Consulting a financial advisor is one of the most important steps towards becoming a good investor as it helps investors strategize their investment journey, ensure proper asset allocation and make the right decisions, says Kailash Kulkarni, CEO, L&T MF.
Kailash says that even after spending so many years in the industry, he has a financial advisor. Addressing the virtual Cafemutual Confluence 2020 Investment Marathon, Kailash shared that he still consults a financial advisor to ensure that he is on the right track to achieve his financial goals and to know the risks involved in various products.
For instance, recently he came across an insurance product, where the fee was only 3%. However, given that there were other miscellaneous charges, only 87% of the investor's investment was getting deployed in that product. Thanks to his advisor, he understood the minute details.
Further, Kailash added 8 mantras to become a better investor.
Planning - Kailash said that investors should diversify investments depending on financial situation, risk profile goals and investment horizon.
Select the right product - Next, investors have to select appropriate investment products that can beat inflation based on their investment horizon and risk appetite.
Get adequately insured - Investors must have adequate term insurance and family floater health insurance to have adequate protection and peace of mind.
Do due diligence before investing - Ask questions – why, when, where, how? And invest in well-regulated investment products only.
Commit discipline / invest like clockwork –Discipline such as invest regularly, start early, invest for the long term and avoid ad-hoc spending unless necessary is necessary in investments.
Trim tax bill - Invest in various tax saving instruments. Investors must consider the post-tax return of a product.
Ensure financial hygiene - Make a comprehensive list of assets, common email ID and mobile number for all investments, update nominee details, draft a WILL and keep the bank account details updated.
Build an emergency fund - Keep aside at least 12 months savings of your monthly expenses in relatively less risky assets such as liquid and overnight funds.
On the active vs passive debate, Kailash feels that actively managed funds are likely to beat passive funds in India for the next 3-5 years. Yet, investors can now look at passive funds to diversify and allocate around 10-15% of their portfolio to passive funds. After 3-5 years, depending on the market dynamics you can increase allocation to passive funds to around 25%.
