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All investors need portfolio advise and management very badly. But as much as it is simple to talk about portfolio advice, it is extremely difficult to render credible portfolio advise. The reasons are not far to seek. Most portfolio managers are not qualified or equipped to advise an investor. Secondly most portfolio advisors tend to follow the age old practice of offering off-the-shelf solutions rather than customizing it to the specific requirements of the customer. Last but not the least, there is an inherent conflict in the role of a portfolio manager. He is required to caution the investor about the limitations of investment returns, but more often than not he does not do so for fear of losing your portfolio account.

A few pointers on the points to be kept in mind while selecting your portfolio manager:

• First and foremost ensure that the portfolio manager is registered as a portfolio manager with Sebi. You can check this out on the Sebi website www.sebi.gov.in or check it in the Prime Directory.

• Select a portfolio manager with a track record of at least 5 years in the business. This will ensure that the portfolio advisor has seen 2 cycles of stock markets and will be in a better position to caution you on the downsides of portfolio management.

• Never trust a portfolio manager who promises the moon. Such promises are never fulfilled.

• Check the track record of the portfolio manager during the dull phase of the market. That is a true test of his money management abilities.

• Always prefer a portfolio manager who offers a non-discretionary portfolio management. It is always wise to take your own investment decision based on the portfolio manager's advise rather than relying solely on his decision.

• Read between the lines when the Portfolio manager flaunts stunning returns on his portfolio. More often than not he could be annualizing the returns of an exceptional week or fortnight.

• Always trust a portfolio manager who tries to educate you on the downsides of equity investing. Such portfolio managers are likely to be more stable in the long run.

• Never go for a portfolio manager who promises you risk-free returns. Remember, there is nothing like a free lunch in economics. Greater returns always entail greater risks though the converse is not always true.

• Never believe a portfolio manager who tries hard to push certain investment products over others. More often than not he is doing it for the incentive of higher commissions.

• Never fall for the bait of assured returns for two reasons. Firstly, Sebi regulations do not permit portfolio managers to assure returns, and hence any assurance is not on paper. Secondly, any portfolio manager who claims he knows the future of the market is bluffing.

Taking care of these minor issues could solve most of your problems in selecting a portfolio manager. These points may sound simple but will go a long way in safeguarding your hard earned money. For any further questions you can contact me directly at harihar@karvy.com

T S Harihar

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