Investing in financial products by Indians has permeated to all socio-economic classes.
The regulators have been steadily loosening up safety guardrails since 2020, by removing limitations and allowing western style exponentially leveraged financial products.
Add to This Mix
- The gamification of trading through apps.
- Pervasive online tip networks through private WhatsApp and Telegram groups.
- Daily changing explanatory narratives, often post-facto, on why markets go up or down.
- The belief that one can deduce and predict future moves based on incomplete, surface-level misinformation.
99.9% of so called wealth managers with big name brands have thousands of agents simply selling you into investment grade funds, funds of funds, and even funds of funds of funds. The explicit aim is to take commissions while selling you on the story that consistency in pouring in your hard-earned savings pays in the long run.
While in the super long run, 10 years and beyond, human optimism plays its part in keeping things always looking up, the interim is when most investors treat the markets more like a casino.
Why Risk Profiling Matters
Understanding your own risk profile and appetite sets a baseline to trading and investment behaviour. Most do not give adequate internal thought to their own reality-based risk-taking ability.
While most wealth managers only focus on goals, they do not really delve into an investor's past and present financial position.
Cash flows, discretionary spends, possible life-altering events, and real market risks are not part of their sales pitch.
What Investors Need Instead
There is a growing need for financial advisors who are, at the outset, aligned with your realities first and then work on strategies that align with goals.
Investors should do a deep-dive, reality-based risk profiling exercise before and even during their investment cycles.
In these interestingly volatile markets, a know-your-risks based approach could mean the difference between capital protection and capital erosion, peaceful sleep versus disturbing anticipation.