InvestorQ : Why is it so important to rely on my own judgement in investing?
Riya Dwivedi made post

Why is it so important to rely on my own judgement in investing?

Shreya Karn answered.
3 years ago

While your broker has the best of insights into the equity market and the investment options, only you understand your unique risk and return. Your investment will eventually depend on your risk-return matrix and that is something only you will have to decipher. That is why it is best that you rely on the insights of the advisor but rely on your own judgement when it comes to investment decisions.

It is your own money at stake. When you are dealing with your money, the buck stops with you. Your advisor could be right or he could be wrong. The outcome is something you will have to face. When the buck stops with you it is best that you take the responsibility for the investment decision.

The advisor could have his own reasons for recommending a stock or a particular strategy. While your advisors are most likely to have your best interests at heart, you have taken the pragmatic approach and believe that only you are best poised to decide on your financial matrices. That is why you must restrict the role of advisors to giving inputs and take accountability for the final decision.

An advisor is not legally bound by his/her decisions but you are monetarily committed to the decision. There is a service agreement that you sign with your broker / advisor which absolves them from any accountability in the event something goes wrong. They are working on a best effort basis and you are expected to take the full responsibility for your investment decisions. In that case as well take the investments decisions too!

It compels you to take a more rigorous approach to investment analysis and investment decision-making. By outsourcing your decisions to your advisors, you may have lulled into a false sense of complacency. When you are taking the responsibility for your own decisions, you are actually working much harder for your money which will have a positive impact

In India, investments decisions are not just about returns and risk. They are also about your tax status, your future plans, your liquidity requirements etc. This is where the information asymmetry comes into play. Your advisor may not have the same extent of relevant information about you as you have. Hence it is always better to take the final call based on the inputs provided by the advisor.