Why Do We Need a Stock Advisor?

Overview

For first-time investors, trading on the stock market can be like taking a plunge in dark waters – with little sight of what’s before you and how to deal with it. You may have done your due diligence in terms of research, but its practical usage will likely elude you when you are in the thick of the action.

Young professionals entirely consumed by work are the demographic that majorly constitutes first-time investors. This is why it is becoming exceedingly simple to invest in the stock market with an army of specialised service providers accessible to you with the click of a button. These platforms have abundant online portals, mobile apps and stock advisory services..

Mistakes first-time investors make

Before we delve into the functions a stock advisor performs, let’s first look at some common rookie mistakes made by new, unguided investors.

Chasing trends

As a newcomer who is on their own, you will be tempted to follow trends. As a result, you may end up investing in stocks the sale of which is in momentum, often to simply associate with big names. A host of other factors must be considered before making such an investment, other than simply to buy low and sell high.

Lack of planning

First-timers setting out to pour their hard-earned money into the share market may not have an end-goal in mind. This leads to reckless and erratic investment patterns that may cause losses. As a new investor, you tend to trade based on your guesswork instead of facts.

Personal bias

Just because you like a certain company doesn’t mean you should necessarily invest in it, because your biases do not guarantee returns. Moreover, even though it is said that fear and greed rule the market, you should not let them sway you into making investment decisions. Because the stock market can be intimidating for newcomers, they tend to give in to their emotions. The bottom line is, new investors let emotions make their decisions.

Holding on to badly performing stocks

New traders often feel the need to hold on to stocks of companies that are not performing well anymore in the hopes that they will pick up. You may wait to sell a stock whose value is dipping until it returns to its original price. This is called a “cognitive error” and may cost you if the shares’ value continues to slide.

Failing to diversify

Diversifying your investments ensures that you don’t put all your eggs in one basket. Investment in just one class of assets such as equity or commodities, or a single sector can increase the risk of losses. Investors should try to include all major spaces in their portfolio.

Why do you Need a Stock Advisor?

Here are key reasons why having a stock advisor is beneficial:

• Expert Guidance: Stock advisors help you make good and informed choices with their expertise and knowledge of market trend analysis and business financial goals.
• Time-Saving: Distribution and research of investments can be very time-consuming. When a stock advisor undertakes this responsibility, they help you to focus on other significant things.
• Customised Investment Plans: Advisors ensure that your portfolio is fit for purpose by developing investment solutions based on your investment time frame, risk profile, and goals.
• Market Knowledge: They remain informed on the changes in the economy, the condition of the markets you have stakes in, or shifts a particular sector may experience that impact your assets.
• Risk Management: Specialists help evaluate and minimise risks so that your money is protected and equally divided among various types of assets.
• Emotional Discipline: In particular, with the help of stock consultants, an objective outlook is achieved during a turbulent market, and investment decisions are not made hastily by fear or greed.
• Long-Term Planning: They assist in planning other future goals, such as buying assets, retirement, and education.

Conclusion

As opposed to stock advisors, brokers simply help conduct the buying and selling of securities on behalf of the investor for a commission on each transaction. Experts providing stock advisory services take a measure of your financial position and analyse facts and data to recommend the best course of action for your investments for a fee.

Traditional brokers have expanded to provide stock market advisory services and carry out trades for investors. They may also legitimise their business by registering with SEBI.

Frequently Asked Questions

Q.1:What types of services do stock advisors offer?

Ans: Stock advisors provide financial planning, risk assessment, market analysis, portfolio management, investment advice, and stock selection counsel. They assist clients in navigating market volatility and customise methods to accomplish their financial objectives.

Q.2:Is a stock advisor necessary for individual investors?

Ans: Investors who lack market expertise, research time, or confidence in making sound financial decisions can benefit from hiring a stock advisor. However, Experienced investors with a solid grasp of the market might not require one.

Q.3: Is it worth it to get a stock advisor?

Ans: Hiring a stock advisor is worthwhile if you want professional advice, improved risk management, and individualised financial planning. They can guarantee that your portfolio aligns with your financial goals and assist you in optimising results.

Q.4:How are stock advisors compensated?

Ans: Stock advisors might earn money through commissions, profit-sharing, hourly fees, subscription programs, or fees depending on the assets they manage. Compensation is determined by the services rendered and the agreements made with clients.

Q.5:What is the difference between an authorised partner and a stock advisor?

Ans: While stock advisers offer financial advice, portfolio management, and investment ideas and frequently receive fees or subscriptions, authorised partners carry out trades for customers and receive commissions. Brokers concentrate on trades, whereas advisors concentrate on advice.