Do you need financial advisor before investing in mutual funds?


Investing in mutual funds is among a various plethora of options available to any investor. And this is the very first challenge an investor faces while deciding on where to put his/her hard earned money. It is a challenge because the objective of the investment is not simply to earn from the savings, but other objectives make it challenging. Other issues which bother any individual includes, safety, ease of buying, holding and selling, convenience, economic, tax benefits and riskiness of the investment instrument.

It is also challenging because every people have his own set of preferences and not every investment options fits in those sets of preferences. Some plan to invest so that they can fulfill their dream of buying a car or bungalow. So other may plan for their child’s education or marriage. Preferences are different but in most cases goal is one. The growth of money with safety. And Mutual funds’ investments provide these flexibilities.

However, the big issue is how to choose a portfolio of mutual funds schemes that suit our exact future goal. Here comes the need of an expert. Investment advisors or financial advisors are means for such guidance. Here in this blog, I will explain that why we need an expert advice before taking any mutual funds investing decision.

Financial advisors for investors investing in mutual funds making for the first time 

Suppose you are a beginner investing in mutual funds and you are in mid-thirties of your age. You have a monthly earning of INR 80000 and have expenses of INR 50000. You have a kid and your wife is a housewife.

Currently, you have 38% of spare money with you every month. Keeping aside INR 20000 from your monthly savings towards family contingency funds, you still have INR 10000 left to invest. This you plan to deploy in a mutual fund. But the issue is which scheme?

You can initiate with a balanced portfolio of 4-5 schemes and can split your investment equally into schemes that you choose. You have an option to select a large-cap oriented fund such as Mirae Asset India Opportunity fund, a multi-cap fund like SBI Magnum Multicap Fund, a hybrid fund such as Principal Balanced Fund, and a pure debt fund such as ICICI Prudential Long Term Plan fund.

In the initial phase, you may keep investing in mutual funds in 70-30 ratio. With 70% in equity, and rest 30% in debt fund. You can also think of allocating some proportion of debt to Hybrid funds to gain some edge over flexibility.

In the initial phase of your investment journey, you have the option to correct any mistake will minimal loss. But when you attain the certain age, for it you might have to pay the larger penalty. Especially, when you take risk of picking your tools for investments randomly and your investment did not turn out to be optimal. Here comes in the role of financial advisors, who are expert in picking and suggesting investments based on your future needs. You can try a trusted advisor on Moneydial. Money Dial is a platform which brings advisors near you at no cost.

Investing in mutual funds – Here is why you still need expert advice?

Now let us take another example, where I will explain why you will need a qualified financial advisor before making investment decisions. Especially, in case of investing in mutual funds. Suppose a 45 years old father with two kids in high school and a working wife as a hypothetical example.

This father of two is investing in mutual funds for quite a long time. Suppose currently he SIP in UTI MNC fund INR 1000, Franklin Smaller Companies fund INR 2000, Tata India Tax Savings fund INR 1000, Reliance Top 200 fund INR 2000, SBI Blue Chip fund INR 1000 and Axis Long Term Equity fund INR 1000.

From father’s side, or even while looking at his planning looks fine. He is investing INR 8000 monthly in diversified mutual funds portfolio. But is the diversification optimal and according to his near futures requirements? Who will judge whether it is an optimal portfolio or not? An investment advisor will do so. He must be qualified enough and also must be authorized by the competent authority of the land to render his services. Moneydial enlists exclusively such certified advisors from your locality.

A financial advisor is likely to look his portfolio from various angles which we might fail to track. He might suggest to lower equity exposure as there is negligible debt exposure. Debt funds cushion our portfolio during the bear phase of the market. Or he may suggest for a reshuffling of the portfolio to include more thematic funds. Thematic funds are currently 12% of the portfolio. He may analyze to come up with the fact that current portfolio comprises 25% of tax-saving funds and remaining 75% in large-cap (38%), small-cap (25%), and thematic fund (12%).

ELSS attracts most of us due to higher returns, yet we need guidance?

Everybody wants to become wealthy. And to do so they first save and then invests. But for to be wealthy this is not enough. You also need to understand investment like a goldsmith understands his tools. For instance, in the above example, the person chose the schemes with a good track record of performance. However, the portfolio is biased towards equity and that too is large-cap orientation. Approximately, 60% of tax-saving funds are in general are diversified with large-cap stocks.

Equity-linked saving schemes are tax saving funds. Higher returns attract most of the mutual fund investors. Then also, before taking such decision we need expert guidance. Let us understand this with another simple illustration. As an example consider a young engineer a new job. He got fascinated with BOI AXA Tax Advantage fund two years back. This scheme currently is fetching 40% return on the year while its 2-year return is 34.2% as on Feb 2018. Two years back from December 2015, he initiated investing INR 20000 per month as SIP for one year in it.

An equity-linked savings scheme (ELSS) comes with a lock-in period of 3 years. It starts from the date of investment. So, his investments will get unlocked from November 2018. All the units allocated over the year will get fully unlocked by October 2019. However, he can only start redemption from November 2018.

 Are you looking for an AMFI certified mutual fund advisor or SEBI registered  investment advisors near you? Register here for free.


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