Sunday, May 17, 2020

Berkshire reports its biggest quarterly loss ever. Buffett does mid-course correction.


In the business world, the rear-view mirror is always clearer than the windshield.




Warren Buffett
On 2nd May 2020, Omaha based financial conglomerate Berkshire Hathaway (NYSE: BRK.B) reported a net loss of $49.75bn for the 1st quarter of 2020, its biggest quarterly loss ever. This includes $70.28bn of mark to market losses in investments and derivatives. Berkshire stock has corrected more than 10% - from $190 to $170 - from mid April to mid May on the back of these results. This 10% correction is in stark and dire contrast to the SP500, which has moved up by about 3% - from 2783 to 2863 - over the same period.

Granted that the bulk of the losses reported by Berkshire are mark to market losses which is system-wide and holds true for everybody - what was the reason for the markets to punish Berkshire stock by 13% vis-à-vis the SP500 in the span of just one month? The only explanation is that the markets were not very comfortable with Berkshire’s investment holdings anymore, in light of the impact of the Corona pandemic on the world economy. Buffett himself pre-empted this move by selling all airline stocks in his portfolio, including American Airlines, Delta Airlines, Southwest Airlines and United Continental. Berkshire owned approximately 10% of each of these airlines and no doubt the unloading of such a big quantity of shares in the stock market would have been possible only at rock bottom prices. Suffice it to assume that Berkshire would have taken a significant hit in this share sale. More importantly though, in selling all airline stocks together, Buffett debunked his own ‘Buy and Hold for life’ philosophy once and for all. We at Attainix Consulting have been saying consistently that the ‘Buy and Hold’ approach does not make sense in the Knowledge economy anymore, since new upstart businesses can disrupt existing established business very quickly. But now that the master himself has reneged on his own words, I guess his actions will speak louder than his words to the millions of his ardent followers worldwide!

But hold on we are not finished diagnosing the action of the markets on Berkshire stock yet. It appears that the markets discovered a bigger problem lurking underneath in the Berkshire folio. See the top 15 holdings in the Berkshire portfolio at the end of 2019 below. What do you notice?


Well I noticed 3 stocks in Airlines, 6 stocks in Banks/Investment Banking, 2 stocks in Card services, 2 stocks in Technology and 1 stock each in Credit Ratings and Beverages. If ever a case was to be made for putting too many eggs in the same basket, then the above portfolio would win hands down! Of the top 15 holdings, 3 are in Airlines and 9 are in Financial Services – of which 4 are Banks. Buffett sold all his Airlines stocks because he believes people will not fly so much anymore after the pandemic – also the fact that video communication has woven itself in every one’s lives. But what about Banks – will their non performing assets not swell as a result of the pandemic? Sure they will, and that is exactly why the stock markets have been punishing the Berkshire stock. The problem for Buffett is that his Bank holdings are so large that he cannot hope to sell them like he sold the airlines, without disturbing the entire market and shooting his own foot! 

So there you have it – the world’s greatest investor has been found to hold multiple stocks in the same sector in his top 15 holdings – a mistake which even a novice portfolio manager would not make. But such is the aura of mega investors that when the going is good such mistakes are overlooked as genius moves. No wonder then, this situation reminds me of one of Buffet’s own quotes – “Only when the tide goes out do you discover who's been swimming naked”. 

Having said all of the above, I should remind you though that Warren Buffett is still sitting on $137bn of cash. This is like an elephant gun which he can use to correct his own mistakes over time. But can you? Do you have tons of cash that you can deploy to correct blunders in your own portfolio that have been exposed by some unforeseen event? If not, get help. Hire an expert to advise you on your portfolio, if nothing else to detect and avoid common blunders well in time.

Monday, April 6, 2020

Corona pandemic – rebalance your portfolio now


Only when the tide goes out do you know who has been swimming naked.


Warren Buffett
We are now in the 13th day of a three week lockdown in India that is being enforced by the Government to arrest the spread of the global corona pandemic which has gripped the entire world. The speed with this virus has spread all over the world is truly terrifying. But perhaps it indicates how much people are on the move nowadays, and how much more they have to travel regularly in today’s commercial world. As of today more than 90 countries and half of humanity is in complete or partial lockdown all over the world! This is because the most effective way of stopping this virus from spreading is to maintain physical distancing from everyone else.

