The Investor And His Advisers
Investors before investing always receive some kind of advice from one or the other person. Most of the investors who are amateurs rely on this kind of advice.
Advice to investors may be based on different sources:
1) A relative or a friend.
2) A local banker.
3) A brokerage or an investment banking firm.
4) A financial service provider
5) An investment counsellor.
Among the above-mentioned sources, the author suggests that investors who are ready to pay a fee for the management of their funds can select some well-established investment but the results are nothing exceptional.
The advice of investment advisors is still better than the advice that our relatives or friends provide us with.
Investors that are new in the market are prone to make mistakes. Lack of proper diversification, high drawdowns of capital, etc. are examples of mistakes that generate returns that are below average.
Graham says,” Much bad advice is given free" and therefore we as investors should select advisors with the utmost character, who are proficient in the investment field.
An investor has to pay a fee for this service. In total not more than 1% should be paid as advisory fees. An advisor will prevent us from panic selling and make us buy when the markets are pessimistic.