Let me start off with a story. So the other day a friend of mine called me up asking me to help him solve a plumbing problem. He probably thought I was good at plumbing because I have been working on rain water harvesting and drip irrigation. Anyway, he tells me that there is a tap that was constantly leaking water. He tightened it fully, but the water still leaks. Asks me if I have a fix for his problem.
I started off by giving the best possible advice like any friend would give. I told him to find a good plumber near his house and have it fixed. He said he did not want to pay a plumber because they are demanding too much for such a small fix. Then I advised him to learn a little bit of plumbing, buy some tools and do it himself. His response was that he did not have time to learn and do it himself. At this point, I was a little bit frustrated and I asked him how can I help. He asked me for a quick fix because I know so much about fixing small things at home. I told him to buy m-seal and cover the mouth of the tap with it. Problem solved!
A couple of days later, he calls me up again and tells me that now their family cannot wash their hand at the kitchen sink. I was not sure what he was talking about. Then he continues — he bought m-seal and closed the leaking tap in the kitchen sink. Now when he opens the tap, water is not coming out! This story never really happened. Going forward I will go on a rant and perhaps not useful for you. So you can stop reading now :).
The confused investor
The reason I bring up this funny story (you did not find it funny?, well it sounded funny when I was running it in my head) is because I meet similar people. Not to belittle anyone, but I will explain. There are some kind of investors who neither want to learn and do it themselves, nor do they want to hire someone to get the job done. I tend to get requests for advice from these kind of people. Their question is usually like “can you recommend me a mutual fund”. I am happy to help, but there is absolutely no context to the question.
My blog is mostly about do it yourself kind of investment. I have written articles on how to choose equity mutual funds as well as debt mutual funds. You can find tons of articles on Google. Yet people ask for names of some mutual funds. When I ask them to hire a financial planner, they don’t want to. The reason could be anything from “advisors are too expensive for the small sum I want to invest” to “I don’t trust them”. If you don’t want to learn and don’t want to hire, then what you get is stupid advice from people like me :).
Why can’t I help?
I am not saying I will not give good advice. But a good advice is only possible if I know the full story. You ask for a MF name, I give you one. Two years later you come and tell me that your investment is down 50% and you are unable to pay the kid’s school fees because of the poor returns. Well, when you asked for advice you never mentioned for what goal and for what duration. You did not mention your risk profile nor shared your investments. You never mentioned if you have emergency fund and insurance. What kind of advice can I give? Again none of this happened.
The returns investor
It also bothers me when some one asks for advice and don’t disclose anything. If one does not want to learn nor pay, and then are asking for advice, they should at least take time to explain their reason for investment and their current investments. And yet these kind of investors want to know how much return they will get with the fund I recommended. How can I tell? I am not a time traveler. If I tell them 6% they say it is too low. If I tell them 10% annualized after 10 years, they say it is too long of a duration and low return.
The insider investor
Some people ask me to show the mutual funds that I have invested in. How does that help? My returns aren’t that great and I invested according to my risk profile and goals. You don’t know when I invested and in what fund and when I exited it. I don’t plan to publish my portfolio and transactions on a daily basis. If you really want to blindly follow someone why not checkout some good investors? Why would you want to invest where I invest?
The reasonable investor
At other times I meet some reasonable investors. They do their own homework of finding some mutual funds for certain goals or asset class or for tax saving. They ask me if the fund is good or not. Since I don’t know the performance and quality of every mutual fund (unless I am invested in it) I look up and read a bit about it and advice. This is much easier.
Again another pointless post. But just figure out what kind of investor you are and if you are asking for advice the right way :). Otherwise you might get pretty bad advice.