The tax saving season is upon us – and with the recent proliferation of “do it yourself” investing, a lot of investors will make their 80C investments online without the support and advice of a human advisor. And quite a few of them will, unfortunately, end up making regrettable investing decisions!

While the convenience that technology has afforded us when it comes to paperless investing and portfolio management is undisputed – it is, like most things, a double-edged sword. Investing, after all, is a mental game just as much as it is a logical & analytical one. And although technology has made tax saving investment easier, has it made it more effective? Anecdotal evidence suggests – no, not quite.

First, you may end up getting stuck into a wrong product that’s not aligned with your goals and objectives at all. Just type “tax saving investment” into Google, and you’ll discover that the results are mostly peppered with life insurance companies who have literally monopolized all searches related to Section 80C related investments! Naturally, once you enter the insurer’s website, you’ll likely find yourself enamoured by all the glossy fine print and the well-thought-out financial planning process and end-up investing into a life insurance plan that’s probably not going to give you a great return over the long term. A human advisor could have proven extremely useful here by helping you dissect all the fine print and assess the suitability of the plan basis your long-term goals.

Also Read: Confused between Term Insurance and Life Insurance? Know the difference before buying a life cover

Second – even if you do end up investing into an ELSS (Equity Linked Savings Scheme) which certainly has the potential to generate superior long-term returns compared to life insurance or government schemes, not having the support of a human advisor can lead to numerous roadblocks on your investing journey. Since ELSS funds basically invest into the stock market, they are essentially very volatile. And while the mandated lock in period will ensure that you do not take emotional decisions when markets become choppy for the first three years, what about after the lock in period expires? Considering that a 3-year investing timeframe is actually woefully inadequate when it comes to equities, will you remain invested despite not being forced to? We find that most unadvised investors really do not end up maximizing the wealth creation potential of their ELSS investment because they end up panicking and redeeming too soon once they are freed from the clutches of the stipulated lock-in.

Again, a combination of humans & technology can make a world of difference here. Technology could help align your ELSS investment to a clearly defined, long term financial goal. All of a sudden, a frivolous tax saving investment transforms into a meaningful one that is an important part of a much larger goal-based financial plan. And in our experience, when you “invest with purpose” instead of “investing for returns”, it unlocks the potential for true long term wealth creation by removing a host of behavioural biases from the picture. It goes without saying that a human advisor would be required to manage the goal-based investment by regularly reviewing your goals and your portfolio, and keeping you on the straight and narrow path to investing success!

Here’s another interesting thought – for all those who believe that investing algorithms are the best way to go because they are free from human biases; you should know that the algos themselves incorporate the biases of the humans who created them in the first place! So, if the person who wrote the tax saving algo believes that a 5% return, opaque investment that’s locked in for 30 years is the best way to save taxes, the DIY platform will end up suggesting that to you. And mind you – a lot of pure DIY investing platforms and built by very competent technocrats – who unfortunately have very limited experience in financial planning and investment management.

To conclude, we believe that the convenience of technology is fantastic when it comes to helping you with your yearend tax saving investment. However, it’s only when this is married to the support of a competent human advisor that this tax saving investment gets turbocharged into something bigger – that is, a means for creating long term wealth. Choose wisely!

(By Aniruddha Bose, Chief Business Officer, FinEdge. Views are personal)