As I had mentioned in my previous post, lockdowns may stop the virus from spreading but they have economic consequences. Shutting down businesses means people lose jobs. The Government is urging many employers to let their employees work from home. While this is eminently doable for services business, it is hardly possible to implement work-from-home in the manufacturing sector. Even if people do not lose jobs, their income will be curtailed in the short term reducing their purchasing power thus negatively impacting the economy. Governments have announced major fiscal stimulus packages in anticipation of such economic slowdowns. There have been debates in some countries whether the economic cost of a lockdown will be more than the damage caused by the virus itself. That is why the response of Governments around the world to this virus has been different. This is illustrated nicely in the chart below


Notice that India is highest on the stringency scale and lowest on the fiscal stimulus scale on this chart. What does this imply – in short it means that India has the best chance among all these countries to be the least affected (economically) by the virus. And in case India’s containment strategy falls short, the Government has more room to announce more stimulus packages in the future. As of today, when I compare the corona virus numbers, India’s strategy seems to be working - touchwood. Notice also that China which adopted a less stringent policy than India has already started coming out of the lockdown and has started resuming normal manufacturing activities, in less than three months. You can extrapolate this to estimate yourself how soon normal life will start resuming in India.

The United Nations estimates that only China and India, among the large economies, will come out of this pandemic with a positive GDP growth rate. The rest of the world will go into a recession. The chart above certainly gives credence to this forecast. If you also believe that the India growth story - while impacted in the short term - is going to be largely intact in the medium and long term, then this is the right time for you to do the following:

  • Review your portfolio now and rebalance it to invest into those businesses that will be the beneficiaries of India’s growth story.
  • Review your asset allocation. It is likely that your exposure to equities has fallen due to the correction in the stock markets. This is the time to restore your asset allocation by moving some money from debt to equities.
  • Diversify your portfolio as per your own risk profile. Be aware that too much diversification may negatively affect your returns.
  • Keep at least six months of living expenses in cash/liquid instruments. 
  • Finally, stay calm and stay invested.

Having said all of the above, Be aware that this is the time to be aware and alert. There is no room for complacency, because of the possibility that the situation may get worse before it gets better.

Sunday, March 22, 2020

Corona virus – what to do with your portfolio now

Be Fearful When Others Are Greedy and Greedy When Others Are Fearful.


Warren Buffett
As I write this post, we are in the middle of a ‘Janata curfew’ – a voluntary lockdown in the entire country, initiated by Prime Minister Modi to impose social distancing on the entire population. That and washing hands frequently are the only two weapons we have against this global pandemic at the moment. This virus is unlike anything that humankind has ever seen before. It spreads so rapidly that it can overwhelm entire healthcare systems in a matter of days. We are seeing that scenario being played out right now in Italy and Spain. The ‘Janata curfew’ is therefore to be treated as a trial run to ensure that we do not get to that point as a nation.

However lockdowns have mega side effects, especially economic ones. The benchmark Nifty has already fallen 30% from the top in anticipation of a slowdown of the economy. If this pandemic does not appear to be coming under control anytime soon, the index could fall even further. PM Modi has also setup a task force under the leadership of the Finance minster to take stock of the situation and recommend appropriate stimulus actions. This is a good move unlike some other countries which have announced various kinds of bailout packages, which appear to be knee jerk reactions. We need considered measures to stimulate the economy at this time, not knee jerk announcements. So what will this task force recommend? Here are the possibilities in no particular order


  • Doles – Daily wage laborers and contract workers who will lose their daily wages due to this slowdown may get some money credited directly into their bank accounts to help them sustain through these difficult times. Some states like Delhi and Karnataka have already announced the same.
  • Interest moratorium – Public sector banks may be asked to give one or two month moratorium on interest payments for loans availed by their Customers. Private sector banks will have to match this in the interest of public sentiment.
  • Deferred payments – Public sector insurance companies may be asked to defer policy premiums by one or two months without lapsing the policy. Private sector insurance companies will have to match this in the interest of public sentiment
  • LTCG suspension – Long term capital gains tax on equities is at 10% whereas Short term capital gains tax is at 15%. The difference of 5% is not enough incentive for investors to stay invested. Hence LTCG on equities may be removed or suspended in order to encourage investors to stay invested and reduce the volatility in the capital markets
  • STCG increase – Anticipating a bounce back rally in the near future which many traders will make money in the short term, the Government may increase STCG temporarily to benefit from this situation. The fact that the Government has not yet reduced prices on petrol and diesel despite international crude prices crashing makes this a real possibility.
  • Increased spending – Government may announce increased spends in key infrastructure sectors such as highways, railways, ports, transportation, health, education and housing
  • Interest rate cut – RBI may cut long term interest rates in order to make it cheaper for businesses to borrow capital and revive their growth
  • Tax cut – Government may announce an income tax cut especially for the middle class in order to put more money into their hands.

