What is the Role of Mutual Fund Advisor?

Reading Time: 2 minutes

Mutual funds are simple by nature. It is the presence of multiple entities that can cause confusion in mutual fund investing. So, here are the roles of mutual fund managers:

Financial Goal Planning

A mutual fund advisor should plan for your financial goals. Most investors are better off planning in terms of financial goals. Investing without direction can have grave implications.

If you are simply investing for wealth creation – call it a retirement fund!

Think of mutual fund advisor as a doctor – he can prescribe the right medicines only if he can diagnose accurately. He can diagnose accurately only if he is told the problem properly!

Asset Allocation

A mutual fund advisor should tell you what should your asset allocation. He decides this mainly basis three factors – the financial goal he is planning for, your age and your risk appetite.

Moreover, he should decide how your asset allocation should be adjusted with changing market conditions. Should it be constant (say, 60 equity and 40 debt) with a periodic (say, yearly) adjustment? Or should it be dynamic – increase and decrease equity and debt allocations to achieve great returns without taking excessive risks?

This is something that the investor should discuss with the advisor beforehand. Most advisors prefer a constant asset allocation with period adjustments. Some prefer a more dynamic asset allocation. A red flag is if your mutual fund advisor doesn’t talk about asset allocation at all.

Investor Management

During times of extreme volatility, investors can get anxious. Similarly, during times good times, investors can get greedy. It is the mutual fund advisor’s role to control and manage these investor emotions. For this, the advisor himself needs to be emotionally stable. If you across a fickle-minded mutual fund advisor, stay away from him.

Tax Optimization

Taxation is a cost in mutual fund investments. A good advisor should be able to not only optimize your portfolio but also reduce the tax implications.

Also Read: Difference Between Direct Plan and Regular Plan

Subscribe for Latest News and Resources