Most investors lose money, and the commonest reason is because they’re their own worst enemies. Behavioral economics shows that all of us suffer from certain prejudices and biases. As a result of these, we often end up making the wrong decisions when we invest . This is why we often sell our winners and hold on to our losers. We tend to be extremely undisciplined and do not follow a plan. Sadly, the easy availability of a wealth of information about companies and their prices at our finger tips has made this problem much worse. TV channels bombard us with data; and online brokers make it easy for us to buy and sell. However, more information does not translate to better decisions – and often causes overtrading which imposes transactional costs. It’s hard for most people to sit and do nothing , especially when there seems to be so much activity going on around them, and it’s easy to get taken for a ride by media hype.

This is why it can be so helpful to have a financial coach to manage your wealth for you. Because he’s emotionally distanced from you, he can be more objective , and stick to his original plan. Because he’s answerable to you, he has to show you that he’s doing what he said he would – he is forced to walk his talk. When you manage your own money, sometimes you’re too emotionally involved to be able to make the right decisions.

Of course, fund managers have emotions too – they are human after all , and have to deal with their feelings as well. Many will refuse to take unconventional decisions which may jeopardise their career, even though these may make you wealthier. This is why it’s so important to find a wealth manager whose interests are aligned with yours. It’s best if you pay him for the advice which he provides you, so that he gets an advisory fee, rather than being reimbursed by his fund or bank for maximising the income he earns for them by churning your portfolio.

Just like a doctor is paid for his professional advice, a financial coach should be paid for his professional advice as well. The trouble is that many investors are shortsighted and are unwilling to pay for this kind of advice, because they expect it to be free. They feel investing is easy – it’s just a question of selecting the right stocks and clicking a button, so why should they pay someone else for doing something which they can so easily do themselves ! After all, they can read the newspapers and watch CNBC as well – and there are plenty of gurus who are happy to provide free financial advice, so why pay for this ?

This penny wise pound foolish approach ends up hurting them, and they end up losing a lot of money. It’s very useful to have a financial coach , who helps to make sure that you remain on the right path and who will guide you properly about how you should be allocating your assets, just like a doctor guides his patients. They key is to find the right coach – and this is not an easy task !