People are very particular about the financial advisor they choose, we consider and evaluate alternatives, we take months to select the right financial advisor, we even change advisors if we are not satisfied. And we are right, we should care, because we are entrusting him with our hard earned money, our personal information, we are actually entrusting with him our lives, as he will be guiding us, he will be setting our investment path, so that we can actualize our life's goals.

So, we need an advisor who is honest, ethical, knowledgeable and who keeps our interests at the center. So, a good financial advisor has to fulfill a number of prerequisites before getting onboard.

But then, the success of our investment plan not only depends on how good the advisor is, we as investors also have a very crucial role to play here. If the advisor has responsibilities, if he can be held accountable, then we too share certain responsibilities.

Apparently some investors do not reveal the complete list of facts and figures about their personal or financial life. This is a major financial mistake, and can sabotage your entire financial plan. The advice of the advisor is based on the facts provided by the investor, if the facts are false or incomplete, then the advice may not be the perfect path towards towards your goals. To get the best from the advisor, the investor should be honest with him. The investor should take care of the following things during the making of his financial plan:

We have a number of people who advise us for our finances, CAs, lawyers, bankers, insurance agents, and financial advisors. On your CA's advise you invest money in a PPF, on your Uncle's advise you have invested in a property in the suburbs, you bought a medical insurance policy on the insurance advisor's advice and likewise. All these existing investments have an important role to play while devising your comprehensive financial plan, and they should be included as a part of your overall asset Portfolio. Consider an example, Arun is in his late 40's and he decides to have a financial plan. So he sits with his advisor and discusses his requirements, and even on the advisor's questioning, he does not reveal about a Rs 10 Lakh FD that he has and a house worth Rs 2 crores that he is expecting to inherit from his parents. This information makes his financial standing pretty sound, but because the advisor lacks this info, he lays down more of an aggressive financial plan for Arun. The Advisor presumes that Arun doesn't have a strong financial standing, and he needs to create wealth to meet his goals in the next one or two decades. But considering his age and the fact that he has decent wealth, an aggressive plan is not ideal for him, rather he should have had a conservative plan which would have protected his wealth along providing with some growth. Had the advisor known the complete facts and figures, he would have deleted the risk element from his plan. Misrepresentation of wealth resulted in creation of a bad financial plan for Arun. When you hide some investments from your advisor, your financial plan will not reflect the true picture.

Communicate your priorities: Let's say you want to buy a house in the next five years. So, you sit with your financial advisor and both of you lay down a plan of how will you be investing to achieve your goal, and you start following the investment plan. Now one year later, you tell your advisor that you need money from the home fund for a vacation to Europe with your wife as it is your 10^th wedding anniversary, and you can't postpone it because you promised this trip to your wife 5 years back. This vacation will disrupt your entire home plan, since the investment was created with a five year horizon and secondly withdrawing money now will result in a significant deficiency in the corpus at the time of buying the house. So, you should have communicated your vacation plans to your advisor when you were devising the plan. The advisor would have either provided for both goals in the plan or he would have asked you to postpone one of your goals. Therefore, the investor should communicate his priorities, his attitude towards risk, his nature, because all these characteristics exercise a significant influence on the investor's financial plan.

Personal Information: The investor may feel that certain details are embarrassing or are not relevant, and he skips narrating that information to the advisor, but such information may be vital and should have been accounted for in the financial plan. For eg. If an investor does not have a very pleasant relationship with his wife and he is expecting a split in the future and he hides this fact from his financial advisor, then this concealment will have a negative impact on his finances. The advisor will not account for this upcoming financial emergency and may direct his money towards his long term goals, leading the investor into a difficult situation in the future. Or if the investor or any of his family members is suffering from a serious health issue, the investor may omit telling about it to his advisor because according to him it isn't a material fact. But here too, providing for a health condition either in the form of insurance or an emergency fund is necessary to avoid pitfalls later.

There is a chance that you may want to entrust some part of your financial plan to some other service provider even though your financial advisor provides those services as well. Like you may want to buy an insurance policy from your insurance cousin, or you may want to plan for your taxes as per your CA only. So, you should be honest and should tell about it to your advisor point blank, because ultimately it is for your benefit. If there is a space for a particular insurance policy in your ideal Portfolio, the space should be utilized irrespective of the platform used. It will also give you a more holistic view of your finances and will depict deviations, if any.

So, the bottomline is your financial advisor is your best financial friend, who ought to know all about your finances, so that he can have your your back always.

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SIP is a tool which helps investors actualize their big goals through small steps. You can achieve a big dream like meeting your daughter's wedding expenses, with an SIP of as small as Rs 2,000 a month. Power of Compounding and Rupee Cost Averaging are the key highlights of an SIP, which adds a few more stars on its shoulder and makes SIP the most favoured way of investing.

Despite the goodness and the unique features, many people still do not prefer investing through an SIP. They are skeptical, “What if I can't afford to continue my SIP after some time or if for some reason I miss my SIP installment”. For this uncertainty, many investors stay away from SIP.

If you too have similar thoughts, then this article is intended to clear your doubts and help you overcome the fear.

What will happen when you do not have enough money in your account on the date of the installment, and you miss the installment?

Many investors think that on missing an installment, their SIP will be cancelled. However, that is not the case. If you have missed it, your investment amount will be less than one SIP amount, that's about it. The Mutual Fund house will not cancel your SIP, nor will it impose any penalty for not paying an installment. For the simple fact, it is your investment, it is not your loan EMI, so you don't owe anyone when you invest. But your bank may levy a penalty for ECS default, and the amount of the penalty is different from bank to bank.

