A friend in need is a friend indeed! When markets are witnessing extreme volatility and the investment landscape only has hues of red, a trusted advisor who regularly communicates with you is exactly what you need. A financial advisor is your all weather friend. He/she is someone who can help you navigate through the volatility storm so that you remain on track to achieving your financial goals.
Why an advisor is just the person you need in turbulent times?
An advisor can help you distil the information: When it comes to making important financial decisions, investors are often influenced by greed and fear. Warren Buffet famously quoted, “Be fearful when others are greedy, and be greedy only when others are fearful.” Unfortunately, more often than not, we tend to do just the opposite. In extreme market situations, such as the current one, these emotions of greed and fear get heightened. Due to fear and panic, investors let the fear of loss influence their investment decisions. It is easy to say, “do not panic”. However, anyone who has ever participated in the markets will agree that in extreme market situations, your sanity takes leave. Often, the source of this panic is information asymmetry and lack of knowledge. An advisor can sit down with you and explain the prevailing situation, the current and future risks and help you identify long-term opportunities.
An advisor can help you stay on course: In order to achieve your long-term and short-term goals, it is imperative that you put together a robust financial plan that accurately reflects your risk-return requirements. Integral to this is creating an asset allocation and portfolio diversification strategy that spreads your investments across multiple asset classes in certain proportions. When markets experience heightened volatility, these proportions can often get skewed. An advisor can help you rebalance your portfolio to maintain your asset allocation weights or advise you in case nothing needs to be done. Additionally, due to an avalanche of news flows, investors frequently make hasty decisions that may not necessarily be aligned with their long-term objectives. An advisor can help you stay on course so that you are at all times aligned with your long-term financial goals.
An advisor can guide you on whether you need to make adjustments to your asset allocation strategy: In extreme market volatility, prices generally tend to decline as investors prefer to exit positions in times of uncertainty. The thing about markets is that it is challenging for individual investors to determine whether the impact is short-term in nature or there are likely to be fundamental changes in the market construct. An advisor can help you monitor the situation and give you advice on whether you need to make adjustments to your asset allocation strategy. He/she can also suggest alternative investments and strategies in order to ensure that you are on track to achieving your long-term financial goals.
It is only in times like the current one when investors can truly understand the value of a financial advisor. A financial advisor can also be your friend and handhold you through turbulent times so that you emerge relatively unscathed once the dust has settled.
