A friend asked me to see value research online – and see the lead story on why you should distrust your adviser. I was amused because ‘How to select a financial adviser’ is a topic with which I have often grappled for and on behalf of many friends.

Let us take a typical ‘media’ answer to a query which is generic:

Sir, I am 45 years old and my portfolio consists of the following schemes what should I do: I do 10 SIPs of Rs. 1000 each in Kotak K 30, Reliance Natural Resources, SBI Contra, Prudential Icici Discovery, Hdfc Equity, Sundaram Paribas Midcap, Reliance vision, Templeton Equity Income fund, Quantum Equity, Franklin Prima, and Escorts Growth fund. What should I do?

Media answer:

You have a very good portfolio spread across a lot of fund houses, a full range of schemes, and really you need to do nothing. Continue them all. However since you are 15 years near retirement you should convert some of these schemes to balanced schemes. So please invest in Principal Balanced fund, Tata Balanced fund and a Birla balanced scheme. That will give your portfolio a nice balance.

A bad financial planner: Sir, take a ULIP instead of so many schemes!

A good financial planner: Sir- Where are your other investments?

Client: My take home salary is about Rs. 82,000 – and I invest in own pf, ppf, nsc, and bank fixed deposits. I have no equity other than the SIPs that I am doing. I have about Rs. 40 lakhs in debt instruments, Rs. 12 lakhs in gold and a house.

FP: Sir you have too many SIPs. Just concentrate on 3 funds sir – Hdfc Top 200, Franklin India Bluechip and Prudential Icici Discovery. Please make the amounts Rs. 5000 each – you need to have much more equity than what you currently have. Your debt instruments will not protect you from inflation – you are likely to live for another 30 years (at least) from today onwards!

Sir  the only instrument that protects you from inflation is equity. So please do this. I am not suggesting any balanced funds for you because you already have so many debt instruments. As you increase your allocation to equities, we will increase some more schemes, but currently 3 schemes are what you need. Take a term insurance to protect your wife and child – just in case. You can buy the policy from wherever you want – choose the cheapest one. Only reason why I am not suggesting an index fund is that all these schemes beat the index pretty regularly and by a wide margin.

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  1. agree with you sir. yesterday I read in leading financial newspaper about recommendations of an ‘expert’ for a young man in his twenty who just started earning, to start SIP in ‘debt’ funds for security purposes and some allocation to equity also 😛


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