Friday, 16 Nov 2018

Why DIY financial planning doesn’t work

201829Oct


Why DIY financial planning doesn’t work

 

You consult qualified doctors for healthcare. So why should it be different when it comes to your financial health? You should consult your financial expert to achieve your financial goal. Do not depend on the Internet for your financial planning because it cannot consider your emotions, sentiments, and the risk appetite.

 

While most of us follow this standard procedure when somebody is ill, we don’t do the same when it comes to managing our finances. Though investing and financial planning are complex matters best left to an expert, many of us insist on doing these ourselves.

And, Internet has nurtured a do-it-yourself (DIY) culture that allows consumers to buy most of their necessities online.

The ‘clickit-get-it’ functionality encompasses almost every sphere of our lives. You can buy, sell or invest without any human intervention in the value chain. The question is: Does DIY attitude always work in your interest?

A host of investment platforms have mushroomed in recent years, promising to make your financial decisions easier. They offer comparisons of all kinds, particularly on the key parameter of recent performance —vis-à-vis market trends and vis-à-vis other schemes in the same category. These investment platforms are selling mutual funds, insurance plans and their numerous variants.

There is no denying that these portals have the utility of their own, especially in a situation when somebody has to make simple investments quickly to derive Section 80C tax benefits at the end of the financial year.

But can they offer a holistic solution to more complex long-term objectives? Can an online platform deliver everything that a certified financial advisor does?

Coming back to health, how do you deal with common ailments such as a cold, flu or a cough? Walk into a chemist shop and you might be given some generic medicine which would solve the problem. And what if the ailment is not ordinary? Would you still go to the chemist for a solution? You can’t risk a wrong prescription and will definitely consult a qualified medical practitioner.

The role of a qualified financial adviser is no different from what a doctor does for your health. He earns his bread and butter by safeguarding your financial interests, so he would look for the best solution for you given your financial situation and investment objectives. It is also not a onetime intervention. He continuously monitors your portfolio and the market situation and tells you the best solutions both in booming or adverse situations.

Some of us take the DIY route of online investments to save time. However, time spent discussing the investment with a qualified financial adviser will help us make a more informed decision that suits our risk profile and fits our needs. A young person, who has just started working, can afford the DIY mode for buying ELSS funds to save tax this year. But if he has to plan for the next 10-20 years or more, the DIY approach would hardly be advisable because his needs would be far more complex.

Remember, professional athletes have more than average understanding of how to take care of their fitness. Yet, they hire fitness instructors to achieve peak performance. You should too.

Courtesy: - ET Wealth Date: - 29 Oct 2018(Rahul Parikh)

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