Professional Advice vs DIY: Which investment approach is beneficial for you?

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February 25, 2020 5:33 PM

You have to invest the money saved in such a way that it provides you the optimum return to make your life goals achievable.

savings, investment, Warren Buffett, fixed return investments, equity investment, equities, equity MF, mutual fund, MF, financial advisor, regular plan, direct plan, advisory fees, do it yourself, DIY, financial planning, finacial goals, diversification, market risk, company specific riskFor savings, you need self discipline to cut unnecessary expenses.

To achieve various life goals and spend a tension-free life after retirement, it is very important to save money as much as possible and invest the money in the most efficient way to accumulate funds for each goal. For savings, you need self discipline to cut unnecessary expenses, so that a considerable part of you disposable income remains intact even after spending on necessities.

Investment guru Warren Buffett had said, “Don’t save what is left after spending, but spend what is left after savings.”

However, saving a lot is not sufficient. You have to invest the money saved in such a way that it provides you the optimum return to make your life goals achievable. In other words, you have to make your money work hard for you and generate a supplementary income.

According to Buffett, “Never depend on a single income. Make investment to create a second source.”

So, investment is necessary not only to meet your financial goals, but to reduce dependency on a single source of income and to protect you from financial disaster in case the primary source of income stops abruptly.

While fixed return investments fail to beat inflation after taxation, you need to take some calculated risks to invest in such a way, that it generates enough return to beat inflation comprehensively in the long run.

Successful business houses do it by generating superior returns. However, starting a new business is a risky affair, as it may thrive or it may fail to survive the competition.

So, it’s better to invest in equities of successful business houses to get a share of the profit they generate.

However, equity investments are subject to market risks, so you need to put only that part of money, which you may spare for long term, so that you may remain invested to withstand the short-term market turmoils.

Apart from market risks, equity investments also involve company-specific risks. So, you have to be very careful to choose, in which company to invest and to reduce the risk, you need to invest in a number of companies.

Otherwise, you may invest in equity Mutual Funds (MFs), which have diversified portfolios of quality stocks picked up by qualified and experienced fund managers.

You may pick the equities or equity funds by either taking help of a professional financial advisor or you may do it yourself (DIY).

For investing through an advisor, all you need to do is to select a good advisor of integrity and experience and pay professional fees to him/her or may take the help of an experienced broker or distributor, who earns commission by offering regular plans.

If to do it yourself (DIY), you may save the advisor’s fee and earn a bit more by investing in direct plan. But from financial planning to execution to monitoring, you have to do it yourself to ensure that you don’t end up losing your capital invested.

Also read: DIY Mutual Fund investing: Key things to keep in mind before starting SIP yourself

However, DIY will be beneficial, only if you have knowledge of the nitty gritties of financial planning and time to study to upgrade yourself, do research to identify suitable investment avenues and to monitor investments from time to time.

Otherwise, it would be beneficial for you to concentrate on what you may do better and enhance your efficiency to earn and invest more and leave your investments on a trusted advisor.

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