The Importance of a Financial Advisor & What Do They Do?

History tells us that stocks tend to outperform all asset classes over the long-term. But while paper returns from equities and equity mutual funds remain strikingly impressive, the unfortunate reality is that few investors actually end up reaping their rewards to the fullest possible extent. More often than not, the reason for this “behavioural gap” is the lack of support of a qualified, competent and unconflicted Financial Advisor.

The need for support from a Financial Consultant becomes all the more pronounced during volatile times, such as the crash of 2008 or the dramatic fall of 2020 when COVID struck, when even the safe haven of debt funds proved fickle.

During turbulent times, investors start doubting their long-term financial plans and start questioning their investment decisions. Just a few such questions are – Should you stay invested or redeem? Should you switch your money to less risky assets… or switch your money into more risky assets? Will markets continue to fall further? Should you rebalance your portfolio at this time? Should you stop your SIPs and restart them at a more opportune time? And, so on and so forth. In testing times like these, a Financial Advisor can help you stick to the path towards your financial goals. Here’s how.

Saves you from greed and fear

Guess who is your worst enemy when it comes to creating wealth from your investments? The answer is – you, yourself! As markets oscillate between the extreme pessimism and extreme euphoria, even the most seasoned investors fall prey to greed, fear and a host of other behavioural traps. By drawing upon their experience of past market cycles, a seasoned Financial Advisor can help you sidestep regrettable investment decisions such as bailing out at market bottoms or piling on investments near market tops.

Helps you avoid regrettable investments

It’s a sad truth that a poor investment is always lurking around the corner. From ULIPs to junk bonds to overvalued IPO’s, investors often tend to fall prey to bad investments – usually goaded by salespeople who are pretending to be Financial Advisors! Having a trusted Financial Advisor who can trawl through the fine print on your behalf can be extremely helpful in this regard, as you’ll be able to steer clear of getting locked into poor investments that can end up destroying a great deal of your hard-earned money over the long term.

Keeps you Goal-Focused

By utilizing technology to keep you aligned to your goals, A Financial Advisor can help you see the bigger picture with respect to your investments. By ensuring that you invest according to a fixed roadmap with pre-defined time bound milestones, your Financial Advisor can ensure that your investments are perfectly aligned to the tenor of your goals; hence, only long-term money flows into higher risk assets. As a result, you’ll be a lot more immune to the ups and downs of the markets, because your perspective to investing will be dramatically and positively altered. Usually, a bionic model such

Helps you select the right investments for your Financial Goals

Most investors tend to rely on star ratings or 1-year returns as the barometer for choosing investments. However, this always ends up backfiring, because what goes up comes down – and vice-versa. Alternatively, many investors tend to get lured by glossy advertisements and investing into NFO’s or other suboptimal investments. Using their expertise and drawing upon concrete research that is generally not available in the public domain, a Financial Advisor can ensure that you select the right investments for your portfolio. In doing so, your Advisor ensures that your portfolio is spread across investments that have the potential to outperform in the future and deliver fantastic risk-adjusted returns to you over your defined investment timeframe.

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