Wondered why your fund manager was not able to protect your savings during slumps? There is no need to, since fund managers are not in a position to manage risk directly. They themselves are not very much aware of how the markets might perform.
So now, the confusion arises as to what are the lines according to which the fund manager differs from a financial advisor.
Financial Advisor:
The job of a financial adviser is to review the investors’ exposure to large-cap equity, take on board the downside risks at the time, consider the risk appetite of the investor, and recommend a tactical change in weight age. It is the adviser who has all the knowledge of the investor’s return targets and risk preference, who should seek liquidation of the portfolio and advise the investor to hold cash.
Fund Manager:
The fund manager’s action is superfluous and can reduce exposure to equity more than is necessary. He basically specializes in the top-bottom research in companies and sectors, as well as the selection, timing, assigning of weight ages and rotation of stocks and sectors that he holds. The specialization of the adviser is top-down research, which should indicate how asset classes will behave and, therefore, decide the weight age in an investor’s portfolio. If the fund manager’s job is to deliver relative performance, it is the work of the adviser to deliver absolute performance in line with the investor’s needs.
So, since these differences have been clearly listed out, it is up to you to invest your hard earned savings, with a view of earning higher returns in future. Do not rely completely on your financial advisor or fund manager for all the advice. Even they could not predict the crash of technology stocks in 2007 which were at its peak until then, leaving a lot of people into the debt traps of loan to finance their requirements of buying house or provide higher education to their child with the help of home loan, education loan etc.
Investing with prudence is what is required. Do not get carried away with the technical jargon the fund houses generally use. Gain knowledge on your own as to how the markets function and find out the current market trends from experts. A well balanced portfolio; providing financial security in future is what you aspire. Take wise decisions in building your savings corpus.