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Investing is a tricky game that can involve both gains and losses. Many choose to invest on their own, while others like to take the help of trained professionals such as investment advisors and wealth managers to decide whether to put their money in equities, mutual funds, bonds and insurance among others and to what proportion.

That many in the investing community are opting for a Do-It-Yourself (DIY) mode is indicative from the massive surge in demat accounts opened in the current financial year. Between April 2020 and January 2021, new demat account additions stood at 10.7 million, a record.  In comparison, new additional in FY 20 was 4.7 million. Market experts feel that this indicates that many retail equity investors could be choosing to invest directly instead of through vehicles such as mutual funds.

The question is whether you should try and invest your money yourself or take the help of money managers? What are the factors that you should consider before taking outside help or doing it on your own?

Wealth management must take into consideration your long-term and short-term financial goals. Financial planning is important in one’s life, whether one wants to build their retirement corpus, fund their children’s higher education or save for a vacation abroad.

DIY 

If you choose to invest on your own, the most important requirement is an understanding of the various aspects of investing, such as portfolio construction principles, the financial products available and their characteristics and how each help in your financial goals.

“If one is investing on one’s own he or she should ensure that the asset allocation and investment choices are aligned to financial goals. For example, avoid using equities which is a long term asset for short term goals. One should do enough research before choosing a product. Also, avoid overtrading (buying and selling excessively) and avoid investing on tips or/rumour,” said Vishal Dhawan, founder and CEO, Plan Ahead Wealth Advisors.

The investor also has to assess his or her risk appetite and choose the appropriate securities accordingly.

“It is important to assess one’s risk appetite and investment horizon for creating an investment portfolio and selecting the right asset class and investment schemes,” said Pankaj Mathpal, Managing Director, Optima Money Managers.

Also, one would require the time and discipline to invest regularly over the long-term.

Going through money manager

If you are not confident or your demanding personal or professional requirement takes your attention off your investments, you need an advisor’s help. With the help of a wealth manager, the hassle of understanding and securing the best possible options for oneself can get sorted. They also spend considerable time and effort on managing your wealth.

Financial planning is a continuous process. Investments and other money matters need to be tracked on an ongoing basis in the light of changing financial goals. This can be done in a process-driven, unemotional way with the help of a professional money manager.

“A financial planner analyses the investor’s profile and suggest investment schemes in a professional way to meet the objective of investment. A financial planner not only does the math or suggests a proper asset allocation but also tries to control the behavioral biases of the investor,” Mathpal said.

However, you should choose your advisor carefully.

“The financial planner/wealth managers must be a registered investment advisor (RIA). Financial planner’s experience, approach and investment philosophy matter the most,” said Mathpal.

Dhawan feels the financial planner helps in removing individual biases in investing.

“A financial planner has the ability to take an independent view of finances and eliminate potential biases when making investment product selection. The planner will also help in creating a robust financial plan on multiple aspects of personal finances from budgeting/expense management to risk management like health insurance, life insurance and succession planning, to loan repayments, refinancing and investment strategy,” Dhawan said.

Hiring an advisor, though has its costs in the form of fees and charges.

“Mode of compensation is an important criterion to avoid conflict of interest. The fee charged could be a match between the services that you are seeking and the fee charged,” said Dhawan.

However, the decision to go direct or taking help of planner should not be based solely on saving on cost involved.