Mutual Fund Advice: Are you getting the right mutual fund advice?
This is not a rant against mutual fund forums or recommendations. We even offer recommendations (see our mutual fund recommendations here) and answer reader questions. We also follow certain groups because sometimes there are meaningful discussions about investing in mutual funds. But if you’re entirely dependent on them for your mutual fund investments, reviews, and remedial actions, you could be in trouble.
No, it’s not to blame you or those who advise you. But a few observations, and our experience in dealing with issues. More often than not, the questions are incomplete. New investors never offer full background information. Even crucial factors like financial details, goals, investment horizon, risk profile, etc. are never offered. A simple question like can I buy or sell this mutual fund is complete in itself for them. But an expert would have a hard time answering the question.
You would have noticed that most real experts always add qualifying remarks to their answer. Of course, most new investors find these remarks confusing. They often complain that the answer is not complete. But the problem is, as explained earlier, that without complete investor information, it is never easy to recommend investments or buy-sell recommendations.
You can check with your friends who have hired a paid advisor or financial planner to find out how much time they spend providing their basic information or their goals or risk tolerance. You can also ask how much time the expert spends explaining investment choices. You will be surprised to learn that the whole process can take a few days.
Thus, a true professional takes the whole process very seriously. So what about the instant advice you get from some experts? Well, most of this advice is substandard. A real expert often asks for a lot of additional information to be doubly sure of offering a personalized solution. Recommendations like ‘Invest in this scheme or category’ without knowing anything about you are always dubious.
So what’s the point of visiting various websites and their recommendations? All this time is dedicated to your education. All of these inputs can be valuable in understanding the details of a problem or pattern. However, you should consider your personal data before making a decision. If you don’t have the time or inclination to do it yourself, relying entirely on random recommendations can be dangerous. That’s why we always offer the unpopular advice: you should only invest directly if you know enough about mutual funds. Don’t rely on instant advice from random experts.