What to Do?

  1. All equity investors have taken a significant hit on their portfolio in the past few weeks. This is now a good time to review your portfolio and replace stocks which have fallen significantly with those that will benefit from the above stimulus announcements. Some educated guesswork is required no doubt in this process, but sectors like pharma, healthcare, consumer goods and chemicals are good choices at the moment. Making good picks from these sectors will help you recover your portfolio loss quickly when the bounce back happens. 
  2. This is also a good time to review your asset allocation, which has become distorted due to the correction in the stock markets. Moving some part of your debt allocation to equities in order to restore your asset location is also a good idea at this time.
  3. If you are invested in credit risk funds or corporate bond funds you need to be extra careful. The slowdown may turn into a recession if the pandemic continues for a few months which in turn may trigger defaults. Overnite funds and/or Gsec funds are the preferred debt instruments for now.
If you still have questions or doubts, reach out to your SEBI Registered Investment Adviser who will be guide you through this patch of global turbulence.

Tuesday, March 3, 2020

Do not mix Insurance with Investments

We are into the month of March – the last month of the current financial year. Tax planning is now uppermost on the mind of those who feel this is their last chance to save some income tax for the year. This urge to save taxes makes them highly gullible to the pointed sales pitch of ever available and savvy insurance agents who are on the prowl to ratchet up sales of their insurance products (endowment plans, savings plan, ULIPS, etc) in the guise of saving taxes for their clients. The lure is that most such insurance products are bundled as investments and promise to give back some multiple of the total premiums paid. Investors see a double benefit – tax savings plus money back at the end of the term. Consequently they are already sold and so quick to sign up for these products that their checks are already signed – they are just waiting to fill in the premium amount. This is how the vast majority of Indians are enticed into subscribing to sub-par investment products with hefty annual premiums for the meager purpose of saving a little tax. What they fail to realize is that by buying such products they neither get adequate insurance cover for themselves neither do they secure their future by way of making good investments. Lack of adequate regulatory prohibitions from bundling insurance products only makes it worse – ensuring this saga continues year after year.

The fact of the matter is this – Insurance does not equal Investments.


Let this message sink into your conscience through the above picture. Think of Insurance as an umbrella that protects you from unforeseen and sudden events. And think of Investments as an inverted umbrella that helps you accumulate and multiply your savings for a comfortable future. Do not ever mix the two – no matter how much the Insurance agent tries to convince you.

Insurance is a protection product and term cover is the purest and cheapest form of Insurance cover there is. That is the only form of Insurance you should consider buying – ideally for a sum assured of up to 10 times your annual income – to protect your dependents in the unforeseen event of any eventuality to your life. There is a cost that you have to pay for availing this protection - the annual premium. Think of this premium as an expense to protect your dependents if something were to happen to you. Do not be tempted by clever sales pitches that promise to recover this expense at the end of the term plus guaranteed additions plus reversionary bonus plus terminal bonus plus god knows what else. These sales pitches and the associated products are designed exactly to target your weak spot – your lack of willingness to treat Insurance premiums as an expense and your greed to recover this money at the end of the term. By succumbing to this greed you will end up owning products that neither gives adequate life coverage nor optimal investment returns. What makes it worse is that these are multi-year commitments which are often difficult to exit without talking a significant loss.

So the next time you are pressured by an insurance agent into buying such a product and are in doubt, ask for more time and then contact your financial advisor for a second opinion. Understand for yourself the tradeoffs between buying a bundled product versus buying a plain term plan and investing the rest of the money. Read The 4 ps of personal financial planning to understand how to go about planning your life’s finances in your own best interest.

