![\"\"](\"https:\/\/blog.certifiedfinancialguardian.com\/wp-content\/uploads\/2020\/03\/Graph-1-Early-indications-of-S-and-P-BSE-Sensex-slipping-into-a-bear-phase.jpg\")
<\/figure><\/div>\n\n\n\nData as on March 16, 2020
(Source: bseindia.com, PersonalFN Research) <\/p>\n\n\n\n
In the last couple of months, the broader index has fallen like\nninepins. Clients are panicking\u2026 obviously, anyone would as the rise in volatility\nis very apparent. <\/p>\n\n\n\n
This is a tough time to\nbe a financial advisor. <\/p>\n\n\n\n
Advisors are facing endless questions from investors. Some typical\nones are as follows:<\/strong><\/p>\n\n\n\n Here\u2019s\nhow financial advisors can handle investors\u2019 queries more effectively during\nmarket downturns:<\/strong><\/p>\n\n\n\n Be a\ncounsellor<\/strong><\/p>\n\n\n\n Advisors must understand that unlike you, investors may not\nunderstand the nitty-gritty of the markets and may get paranoid by market\nfalls. As their advisor or financial guardian, you need to educate them. Be a good\ncounsellor, one who understands their worries and addresses their concerns. If\nthey ask for any specific information, first, provide them with accurate\ninformation, even if you think that could be unimportant. <\/p>\n\n\n\n Review\nthe asset allocation <\/strong><\/p>\n\n\n\n Advisors should take advantage of market falls and revisit their investor\u2019s\nasset allocation. Ensure if that\u2019s still in line with their investment needs\nand financial goals. If other asset classes have overshot their respective\nallocations as per the initial plan; then you, as their advisor or financial\nguardian can suggest that they increase investments in equity assets. In\ncontrast, if their equity assets have shot the upper limits set in the original\nplan, then suggest timely exits. <\/p>\n\n\n\n Review\nthe mutual fund portfolio (backed by thorough research)<\/strong><\/p>\n\n\n\n Often, investors get tempted to discontinue their SIPs when they see poor returns. As their financial guardian, discourage them from taking such a step. Instead, highlight why you have recommended SIPs in certain schemes. That said, thoroughly analyse their mutual fund portfolio and see if any of the schemes need to be swapped with better ones. As you would agree, volatile markets test the skills of fund managers. <\/p>\n\n\n\n While restructuring the portfolio, always rely on process-driven\nfund houses rather than selecting schemes based on their past performance track\nrecords which may or may not be sustainable in the future. Also note, fund\nhouses that depend excessively on individual fund managers often suffer when\ntheir star fund managers resign from the fund house. <\/p>\n\n\n\n Ensure\nthe portfolio is strategically build based on the \u2018Core and Satellite\u2019 approach\n<\/strong><\/p>\n\n\n\n The ‘Core and Satellite’ investing is a time-tested strategy to\nbuild an investment portfolio. For the mutual fund investors, the ‘Core\nportfolio’ should consist of large-cap, multi-cap, and value\nfunds, and the ‘Satellite portfolio’ may include large & mid-cap,\nmid-and-small cap funds and aggressive hybrid funds. <\/p>\n\n\n\n Some investors might ask why can\u2019t they invest just in mid and small-cap\nfunds since their time horizon is 5 years+ and the NAVs of small and mid-cap\nfunds (plus the mid-cap and small-cap indices) have fallen a lot. <\/p>\n\n\n\n Explain to them that they should\nfollow the \u2018Core and Satellite\u2019 approach for the following reasons:<\/strong><\/p>\n\n\n\n Ideally, the \u2018Core\u2019 holdings should form 60-65% of your mutual fund\nportfolio, and the remaining 35-40% can consist of \u2018Satellite\u2019 holdings. Weightage\nof each portfolio constituents in both ‘Core’ and ‘Satellite’ categories can\nmake a huge difference in the end.<\/p>\n\n\n\n What matters most is the art of cleverly structuring the portfolio\nby assigning weights to each category of mutual funds and the schemes picked\nfor the portfolio. <\/p>\n\n\n\n Unless you, as the advisor, monitor your clients\u2019 portfolio and\nrecalibrate the weights as per the market dynamics, especially for the ‘Satellite’\npart of the portfolio, it may not derive the real benefits of the ‘Core and\nSatellite’ approach. <\/p>\n\n\n\n Set\nthe return expectations right<\/strong><\/p>\n\n\n\n Sometimes, investors have unrealistic expectations. As their\nfinancial guardian, address their concerns and guide them skilfully, so they begin\nto have rational expectations in their journey of wealth creation. <\/p>\n\n\n\n Explain to them that risk-and-rewards go hand-in-hand. Rather than\nsetting return expectations randomly, link it to their financial goals is\nnecessary. <\/p>\n\n\n\n If you can explain and educate investors on this aspect, it may not\nonly release the unnecessary pressure on you, their advisor but also help investors\/clients\nstay calm under testing times like these and avoid committing investment\nmistakes. <\/p>\n\n\n\n And last but not the least, be empathetic towards them, show\nintegrity, and handle your clients’ money with as much care and prudence as you\nwould do with your own.<\/p>\n","protected":false},"excerpt":{"rendered":" As you know, markets have been volatile ever since Coronavirus became a global epidemic. From the all-time high of 42,273.87 points on the S&P BSE Sensex (made on January 20, 2020), we ended at 31,390.07 points as of March 16, 2020. That is a -26% correction in less than two months. The S&P BSE Sensex,…<\/p>\n","protected":false},"author":3,"featured_media":1745,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"cybocfi_hide_featured_image":""},"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/1742"}],"collection":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/comments?post=1742"}],"version-history":[{"count":2,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/1742\/revisions"}],"predecessor-version":[{"id":1747,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/1742\/revisions\/1747"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/media\/1745"}],"wp:attachment":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/media?parent=1742"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/categories?post=1742"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/tags?post=1742"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}