Here you must note, that if in case you miss three consecutive SIP's, then the mutual fund will stop sending any further ECS mandates to your bank, and will stop your SIP.

Wondering what will happen to the SIP installments you paid for, before the SIP stops?

Your investment will remain intact. The amount collected through SIP's will remain invested in the MF.

So, if you have an SIP of Rs 2,000 a month and you have paid 15 installments and then missed three SIPs in a row. This means your total investment in the MF is Rs 30,000. Nothing will be deducted from your account, this 30,000 will remain invested in the Mutual Fund and will keep growing with the fund, until you opt to withdraw your investment.

You can avoid the bank charges on missed SIP installments as well. If you can foresee that you might not be able to pay for your SIP for some time because of a financial crunch, then you can opt for the Pause SIP facility, which is offered by some Mutual Fund Schemes. In this facility, you can pause the SIP for a specific period like 6 months, and after 6 months, the SIP will automatically start. If you feel, you need a longer break, then you may stop the SIP and restart as per your convenience.

So, it's pretty easy to stop and resume SIP's anytime. At times, it may happen that you forget your SIP date and you fall short of the minimum balance to be maintained for your SIP, so it won't be a big deal and you can resume as usual from the next month onwards. But then, if you miss SIP installments, you must remember that each miss is dragging you one step away from your goal. Moreover, missing too many SIP's will also hamper averaging of costs.

To avoid missing SIP's due to insufficient bank balance, it's best you register your phone number and e-mail id with the fund, so you'll get an alert from the MF a few days before the SIP date. You'll get another message updating you with the status of the SIP transaction as to whether it was successful or not.

If you do miss one or some of your installments, then ideally you should make up for it by investing the amount of the missed SIP's in the same scheme in the near future. This will ensure that you are never falling behind in the pursuit of achieving your goals.

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“It's July already, I am in the midst of the year. I'd rather start investing from the next year. New Year, New Beginnings”

That auspicious new year will never come

“I am young in my career, I am earning Rs 20,000 a month, which is just enough to meet my expenses. I'll start investing when I start earning at least Rs 30,000 a month”.

And then you'll say the same thing to yourself when you reach the 30,000 mark.

“This year, I am planning for a vacation to Dubai, so I need to spare some money for that. I will start from next year.”

Vacations will come and go, your Investments will stand by you in all facets of your life.

“I am waiting for the right time to invest, like when I'll have some extra money”

Money can never be extra, you have to carve out for your investment from the money you have.

“The markets are high, Investing now will be a costly affair”

No one can predict the direction of the markets, it may never come back.

These are the excuses you give to yourself and to others. You should get over the lazy attitude and start investing now. Because the cost you'll pay for delaying investment can be very high.

Why do we say, you shouldn't delay investing? Why should you start investing in the early stages of your life?

What are you losing?

Power of Compounding: Ramesh and Suresh are two friends, both of them are 25 years old and working in the same company. Ramesh is a smart guy, he decides to start an SIP of Rs 5,000 for 10 years. While Suresh picks up two of the above mentioned excuses and he procrastinates his investing. Now Suresh realizes the need to invest after 5 years and he too starts an SIP of Rs 5,000 a month in the same mutual fund as Ramesh's.

Their Investment comparison is as follows:

* Assuming a CAGR of 20% for the overall investment period

Conclusion: Suresh, who started investing 5 years after Ramesh, invested Rs 3 Lacs less than the latter but the difference in their investment's maturity value is huge i.e., Rs 12,28,035. This huge difference is because of the Power of Compounding, which has taken Ramesh many steps ahead of Suresh in just 5 years. This huge difference has resulted when the SIP was of just Rs 5,000 a month and the difference in duration was 5 years. So, imagine the cost you are bearing by procrastinating your Investing for decades now.

Failure to meet goals: When you delay investing, you are dragging yourself away from your life goals. It may not be easy to collect a huge corpus in a very short period of time. Consider the above example, Ramesh has Rs 17.21 lakhs at the age of 35, so he can use this money for making a downpayment for his dream home. But Suresh, who is also 35, may not be able to do this with Rs 4.93 Lakhs. So procrastinating his Investment has taken him away from fulfilling his goal of owning a house, he will need some more years for accumulating the money required for making the downpayment.

Tax Benefits: Many investments carry the dual benefit of Yielding Returns plus Saving Taxes. So, if you are the one who has not yet started investing for saving taxes also, then you are practically committing a financial crime. Let's say, Harish falls under the 20% tax bracket, but he is too lazy to invest for tax. He shakes off the load from his shoulders by explaining to himself that “I live in India, I am paying taxes, because it's my responsibility to contribute towards the economic development of the country”. He omits to tell his conscience that he is also paying VAT on everything he consumes, he pays road tax to drive on the roads, he pays water tax to drink water, he pays service tax on the movies he watches, etc., and all these taxes are also contributing towards the economic development of the country. Hence he must save paying Income Tax as much as he can. If Harish would have invested in a tax saving instrument, like PPF, which is giving a nominal return of 8%, his effective return is 8% plus the 20% tax he is saving, i.e. a cumulative return of 28%. (For simplicity sake, we have ignored the time value of money). It doesn't make sense to lose out a return of 28% p.a. just because Harish is procrastinating investing. We have taken the example of PPF, if we replace it by a high return generating option like ELSS, then your money would know no bounds.

These were the three basic costs you are paying by procrastinating your Investments, there are many more that you actually bearing. The excuses are endless, but the time is not. So, stop procrastinating and Start Investing Now.

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