Best SEBI Registered Investment Advisor is even a reality? Equity investor must understand that there is no Best SEBI Registered Investment Advisor. One SEBI Registered Investment Advisor might be good for someone and at the same time not appropriate for someone else.
So let us understand how one can get the Best SEBI Registered Investment Advisor for himself/herself? While analysing any Investment Advisor, one must vet the Investment Advisor based on the following points :
Stock Market Tip Providers vs Long Term Value Investing?
We all know there are many Stock Market Tip Providers, and at any given point of time, they always will have at least a few stock market tips to invest in. Definitely equity investor will get stock ideas for free, but this seldom helps in making profits in the stock market on sustainable basis.
At times one might make some money, but one does at times make money by gambling as well!
On the contrary, long term value investing might sound boring to most of us, but unfortunately long term value investing is one of the most proven ways of making money in stock markets over the past century. Long term value investing involves investing in a company from at least 2-3 years + view and buying the company at cheap valuations.
As humans, it is very difficult to digest that one can make more money by being invested in a stock and not do anything for 3 years, compared to regularly churning the portfolio. Another benefit of long term investment is lower brokerage costs and 10% long term capital gains tax v/s 15% short term capital gains tax.
Equity investor should compare his net of brokerage and tax returns to compare any two investment strategies, because that is the money you get to take home in the end.
To test whether it is true, one can do a quick self-research and list down the names of people who made big money in the stock market over the last century and check their investment approach and you will be convinced that long term value investing is the most common approach. Something like stock market tip provider, which has not worked for anyone over the past century, why will that work for you now?
Choosing the Best SEBI Registered Investment Advisor?
Best SEBI Registered Investment Advisor for one might not be the case for others. Equity investor must first be clear about his/her expectations and goals before deciding on a SEBI Registered Investment Advisor.
Some SEBI Registered Investment Advisors invest in very good quality companies and safe stocks only, whereas some SEBI Registered Investment Advisors invest in volatile and turnaround companies.
If an equity investor are is okay with stock market volatilities then one should select the later SEBI Registered Investment Advisor, and if an equity investor is happy with comparatively lesser returns but cannot handle stock market volatilities, he/she should select the first SEBI Registered Investment Advisor.
However, in all cases, Equity investor must avoid day traders and FNO traders even if they are SEBI Registered Investment Advisors, simply because Itihas Gavah Hai. How many day traders and FNO traders have made it really big?
Open any stock market related website and you will find a list of stocks one should buy, but what will you do with only the stock names? What to do if those stocks fall after buying them? Best SEBI Registered Investment Advisor will help you stay invested even during tough and volatile stock market times and guide you through it.
Fee-Based SEBI Registered Investment Advisor?
Fee-Based SEBI Registered Investment Advisor is the way to go.
While deciding on the best SEBI Registered Investment Advisor, one must always consider net of fees returns over a 3-5 year period.
Consider 2 cases:
1) Shyam makes 12% CAGR without any fees;
2) Ram makes 18% CAGR returns and pays 2% fees to his Investment Advisor.
In this case definitely Shyam saved money on the fees, whereas Ram made higher returns of 16% even after paying the fees.
Even mutual funds have fees which are part of their expense ratio! There are never free lunches in the world! Also, one does not pay fees only for stock tips / ideas, one should pay fees also for his hand holding by the Investment Advisor over the entire stock market investment cycle.
Unbiased Investment Advice?
Best SEBI Registered Investment Advisor will always provide you with unbiased advice.
Best SEBI Registered Investment Advisor will never have any hidden commissions/charges which can bias their investment advice. If there are any such charges, his advice might be biased.
Equity Investor must also understand the difference between Regular Mutual Fund plans and Direct Mutual Fund plans.
Regular plans have commissions for the distributor/advisor who is advising you on any fund plans. There is nothing wrong in paying commissions, but one must always be aware about the same.
Credentials of SEBI Registered Investment Advisor:
Best SEBI Registered Investment Advisor shall have not all, but most of the following credentials.
1] The SEBI Registered Investment Advisor should have at least a decade of experience in stock market so he has witnessed at least one entire up and down cycle.
2] The SEBI Registered Investment Advisor should definitely have SEBI registration number, which one can check on the SEBI website for the Registered Investment Advisors.
3] Equity Investor can also check if there are any fraud cases against the SEBI Registered Investment Advisor in the past. Fraud cases are different from poor temporary market performance, which every Investment Advisor goes through in their career.
4] A good Investment Advisor will be humble and will always accept his mistakes and learn from it, because even Warren Buffet has had made mistakes in stock markets, so who are we to not have any mistakes?
Best SEBI Registered Investment Advisor will always back his ideas based on research. Investment Advisor will never run short of simple explanations why he likes a particular security. Also, the investment thesis should be simple and logical, and should not be full of technical jargons.
Best way to understand the research quality of a SEBI Registered Investment Advisor is by asking for some past sample research reports and going through them. All advice of the Investment Advisor should be backed by facts and logic. More detailed the research is, better SEBI Registered Investment Advisor he is.
Mention in Press and Media:
Best SEBI Registered Investment Advisor might not necessarily be a regular visitor at your favourite media channels.
At the same time, having no media presence at all also might not be a good sign. For such SEBI Registered Investment Advisors, one should consider him/her only post reference from your good/genuine friend who has taken their advice since few years. Generally, it is difficult to get a non-biased understanding about the investment advisor by talking with a reference provided by the advisor himself, and the reasons are obvious.
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