Monday, February 3, 2020

Insurance vs Investment

We are into the month of February, the eleventh month of the financial year which spans from April to March. Historically the last three months of the financial year, i.e. Jan to March, have seen an increased demand for Insurance products in India. This is because the premium paid for Insurance products qualify for a tax deduction under section 80C of the Income Tax act up to an annual limit of Rs 150,000. This is quite liberal a limit for most Indians where the average annual per capita income is only Rs 135,048 (ref https://en.wikipedia.org/wiki/Income_in_India). In a country where the largest insurance company LIC – is owned by the government, Insurance companies and their agents have found it relatively easy to sell Insurance products to the vast Indian middle class on the basis of tax savings that will accrue to them for paying Insurance premiums. This narrative has not only suited the Government coffers very well (LIC paid a dividend of Rs 2,610cr to the Indian Government for 2018-19) but also the mindset of the Indian middle class which has been conditioned over the years into saving its hard earned income in tax saving instruments instead of investing it. Consequently millions of middle class Indians even today are more comfortable buying a LIC policy instead of investing in an investment product such as a Mutual Fund.

Truth be told, this mindset worked well during the post independence era when the Mutual Industry in India either did not exist or was in a nascent stage. However ever since the emergence of private sector mutual funds in 1993 and the stringent regulations put in place by SEBI since 1996, the Indian mutual Fund Industry has taken off and since 2004 has evolved into a mature financial industry with Assets under management (AUM) of more than Rs 27 lakh crores at the end of 2019 (ref https://www.amfiindia.com/indian-mutual).  In fact the AUM of Mutual Funds in India has registered a compound annual growth rate (CAGR) of 25 per cent over the five year period from 2013-2018, outstripping the CAGR of only 11 per cent registered by aggregate bank deposits of scheduled commercial banks during this period (ref https://rbidocs.rbi.org.in). Consequently the vast Indian middle class needs to wake up and re-condition its mindset and see-through the sharp sales pitch of Insurance agents who peddle Insurance products to them solely on the basis of tax savings.

Insurance is an entirely different requirement from Investing. Insurance takes care of the protection needs of the individual – due to sudden events related to life, job or health – whereas Investing addresses the topic of wealth generation for building a nest egg for your entire life. Therefore whenever Insurance is being sold as an Investment, you should de-link the Insurance need from the Investment need and only consider buying the Insurance portion (Term Insurance) to satisfy your protection needs and then invest the difference. Combining Term Insurance with Investments in the form of Savings plans or Endowment plans locks investors into long term commitments into products where there are expensive management fees and associated agent commissions which is a drain on the individual’s hard earned money.

The Finance budget for 2020 has taken a welcome step in this direction by giving taxpayers the option to decline these exemptions in order to avail a lower income tax rate. This is a soft signal from the Government that individuals are free to make their own choices for their saving requirements and should not rely solely on the tax incentives provided with Insurance products for this purpose. This option will force all taxpayers to now calculate whether they are better off availing the tax exemptions and paying a higher tax rate or declining the exemptions for paying a lower tax rate. In this process, the re-conditioning of the mindset to buy Insurance products solely for the purpose of saving tax will automatically take place. It is quite possible that existing investors who are heavily invested in Insurance products may choose to avail these exemptions. However new entrants to the job market and other young investors will certainly want to make their own savings decisions and avail a lower tax rate. Both classes of investors will do well to reach out to a qualified Registered Investment Adviser to guide them through this change.

Tuesday, January 7, 2020

2019 - Letter to Clients

After a lackluster 2018, 2019 turned out to be another difficult year in the stock markets for Indian investors. Here is how the year panned out for various asset classes during the year.

Asset class
2019 return
Gold
23.8
PPF
7.90
NSC
7.90
Debt ultra short
6.92
Post office 3-year deposit
6.90
Debt Liquid
6.32
Fixed deposit (1-3 years)
6.25
Nifty 50
12.02
Nifty Midcap 100
-4.32
Nifty Smallcap 100
-9.53


icAdvisor average
-2.84
No one could have guessed it at the start of the year, but Gold was the star performer during 2019. Appreciation in Gold, an unproductive asset, normally signals a defensive approach by investors. The stock markets were anything but defensive though. The Nifty started the year at 10,862 and ended it at 12,168 – giving a healthy return of 12.02% in the process. The Nifty Midcap 100 and Nifty Smallcap 100 on the other hand gave negative returns of -4.32% and -9.53% respectively. This was the second consecutive year when these two indices gave negative returns. This means that investors with growth portfolios in the midcap and smallcap space will have to increase their investing timelines in order to first break even and then generate a positive return. As far as our icAdvisor advisory service is concerned, the annual return of client portfolios under our advice clocked in at -2.84% this year. More than 90% of our client portfolios are Growth oriented and with this constraint we were still able to outperform both the Midcap 100 and Smallcap 100 indices. Here is how many of our client portfolios outperformed the three indices in percentage terms

