Sunday Mood: Haircut in times of lockdown - Why an expert is required!

Since the lockdown was announced people have often complained of not being able to remember what day of the week it is! Our Sunday Mood article reminds you that another week has passed and it's a Sunday yet again! The past week can be termed as one of the most turbulent for the mutual fund industry with a leading AMC shutting its debt funds virtually trapping Rs. 30,000 crores of investor money. But, our topic of discussion today is not anywhere related to the debt market or the financial haircuts that banks and financial institutions take on their loans! Enough of that discussion has happened in the week that has passed by over phones, conference calls & Zoom conferences.

Lockdown has also brought in another type of problem for men which is the inability to get a haircut! With the Home Ministry quashing the hopes on 25th April of letting salons open the Indian men realized that it is still days for them to get their much-awaited haircut. But here was me, not ready to be bogged down by the Home Ministry order! I readied my wife to give me a haircut. We watched a couple of youtube videos for approximately 20 minutes and set off to give me a perfect haircut. The curiosity and confidence of my wife were high and I was also pretty sure that it will be a good job as it looked pretty easy on the video. So, I mounted on the stool, and my wife ready with a pair of scissors and comb set to do her first haircut ever. The first few strokes seemed fine but within 3-4 minutes we started realizing that what looked easy on the video is definitely not easy. Panic set in and my wife desperately started trimming random areas of my head in order to bring uniformity but to no avail! Seeing this the expert in me woke up and I myself tried a few strokes of the scissors but it further complicated the job. The end result? I have been searching for a cap/scarf as the current condition of my hair will make me a laughing stock!

Long story short, the idea of trying to be the expert backfired and I am in need of a professional hairstylist (aka barber) asap! While this incident happened with me, this made me realize that this sort of misadventure is more common in the financial industry. A lot of investors today trade in investment products like mutual funds in direct mode. This helps them bypass the advisor and save around 0.5-1% on returns and also save on the advisory fee that an advisor may charge! During times of bull market, the investor may get an impression of having expert equivalent skills as the whole market is surging so even the funds that have been chosen by our expert investor are bound to perform. The real test of patience comes when things start turning sour, when the bears take over the market and even the best performing funds start showing double-digit negative returns.

An advisor is that expert who has the skills to help you wither the storm of a bear grip in the markets. He isn't a predictor and may not be able to foretell you the coming of a bear market but years of dealing with the markets have definitely boosted the patience and judgment levels of experts and they know better how to deal with times like these. An expert also provides you with a shoulder, a hand to rely upon during times of acute market distress. And lastly, an advisor is the one who keeps your asset allocation in the right order! If your asset allocation is set as per your needs then bear markets are only a temporary phase that may affect your portfolio values but won't affect your liquidity position. The role of an advisor is paramount in maintaining asset allocation. We often observe many SIP stoppages during the times of market downfall and the majority of these come from direct accounts. The reason for this is again that in the absence of an expert the investor panic sets in faster than required which replaces logic and leads to adverse decisions.

The campaign of the mutual fund body in India named Mutual Fund Sahi Hai has definitely brought in lakhs of investors to the industry but to provide direction to these new investors we at FinRise think that the campaign call to action should be modified to Mutual Fund Sahi hai, But Advisor Zaruri Hai! 

And yes, you don't have to give yourself a haircut to realize this as I have already done it on your behalf! Happy reading and enjoy your SUNDAYS!!

For investment advice across financial products feel free to write/call us at finriseinvestment@gmail.com or +91-8568953926!