I am 38 years of age. I am 38 years old. I am very conservative when it comes to investing in financial markets. I prefer investments with fixed returns. 90% of my corpus was invested in fixed deposits and 10% equity via MFs. My investment strategy has always been DIY. I believe financial advisors are simply insurance and mutual fund distributors, who are motivated by commissions that eat into you gains. What investment strategy is best to help you achieve your financial freedom goals?
-Ashish
Fixed-income investments are the best option for investors who don’t want to take on financial risk. Ashish is very aware of his risk and is doing his best to save money for a financially independent retirement. His strategy may have worked in the late 1990s, when interest rates on deposits were at 10% p.a.
Today, we live in an environment where interest rates are as low at 4.5 to 5.5% p.a., inflation is at an all time high, and markets are volatile because of the effects of a pandemic or the ongoing Russia-Ukraine conflict. This conservative strategy is not in Ashish’s best interests. His gains after inflation and taxes will not be sufficient to meet any financial goals.
I would recommend that you trust a fiduciary to protect your interests. Because they are subject to regulations that protect investors interests, choosing a SEBI-registered investment advisor is a safer bet. Financial advisors can offer advice on Mutual Fund investments and insurance products, but it is up to you to decide whether or not to proceed with the investment. Additionally, this is just a small portion of what an advisor does.
Their primary goal will be to understand how money works in your life. This would include understanding your income and future earning potential, breaking down your monthly expenses and managing your debts. They will then create a financial strategy to help you reach your financial goals. Advisors are responsible for ensuring that you adhere to your financial plan and managing your emotions to avoid any market volatility.
You need to diversify your investments beyond fixed deposits in order reach any financial goals. There are many low-risk asset types, such as debt funds and government bonds, that can help you safely diversify your assets while generating inflation-beating returns in the long term. A financial advisor can help you determine your risk tolerance, risk capacity, risk tolerance, as well as recommend investments that will help you achieve your financial goals.
Tarun Birani, founder & CEO TBNG Capital Advisors, answered your query.
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