Five point to select an investment advisor

Source :PHILIPS fisher


Step 1. Divide all investment men who are being seriously considered
as a source of investment advice into two classes.

Those who are fundamentally more interested that a particular transaction to your long-range benefit than they are in the fee, commission, or profit they
will make from that transaction,

and those for whom making this fee,
right now, is the larger part of the motive behind the specific move they are proposing.

ELIMINATE at once anyone who does not clearly
Step 2. Ask any prospective financial adviser about his basic investment
philosophy, that is, what he is going to try to do for you and how he proposes to go about it.
Eliminate anyone whose long-range
objectives are different from your own.

Step 3. Ask for specific details of how you are considering the company for investments.

Find out what he is doing to keep in touch with what is going on inside
the companies whose stocks he recommends you to buy, not just now,
but after you have bought them,

and while you are holding them. See
how carefully he watch the management factor rather than depend largely upon published financial statements after such
statements (which are results, not causes) are available to the entire
financial community.

Remember it is knowing important facts before they are known to the financial community as a whole that is the
greatest source of important profits or the avoidance of important loss.

Never forget that a brilliant investment mind acting upon meager and
inadequate knowledge will produce results far inferior to an ordinary
but reasonably competent investment man who has full knowledge of
the significant facts about a company at a time when most others do not.

Step 4. If you already own a group of securities, see whether a
prospective investment adviser has equally positive opinions about
whether you should sell or hold each of them.

No one can have access
to such an endless amount of real background data that he can be
an expert on all the stocks listed on the various exchanges or commonly
traded over the counter.
Therefore, when confronted with a
list of stocks not previously bought at his suggestion,
an HONEST INVESTMENT MAN frequently has a TOUGH PROBLEM . He can leave his NEW client in stocks which have a good reputation but about which he IS not adequately informed.

On the other hand, he can be frank with
his client, tell him that he can only be responsible for investments he
really knows and leave it up to the client whether he wants to switch
the stock about which neither of them has adequate knowledge (and
which may nevertheless be an excellent investment) into something
which may be no better but which the investment man is in a position
to watch intelligently.

Usually the investment man who is most FRANK about what he does not know is the one who has thorough knowledge
about something else.
The man who in the investment field pretends to know everything about everything is the one who can be quite dangerous.
Similarly, never expect an investment man to be qualified to pass an opinion on all possible common-stock purchases.

Step 5. Learn what you can of the record of any investment man
under consideration. Eliminate those whose performance appears to
have been poor in relation to the action of the general market for
the period under study.

In this connection, keep in mind that some of the most spectacularly successful common stock investments may take as long as several years before they commence to prove themselves
in the market.

Therefore ignore, one way or the other, any record of performance that is of less than three years’ duration.

Also, do not ask a prospective candidate for handling your investments to give you
references in this connection unless you know him quite well.
It is inevitable that he will do better for some people than others.
It is only human nature that he will refer you to some for whom he has
done particularly well.

However, if you can find people whom he has served over the years, what they have to tell you may be extremely
Then, if the record is not good but otherwise you are impressed with both the man you are considering and the investment Man behind him, go into the matter a little further.

Sometimes an investment man’s record will appear poor, primarily because the client partly follows rather than fully follows his advice.
Thus, some investors commit the major financial folly of being unable to resist taking small profits.

Against all advice, they grab a few points’ gain and are sold out
of a brilliant investment long before it triples or quadruples.

Hence, they have no large gains to far outbalance the occasional loss that
is inevitable with any common stock adviser.
To blame an investment man for this, when it is done against his advice, is of course
ridiculous.f a brilliant investment long before it triples or quadruples.

Hence, they have no large gains to far outbalance the occasional loss that
is inevitable with any common stock adviser.
To blame an investment man for this, when it is done against his advice, is of course

Author: Atul Singh Stock Market Analyst

Disclaimer: This Blog, its owner, creator / contributor is not a research analyst and expressing opinion only as an individual investor in Indian equities. He/She is not responsible for any loss arising out of any information, post or opinion appearing on this blog. Investors are advised to consult financial consultant before acting on any such information. All information in this blog is posted for personal study, All information posted on blog is as available in public domain.