In the current environment, stakeholders in the financial services industry have taken the initiative to educate individuals about the need and importance of savings and investments. For any individual who has an income, responsibilities and goals, learning about making the correct investment decisions is imperative. When it comes to making optimal investment decisions, there are two things that come into play: 1) correct information & knowledge and 2) overcoming behavioural biases. The first step towards making optimal investing decisions is recognising the relevance of the above two factors and the second step is to seek the correct advice. A financial advisor can help you navigate the challenges that both of these present by keeping you updated with the relevant product information and by guiding you through turbulent market conditions.
Financial advisor as a provider of information and knowledge
The investment landscape is in a constant state of flux with new products and services being introduced at fairly short intervals. These products can be fairly nuanced and are designed to cater to the risk/return requirements of every kind of investor. Every investment option has a certain degree of risk embedded in it, has an ability to generate a specific range of returns and is bound by time horizon. Mirroring this, every investor has a certain risk profile, needs a minimum return from his portfolio and is constrained by investment time horizon. A portfolio will perform optimally only if the idiosyncrasies of the investor are well aligned with the investment product profile. A good advisor will ensure that he is not only aware of the various products available in the market, but also that he keeps his client updated with new options or even suggests existing options in response to change in the circumstances of the investor. While it is good to trust your advisor, it is better to have atleast a basic understanding of your investment portfolio and the options available to you.
Financial advisor as a guide through turbulent times
A host of behavioural and cognitive biases constantly conspire to limit our ability to make optimal investment decisions. Interestingly, these biases are so strong that despite being aware of their existence we often succumb to them. A financial advisor can be of great help in overcoming behavioural biases and guiding through turbulent times. An advisor can help you draw up a comprehensive investment and asset allocation strategy that can be the guiding principle for your exposure to different asset classes. Additionally, a good asset allocation strategy can stop you from making irrational decisions during turbulent times when asset prices get skewed.
An optimal investment portfolio can play an integral role in helping you reach your financial goals. A financial advisor can help you make optimal investment decisions.
