Many people give an unsolicited advice to their friends, relatives or colleagues, when it comes to investing. Generally, investment decisions are affected by our values, emotions, etc. But a good investment plan requires a right strategy based on principles like diversification, asset allocation, valuation and downside protection much more.
A few types of financial advisers sell investment products which give them high commission and are not suitable to client’s financial goals. As we see the recent market crash in the stock market due to Covid crisis, Insurance agents take an opportunity out of this and always tell us that traditional insurance policies are safest. An important aspect of a healthy client-advisor relationship is honest and open communication that goes in both directions. Clients might express a desire to make a particular financial move or to invest in a particular stock, mutual fund, gold or other investment vehicle. A good advisor will tell the client whether or not they disagree with this suggestion and, if so, the reasons for the opinion.
Here we discuss few points related to advice from unqualified people;
Tips from friends and relatives ruin your finances
Many people invest money based on their friends, colleague’s advice, and media information. I heard a lot on social media that people are investing blindly on advice of someone who does not have proper knowledge of the pros and cons of that investment. In recent times, markets are in a bullish trend, everyone is suggesting to invest in the stock market. Many people who are not even invested in the market also give suggestions, people also attracted more to invest in the stock market in bull run. Whether it is a bull or bear market, wrong investment impacts your financial goals. Don’t be influenced much by bull and bear markets, control your emotions and design a portfolio with proper investment strategies to build your portfolio.
In the current bull market, everyone is making better returns. People who are getting more returns become overconfident and start giving unnecessary advice to their friends, relatives etc. Even though they are not experts, they do not care. For example, we read a lot about investing in Bitcoin. Many online platforms are starting advertising that this is the top performing asset class which given maximum annual return of 1300%, 400% average returns in 4 years. The truth is that there is always a question of risk and reward ratio.
Working with the types of advisers
Good financial advisors use active asset allocation. This means they invest according to market fluctuations. Active investing takes advantage of opportunities based on changing economic and market conditions. I think financial advisors who stick to passive asset allocation models such as without proper portfolio management strategies, blindly go with SIP plans irrespective of market conditions. These people who don’t have proper knowledge and skill but charge you and throw the stone in the dark room and escape.
Big investor influence
This is exactly what would happen on a smaller scale if the stock on which the big investor is giving free tips is also fundamentally a good investment and is a likely bet otherwise. the more people buy the stock, the more the chance for the price to go up. The big investor stands to gain if the conviction that they hold is shared by multiple other investors. In that way, they certainly stand to gain when the price goes up.
Online Platforms
There are lots of people online who give answers to your questions, they’re simply a person online trying to answer your questions in an informed way. They aren’t intimately aware of your situation, they are simply trying to inform you in the simplest way possible. But you can’t expect the quality of investment advice from a stranger online. It’s a completely different scenario from going to an investment advisor and from reading a random statement online.
If you want sound, actionable advice, you should always talk to an expert. A professional who understand your existing financial position and will give you best advice.
Комментарии