When the markets are bullish, most financial gurus think they will never go wrong. Bears shatter that delusion
Madhu T TNN
Kamala and Sunil are in a serious fix. Their investment advisor has abandoned them. Or rather, the advisor has decided to quit his profession, after making huge losses in the market recently. The couple, working in a private firm in administrative section, never had lots of money to invest in the stock market. That is why they were elated when their neighbour took it upon himself to make them rich through investing in the stock market. He was updated about the happenings in the market; always had time to chat up about the market and the possible returns one can expect; he never ran out of investment ideas. Or at least it seemed to Kamala at that time. The last two years have been good, but reality caught up with them a few months ago. First, the advisor seemed a little disoriented. Then he stopped dropping in on the evenings to chat up and update about the market. Finally, it was his wife who broke the news to the couple. The advisor has lost a few lakhs and his family has persuaded him to pull out the entire money from the market. They also warned him not to advice others about investing in stocks. In short, the wife told Kamala that she is on her own from now on. The couple really felt sorry for their advisor, but they were equally concerned about their investments. All they have done in the last two years was to follow the advice of their neighbour; they didn’t understand stocks or never followed the market. Now what to do? Have they checked their portfolio to find out how they have fared? No, replies Sunil. It is not out of lethargy. He simply doesn’t know how to do it. Can’t he look for the prices of the stocks he holds to check whether he has made any money on them? He said that was not the problem, the problem was what to do after that. “Suppose we made a loss, what are we supposed to do?” asks Sunil. That is definitely a possibility. If their advisor has made losses, chances are that they would also have lost some money in the market. But pulling out the money from the market without checking the prospects of the stocks would be stupid. After all, market goes through phases when you find your investments making losses. But that doesn’t mean you should cash out. “This is a common phenomenon when markets are in a correcting mode. A lot of self-appointed advisors tend to run away from market, leaving their unsuspecting clients in the lurch,” says a certified financial planner. “The sad part is most of these duped clients are so clueless about the market that they can’t even take a decision.” It seems, everybody is a Warren Buffett when the market is on a bull phase. At least that is what professional financial experts say. They say relentless bull run inspires so much confidence in ordinary folks that they start to believe they would never go wrong in their stock selection. Well, needless to say they find themselves completely on the wrong foot when the market come into the grips of bears. The point is you may come across a friend or neighbour who would fit in this category. They will offer you free advise, but what you are saving on the fee won’t cover up for your losses in the future. “At least what investors can do is to educate themselves about the market. They shouldn’t follow their frineds’ advice blindly, they should make an effort to understand where they are putting in their hard earned money and what could be implications if things go wrong,” says the CFP. In short, it is always better to seek advice from a professional. And even then follow his advice only if you are convinced. Relying on friends and neighbours for investment advice will look easy, but it can have disastrous consequences.
Madhu T TNN
Kamala and Sunil are in a serious fix. Their investment advisor has abandoned them. Or rather, the advisor has decided to quit his profession, after making huge losses in the market recently. The couple, working in a private firm in administrative section, never had lots of money to invest in the stock market. That is why they were elated when their neighbour took it upon himself to make them rich through investing in the stock market. He was updated about the happenings in the market; always had time to chat up about the market and the possible returns one can expect; he never ran out of investment ideas. Or at least it seemed to Kamala at that time. The last two years have been good, but reality caught up with them a few months ago. First, the advisor seemed a little disoriented. Then he stopped dropping in on the evenings to chat up and update about the market. Finally, it was his wife who broke the news to the couple. The advisor has lost a few lakhs and his family has persuaded him to pull out the entire money from the market. They also warned him not to advice others about investing in stocks. In short, the wife told Kamala that she is on her own from now on. The couple really felt sorry for their advisor, but they were equally concerned about their investments. All they have done in the last two years was to follow the advice of their neighbour; they didn’t understand stocks or never followed the market. Now what to do? Have they checked their portfolio to find out how they have fared? No, replies Sunil. It is not out of lethargy. He simply doesn’t know how to do it. Can’t he look for the prices of the stocks he holds to check whether he has made any money on them? He said that was not the problem, the problem was what to do after that. “Suppose we made a loss, what are we supposed to do?” asks Sunil. That is definitely a possibility. If their advisor has made losses, chances are that they would also have lost some money in the market. But pulling out the money from the market without checking the prospects of the stocks would be stupid. After all, market goes through phases when you find your investments making losses. But that doesn’t mean you should cash out. “This is a common phenomenon when markets are in a correcting mode. A lot of self-appointed advisors tend to run away from market, leaving their unsuspecting clients in the lurch,” says a certified financial planner. “The sad part is most of these duped clients are so clueless about the market that they can’t even take a decision.” It seems, everybody is a Warren Buffett when the market is on a bull phase. At least that is what professional financial experts say. They say relentless bull run inspires so much confidence in ordinary folks that they start to believe they would never go wrong in their stock selection. Well, needless to say they find themselves completely on the wrong foot when the market come into the grips of bears. The point is you may come across a friend or neighbour who would fit in this category. They will offer you free advise, but what you are saving on the fee won’t cover up for your losses in the future. “At least what investors can do is to educate themselves about the market. They shouldn’t follow their frineds’ advice blindly, they should make an effort to understand where they are putting in their hard earned money and what could be implications if things go wrong,” says the CFP. In short, it is always better to seek advice from a professional. And even then follow his advice only if you are convinced. Relying on friends and neighbours for investment advice will look easy, but it can have disastrous consequences.
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