Educating Investors

What is an Investment Advisor?3 min read

Every retail investor has this one question in his mind that which stocks would give him good returns and help him grow his money with a greater pace than the other asset classes. So, in this case, what should a retail investor do? Is there anyone whom he can approach for the right advice, the answer to all these questions is an Investment Advisor

So who is an Investment Advisor?

An investment advisor (also known as a stockbroker) is any person or group that makes investment recommendations or conducts securities analysis in return for a fee, whether through direct management of clients assets or by way of written publications

As per the new rules of SEBI, only a SEBI registered adviser can give you investment advice. 

The investment advisers can be of two types:

  1. Advisor 
  2. Advisor + Distributor

Beyond this, anyone who gives the investment advice is doing it illegally as per the SEBI regulations.

Now let us discuss some qualities of a bad or fake investment advisor:

  • Advisor without SEBI registration: Investors should avoid those advisors who are not registered under SEBI as they do not comply with the best practises of SEBI.
  • Fake advice of Guaranteed returns: Investors should understand the fact that No one can guarantee returns from the stock market, so you need to avoid advisors that assure you guaranteed returns or you can earn some X amount daily
  • The Advisor who have fake testimonials and track records and market themselves under the name of big Investors: Most of the times we fall under the false claims and testimonial of fake advisors, who project themselves as the top advisors or they are the part of the famous investors out there, we should study and so some background check in this case
  • Dedicated fake team to guide you on investment:  It is observed in many cases that the advisory team do not have the right professionals to guide the investor, following this advice can cause some serious losses

These were some of the qualities of a Fake investment advisor now let us discuss some qualities of a genuine investment advisor that all retail investors should look at:

  1. Presence in Market: The overall experience and presence in market signify how capable he must be to run his business. An advisor should have at least 15-20 years of experience so that he has the maturity and experience in tiding over various ups and downs of the market.
  2. Market Reputation: You can visit the website, articles, reviews or social platforms to know about the advisory, you should especially focus on his reputation, market acceptability and brand equity in the investment community.
  3. Research and Findings: You should focus on the transparency of research and how he recommends specific stocks.
  4. Registered Advisor Only: Do check if the advisor is a SEBI registered advisor or not as it is always advisable to trust a SEBI certified advisor only.
  5. Good Average Returns: Look for an advisor who has good returns, no advisor can be perfect but try to see if they have given returns more than the market’s performance. The performance should be more than 5 years at least. 

Normally an investment advisor can charge up to 0.25% to 1% per year of your profit and the minimum asset under management is quite high, common retailers who do not wish to have an investment advisor can go for other alternatives.

One can also invest in expert-curated ready-made baskets of stocks or mini-portfolio of Samco’s StockBasket, these baskets are managed by their research team are rebalanced timely as per the need. Baskets in StockBasket are categorised according to the financial needs of the investors.

You can invest in them by opening a free StockBasket account!

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