Index
% folios outperforming the index
Nifty
32
Midcap 100
68
Smallcap 100
79
 2019 was also a year which was marked by a peculiar trend – large cap quality stocks that were already costly became more costly at the expense of quality midcap and smallcap stocks, which were shunned by investors as being too risky. This led to a situation where the Nifty ended the year at a PE of 28.3, very close to its lifetime high of 29.9 and two standard deviations away from its average of 19.8. At these dangerously high PE levels Nifty stocks have only two possibilities – either deliver increased earnings to justify the stratospheric PE or face a price correction. The December qtr results which are starting later this week will be interesting to watch from this point of view.

In terms of trends the Nifty once again saw three broad trends during the year – two uptrends and one downtrend. The quantum and duration of these trends were as follows:

Trend
Quantum%
Period
Uptrend
14.3
Jan to Jun
Downtrend
-11.9
Jun to Oct
Uptrend
15.0
Oct to Dec

This can be seen visually in the daily chart of the Nifty during 2019 below

The previous year also witnessed three broad trends in the Nifty and 2019 continued this trend. Consequently volatility remained high during the year. In response to this volatility we continuously advised our Clients to sit on cash whenever possible. During the end of the year we saw the emergence of a new trend although in small proportions – booking profits in stocks that had run up way too much and investing into quality names in the midcap and smallcap space. 2019 was also marked by a lot of upheavals in individual businesses, notable among them being DHFL, Mcleod Russell, Cox and Kings, Thomas Cook, Yes Bank, Sintex, Reliance Home Finance, Reliance Communications, Café Coffee Day, Jet Airways, Reliance Power, Reliance Capital, Jain Irrigation, Lakshmi Vilas Bank, Vodafone Idea and HDIL amongst others. All of these stocks lost more than 80% of their market cap during the year. It was perhaps the consequence of this kind of literal carnage in so many stocks that investors flocked to quality large cap names and kept pushing up their price to stratospheric levels!

On the economic front there was bad news all around. The GDP growth rate slumped to 4.5% during the year, the lowest growth rate in decades. Unemployment continued to be high and GST collections also slipped during the year confirming a slowing down of the economy. These and other indicators have put the Governments target of $5tn economy by 2024 at serious risk. On the bright side, the Government was active in acknowledging the problem and took many remedial steps to reverse the trend including a lowering of corporate tax. The cumulative effect of these measures is likely to show result in the next couple of quarters.

What can be look forward to in 2020? The Indian economy has slowed down but the Government is making all efforts to revive it once again. The fact that the elections are behind us and that there is a stable Government at the center with an even larger mandate is assuring for investors. The stock markets have run up already in anticipation of the moves made by the Government. Quality large cap stocks are trading at stratospheric levels and are due for a correction unless their December quarter earnings support their high prices. Quality Midcap and Smallcap stocks however are looking very attractive at the moment. This I believe will be the sweet spot for 2020.

At the end of this difficult year, it is a good idea to take a moment and review the fundamentals of long term investing. We enumerate them here for quick reference:
  1. Asset allocation – Diversify your financial assets across Debt, Equity, Real Estate, gold, etc. depending on your risk profile and age. Real Estate and Gold assets should be used to satisfy consumption needs only. It means that your financial assets should be invested only across Debt and Equity. One simple rule of thumb to do this quickly is to subtract your age from 100. The number you get should be the percentage of your assets that you should allocate to equity - the rest should be allocated to Debt.
  2. Financial planning - Identify your financial goals and classify them by time horizon – short term, medium term and long term. Use Debt assets to achieve short term goals, mix of Debt and Equity assets to achieve medium term goals and Equity assets for achieving long term goals. This will be the basis of your financial plan.
  3. Reviewing your plan - Review your financial plan yourself or with your advisor at least once a year and make adjustments depending on the prevailing market situation.
  4. Invest right - When it comes to equity, invest in quality businesses and then give markets time to give you returns. This calls for patience in the face of volatility. Speak to your financial advisor whenever you are in doubt and need a second opinion.
I want to inform all my Clients that during the year we made further improvements to our stock picking algorithm. These improvements include using advanced technical indicators in addition to fundamental indicators to ensure that we get the timing of investments right also. I believe these improvements are already working in favor of our Clients.

