Never ask for advice at social gatherings

Instead, set up an appointment for a later date to discuss your personal finance

In this article, we discuss three questions that you should not ask investment professionals in a social gathering.

Meeting life goals

First, never casually ask investment professionals where to invest. Why? You invest for a purpose. Often, it is to meet life goals such as buying a house or funding your children’s college education. Your objective is to accumulate wealth to meet such expenditure. Your ability to accumulate wealth is a function of several variables, including willingness to take risk and how much you can invest every month. Unless the investment professional knows all these variables, she is unlikely to offer you an optimal solution. For example, an equity fund may be appropriate for a time horizon of 15 years, but not for a short-term goal. Why? It takes a while for investments to recover unrealised losses after a market decline. Further, an aggressive equity fund could be inappropriate for a high-priority life goal. Why? A high-priority goal is one that you cannot postpone — funding your child’s college education, for instance. If you invest in an aggressive fund, you could suffer significant losses that could lead to failure of your life goal.

Second, never casually ask an investment professional to suggest avenues that offer returns marginally higher than bank fixed-deposit rate. Why? You have to invest in equity and bonds to create your goal-based portfolios. Bank fixed deposits form part of bonds as an asset class.

Market and investment

Third, never casually ask an investment professional whether the stock market is likely to go up or come down. Why? The direction of the market should not drive your investment decisions for your goal-based portfolios. You have to doggedly invest every month through a systematic investment plan in an equity fund till the end of the time horizon for your life goal.

But what if you want to directly invest in stocks to earn returns? You then require a trading plan. This involves knowing the entry price, the price target and the stop loss for each stock you want to buy. Unless the investment professional can provide all these variables, just getting the list of stocks to buy may not always help.

If you meet an investment professional at a social gathering, set up an appointment for a later date to discuss your personal finance, should you require professional advice. But if you are self-managing your investments, you can ask the professional about recent developments in the financial markets. That would give you insights about managing your investments.

The writer is founder of Navera Consulting. Send your queries to

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