Financial planning is a chain of events which are process led and missing out on even one of the links is catastrophic. A comprehensive financial advisor is the key to meeting your financial goals.
Summer is upon us and most of us would have already started packing our bags to hit the road. But would it surprise you if I were to tell you that your investment journey is quite similar to your road journeys?
Over the last few years, equity market has gone through a tough cycle. Investors have, like in the past, panicked and many have given up on their financial goals and withdrawn from their mutual funds in panic; they have either stopped their systematic investment plans in panic. This is not the first time this has happened, and I can assure you this will not be the last.
At the same time, investing has become easier. The introduction of direct plans, the coming up of online investment platforms everywhere have given us multiple options to invest and also in a cost-efficient way. Over the years, investment has become not just a destination but also a bit about the journey. Let’s see what we can learn from our road trips to make our investment journeys also as smooth.
Where’s that map? If you are going on a road journey, you would typically carry a map. This is especially so if you are going on a self-drive foreign holiday. After all, you don’t want to be lost.
Investing is pretty much similar. Here, your financial plan is your map. You cannot start investing without a plan, else you must be putting money anywhere and everywhere without a direction.
You also need to see convenience. A hatchback would be too small, I guess. But would a sedan be enough for you and your family or do you need a multi-utility or sports utility vehicle? In summary, your vehicle should be comfortable.
Similarly, your investment journey should also be comfortable. Do you have an emergency corpus to fall back on while your investments continue undisturbed? You don’t want to dip into your savings every time there’s an emergency, else your money will not grow. Also, check if you invest in a paperless and digital way and how you are going to keep track of your investments. Either ways, you should be able to monitor them periodically.An experienced driver helps
Whether it’s a self-drive holiday or you aim to hire a professional one, the driver should be skilled and experienced to drive on highways.
Similarly, whether you invest on your own or hire a professional investment advisor, one has to be skilled and knowledgeable to navigate the markets. Your advisor’s interest and your interest should be aligned. It also helps if your advisor is empathetic and accessible.Every journey comes with risks: manage them
Good road trip planning entails that we check the brakes of our car before we start. The car ought to be good condition; tires, wipers should wipers, oil etc. in your car before you start off?
Similarly, you need to prepare yourself before your embarking on your investment journey. Whether you opt to stagger your investments through systematic investment plan or invest in lump sum depend on how your income comes to you; salaried and regular income or business income that varies month or month. Also, how well you manage your risks on your investment journey depends on what sort of instruments you choose to invest in.
And if there are any road side breakdowns, would you have enough support along the way to assist you to, say, change your tire, repair your car and so on? Similarly, it helps if your advisor is accessible.
If the above planning for your road trip also makes sense to you for your investment planning, then it’s important to map out your investment journey properly.
Is your advisor offering the full suite of financial planning services like your risk profiling, a detailed financial plan, goal-oriented, solution-oriented investment vehicles, reducing market risk and liquidity risk, undertaking goal and portfolio reviews, doing portfolio rebalancing based on your risk profile? Financial planning is a chain of events which are process led and missing out on even one of the links is catastrophic. A comprehensive financial advisor is the key to meeting your financial goals.
To sum up, not everything that is cheaper is better for you. Cost savings can be notional in the long journey of meeting your important financial goals. There is always a cost attached to quality service however, make sure that there is actual value that you receive for the commission / fees that you are paying for the financial advice you are receiving.
The equity markets over last couple of years have given us a window to figure out what’s important. Fear will rear its ugly head once again and greed will do so too, in the future as well. The cycle will repeat itself. It’s critical to learn from the past to ensure that you take the right decisions in the future.(The author is CEO at Finedge)