World Cup Football study reveals the Goalkeeper moved to either left or right side 94% of the time and stood in the centre only 6% of the time whereas the strikers have netted the ball straight 30% of the time. Most goalkeepers dive to the sides. Just standing there is viewed as being stupid and embarrassing.

I suspect most of us have a bias toward action, especially  we think we’ll look stupid if we standstill. The best-behaved investors understand that it’s in their best interest to do nothing most of the time, even though everyone else around them may be saying otherwise.

Investors like action and timing the market. This results in over trading. This is one of the primary reasons why active funds are underperforming the passive funds. The solution lies in constructing a diversified portfolio of low-cost investments and planning to hold on to it for a long time. Direct Mutual Funds and NPS are low cost products.

Value creation by Investment Advisers: Investment advisers can create value in three areas; Expense management, Asset allocation, and Behavioral counselling.

1.Expenses Management

The dynamics of the expenses of a family are undergoing change over the decade.

Fixed expenses such as Loans EMI and insurance premiums which were more than 50% of the family budget is coming down. Real estate as an investment asset is losing its charm. Financial awareness has contributed to popularize term insurance at the cost of endowment policies. Online Term Insurance have become cheaper.

Variable expenses: Health care and hospitalization expenses are taken care of by health insurance policies. The burden of maintaining a car and fuel are taken care of by Uber and Ola.

Discretionary expenses: It is no more discretionary but vital for a quality living. The share of it in some family budget is more than 50% now. Gadget upgrades, Vacations, Trending fashions, Garments (Discount offers!), Birthday parties, Gym, Sports equipment, Salon expenses etc have become essential expenses in a family. As the saying goes, when income goes up, wants become needs.

2.Asset Allocation

“Do not put all your eggs in one basket”; goes the saying. But diversification needs expertise and in-depth knowledge of various asset classes.

First, diversification works overtime. When we talk about diversification, we’re talking in terms of years, even decades. Not just days, weeks or even months.

Second, diversification is not exciting. It’s the investing equivalent of hitting singles and doubles your whole life. The strategy of Dhoni at the slog overs is worth analyzing here.

Finally, diversification looks like a mistake at any given moment. A well-designed and diversified portfolio will always have something that’s doing not well, a few things that are average, and one or two things that are exciting.

So, the ultimate solution is not timing the market but to time your investments matching your Risk appetite and Goal horizon. One should ensure that safety, liquidity and tax efficiency are factored during investment.

3.Behavioral counselling: Investor Biases

Card Richard’s famous cartoon depicts Investor return is always lower than Investment return. This happens due to the cognitive dissonance and emotional biases of the investor.

Cognitive dissonance arises due to logical or information processing errors. This can be easily counselled by knowledgeable advisers. The bias types are Mental accounting, Anchoring, Hindsight, Confirmation, Illusion of control, Framing, Availability, and conservatism

Emotional biases types are Overconfidence, Loss aversion, Status quo, Endowment, and Regret aversion. It is better self-corrected.