Investments and goals: Why you need the guidance of a financial adviser

livemint.com:

The investing puzzle How many of us understand the right asset allocation to have in accordance with our risk profiles, time to the goal, liquidity needs and return expectations? India has more than 1,500 mutual fund schemes, over 400 portfolio management services (PMS) providers, 200-plus alternative investment funds (AIFs), more than 500 non-convertible debentures (NCDs) and bonds, over 100 fixed deposit options and thousands of other investment products. How does one decide which ones to invest in and which ones to avoid? The problem does not stop at deciding the right asset class or product category, but also zeroing in on specific funds, asset management companies and fund managers. For example, in the last three years, the worst-performing small cap fund gave 27.5% annualized return, but the best gave 47.7% annualized returns.

The difference is of a staggering 20 percentage points. So, you can see anywhere between 27.5% and 47.7% returns, depending on your ability to pick the right fund. Forget about the 20-percentage-point difference, even if the difference is three percentage points, the outcome is hugely different.

For example, ₹50,000 monthly SIP (systematic investment plan in mutual funds) for 25 years, at 12% annualized returns, will become ₹8.5 crore. The same ₹50,000 SIP for 25 years at 15% will become ₹13.7 crore, a difference of a whopping ₹5.2 crore. You will now say, okay I will invest in Index! That still does not solve your problem, unless you can get the right asset allocation.

There are hundreds of index and exchange traded funds (ETFs). Most don’t even know that ETFs are mutual funds, that’s unfortunately the level of financial literacy among Indian investors today. Behavioural issues Let’s say