DIY For financial planning can costly
There are many aspects to a comprehensive financial plan. It
includes goal planning, risk profiling, asset allocation, periodic review of
investments, tax management, etc. Not to mention planning related to any other
financial goals that you may have. With the emergence of easy-to-transact apps,
there is an inclination towards Do-It-Yourself (“DIY”) financial planning.
While it may have some benefits and the various tools may make it look easy, a
DIY approach to financial planning less fruitful and more importantly, could
add to the risks. Here’s why it is better to take the mutual fund route through
guidance by a professional financial planner for investments:
DIY financial planning demands time and resources
Managing investments and taking financial decisions over an
extended period takes time, skill and effort. Whether you are a busy executive,
full-time homemaker or own a business, it may be difficult to consistently take
time out to understand your finances, research investment options, review the
financial plan and keep track of it. Moreover, you will need to be aware of the
market at all times and do a lot of reading. You might have to trade off time
and efforts between financial planning and activities in other areas of your
life that are more enjoyable or critical. It may turn demotivating and costly
if the decisions are not the most optimal ones. Your hard earned money deserves
expert handling. Mutual funds provide solutions to suit investors of varying
risk profiles and life situations. Take an appointment with your financial
advisor to know more.
Risk of emotions affecting financial decisions
Significant or unexpected life events and the volatile
performance of investments tend to invoke emotional responses. These aren’t
conducive to making ideal financial decisions. When you’re managing your own
finances, it is easy to get excited and impulsively put money on a hot stock,
panic because of an erroneous financial decision, be overcautious or speculate
beyond one’s financial tolerance. These actions come in the way of financial
discipline and may lead to mistakes that result in financial losses. It’s like
visiting a doctor when we fall ill. Can a DIY approach replace a doctor?
Obviously not, financial planning is not too different.
Do-It-Yourself can become No-one-does-it
Financial planning is not a one-time activity nor is it
something that can be pursued as a hobby. If you are unable to find time for it
regularly, ‘do-it-yourself’ quickly turns into ‘no-one-does-it’. It then
becomes challenging to attain your financial goals. This can have a negative
impact on your long-term financial performance.
If you want to learn to plan your finances or enjoy doing
it, rather than jeopardizing your finances, you could take control of a small
part (e.g. around 10%) of your portfolio. Gradually you will gain knowledge and
experience, have the satisfaction of managing your finances and feel good when
you make the right decisions. At the same time, mistakes will not severely
impact your overall portfolio. Getting your finances in order and ensuring the
financial security of your loved ones are extremely important. Therefore, it
might be better to go for professional financial planning.
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