with your goals.
5. Why pay a fee to an advisor when investments, information, execution, and “advice” are available for free?
While it’s true that information and execution are available online, professional advice provides personalized and strategic planning that free resources cannot match. Sachin discovered that SEBI-registered investment advisors offer fiduciary services, ensuring advice is in the client’s best interest. They provide comprehensive financial planning, including investment management, tax planning, and estate planning, which free tools cannot fully replicate. The fee you pay is for their expertise, personalized attention, and the peace of mind knowing your finances are in professional hands.
Why work with a SEBI Registered Investment Advisor?
Working with a SEBI Registered Investment Advisor offers numerous benefits that can greatly enhance your financial planning experience. Here’s why:
- Fiduciary Duty: SEBI Registered Investment Advisors (RIAs) are bound by a fiduciary duty to act in their client’s best interests. This means they provide unbiased advice tailored to your financial goals, without any conflict of interest.
- Expertise and Experience: RIAs have the necessary qualifications and experience to guide you through complex financial decisions. They stay updated with market trends, regulatory changes, and new investment opportunities, ensuring your portfolio is well-managed.
- Comprehensive Financial Planning: Beyond just selecting investments, RIAs offer holistic financial planning, including retirement planning, tax optimization, estate planning, and risk management. This comprehensive approach ensures all aspects of your financial life are coordinated and optimized.
- Personalized Advice: Unlike generic advice available online, RIAs provide customized recommendations based on your unique financial situation, risk tolerance, and long-term objectives. This personalized approach helps in creating a robust and effective financial plan.
- Transparency and Trust: SEBI Registered Advisors are required to disclose their fees and any potential conflicts of interest. This transparency builds trust and allows you to understand exactly what you are paying for and what you can expect in return.
- Peace of Mind: Knowing that a professional is handling your investments and financial planning gives you peace of mind. Sachin, for instance, found relief and confidence after deciding to work with a SEBI Registered Investment Advisor, as it brought structure, professionalism, and strategic planning to his investments.
In summary, there are lots of distractions around, which may hamper your financial life to a great extent. It is important to have a balance between your professional work life and financial life. Working with a SEBI Registered Investment Advisor ensures that you receive expert, unbiased, and comprehensive financial advice, which can significantly improve your financial well-being and help you achieve your long-term goals.
Manikaran Singal is the founder and Chief financial planner at Good Moneying Financial Solutions. He is a CERTIFIED FINANCIAL PLANNER CM and SEBI registered Investment adviser (Regd no. INA 100001620). He’s having 20+ years of experience in financial services space.