I also want to take this opportunity to thank you for putting your faith in our investment thesis and in our icAdvisor service with your hard earned money. Your continued trust makes us stay committed to the vision encapsulated in our tagline – ‘Growth through Knowledge’. I am available to address client queries at all times and am approachable via email or whatsapp. 

Finally, let me wish you and your family a very happy and prosperous Happy New Year and hope that our relationship will continue to grow for many years to come!

Abhijit Talukdar
Founder, Attainix Consulting
SEBI Registered Investment Adviser - INA000006703

Tuesday, September 10, 2019

Do you know your fund’s TER?

Like a growing number of Indian investors, you most likely invest in Mutual Funds on a regular basis. You are also perhaps aware that Mutual Funds charge a certain percentage of their Assets under Management (AUM) for managing the fund. This expense is known as the Total Expense Ratio (TER) and it is a number regulated by SEBI. The maximum TER that funds can charge as management fees depends on the size and type of the fund, as shown below:


AUM slab (Rs cr)
Equity oriented schemes – max TER%
Debt oriented schemes – max TER%
0-500
2.25
2.00
500-750
2.00
1.75
750-2000
1.75
1.50
2000-5000
1.60
1.35
5000-10000
1.50
1.25
10000-15000
1.45
1.20
15000-20000
1.40
1.15
20000-25000
1.35
1.10
25000-30000
1.30
1.05
30000-35000
1.25
1.00
35000-40000
1.20
0.95
40000-45000
1.15
0.90
45000-50000
1.10
0.85
More than 50000
1.05
0.80


As of end of Aug 2019, there were 269 active equity oriented mutual fund schemes in India, with AUMs ranging from a high of 25,069cr to a low of just 0.64cr (source: www.amfiindia.com). Since fund size determines the maximum TER that can be levied by the AMC, it is important for investors to know the fund size before short-listing it. At the top of the scale of 2.25%, every Rs 1000 invested by investors can lead to a fee income of Rs 22.50 for the AMC. This is an annually recurring fee which will be deducted every year - in fact it is deducted proportionally from the NAV every day. What this also means is that if the fund returns 15% per annum before fees, the investor will only get a return of 12.75% after fees. In fact, since management fees are deducted from the NAV on a daily basis, investors will actually get much less than 12.75% on an annualized basis due to the compounding effect of the daily fees. Hence everything else being equal, a fund with a lower TER is always desirable.

A lower TER is even more desirable for debt funds whose expected annual returns are much less than equity funds. Note that as per SEBI guidelines, the maximum TER for a debt oriented fund is only 25 basis points lower than equity oriented funds in the same slab, although the returns for a debt fund can be less than half that of an equity fund over a longer duration. This means that a lower TER is critical during debt fund short-listing, since a higher TER can eat away a significant portion of the absolute returns of the fund.

What to Do

One way to get a lower TER is to always invest in mutual funds with the Direct plan option. This one action alone can reduce the TER by more than 50% compared to the Regular plan of the same fund. Consider the following table that shows the average TER for the three categories of funds for Regular and Direct plans (source: www.valueresearchonline.com)

Fund Category
Regular plan average TER
Direct plan average TER
Savings in Direct plan
Equity
2.02%
1.22%
39.6%
Hybrid
1.96%
0.98%
50.0%
Debt
0.9%
0.42%
53.3%

Since Direct plans offer savings of more than 50% over Regular plans, it is pretty obvious that every investor should opt for them by default. The question then is how to shortlist Direct funds without the help of a Mutual Fund Distributor (MFD) since they will only offer you funds with the Regular plan. You have two choices here – the first choice is to learn to do it yourself. Apart from the pleasure of saving money you will also have the satisfaction of gaining some investing knowledge in the process. If this option is not feasible for you for any reason, then the next best option for you is to hire the services of a SEBI Registered Investment Adviser (RIA) who will charge you a part of your savings for providing his/her services. In this case you will save a little less money but will have the benefit of professional selection of funds as per your risk profile and goals as well as the facility of reaching out to an investment professional any time during the service period. Both options will save you money and have their own benefits – the choice really is yours. An informed investor is always a wiser investor!