#144. Unit Trust Agents And Your Investment

Is Your Unit Trust Agent Knowledgeable To Help Your Investment Grow?

How many of you have lost some money in unit trust investments? Well, I hope you have come to right place. I will explain in a while below. Now, Warren Buffett gave his staffs two very clear rules. Rule number one, do not lose your money. Rule number two, refer to rule number one.

So, what is investment? 

I won't answer this question, instead, let us ask another more important question. Why do we invest?

We invest because we want to make money. We want to make our money make more money. That is the simplest philosophy. However we have complicated things along the way. And more importantly we forgot about the true aim and reason for investing.

Your unit trust agents should play an important role in making sure that your investment makes you money. Not the opposite. However, I always cringed and curled when I hear from friends and relatives that they have just bought so and so unit trust funds from so and so unit trust agents. 

Well, well, why do I cringed? 

Right Funds

Most of the time, these agents recommended the wrong funds. That's the first reason. You may ask, how can I say that when I have not even profiled my friends and relatives on their risk appetite. There are only a few funds that are worth investing in. Read an old article that I have written to find out one of the best funds to invest in. 

When I don't hear my friends and relatives talking about funds that are supposed to track the market trend, I know they have bought the wrong funds. Market is cyclical. There are ups and downs in the market. Buying a fund like Index Fund clearly shows you are long sighted and smart in your investment.

However, even if you have invested in an Index Fund, doesn't mean that you are well on your way to riches. And you can now sit back and watch your investment grow. Not yet.

Next reason why I cringed when I hear people buying or investing in unit trust funds at the wrong time. More often that not, they invest when the market is too high, or when the market is going to dip further. 

Perfect Timing

Just like the day and night, everything has a timing. There is time for us to eat and to sleep. Investment is the same. There is a time to buy. And a time to sell.

However, when someone has bought at a wrong time, I know that the unit trust agent has just closed a deal just so he or she can take home a fat commission. Unit trust agents earn their keeps based on how much they can get their clients to invest in the unit trust funds. They just want to earn a living and will not tell you that the time is not right to invest. 

When the market is down, the agents should be recommending you some bond funds. At this moment, best to buy some bonds and wait till the market dips to the bottom. Once it hits the bottom and on its way up, you can then switch your funds from bond funds to equity funds. No hurry now to go into equity funds. I became perplexed when I heard my friend who had just invested in an equity fund two months ago. What was the agent thinking? Just to make some sale and earn the commission. 

Knowledgeable Unit Trust Agent

Next, I will ask my friends and relatives how much they know about their unit trust agents?

The answers I get will be: "Oh, she is good. She is a full time agent. She just sent me an SMS to inform me that the price has gone lower and whether I want to top up."

Spot the rat there?

Being a full time agent does not necessarily means she is good. It is how knowledgeable the agent is on the market. Whether the agent knows when is a right time to invest?

Of course from the answer above, I don't find the agent knowledgeable on the market. Otherwise, she would not have sent an SMS to my friend to ask him to do a dollar cost averaging by topping up his earlier investment. 

If the agent knows about the market, she would not have advised anyone to go into a declining market and only to ask the investor to top up the investment later when the price goes lower. 

That to me is suicide in investment. You are burning your money.

Remember, investment is supposed to make you money. There is a time to buy. There is always a right time to buy. 

So, how to spot a knowledgeable unit trust agent?

Test your unit trust agent by asking: "Show me on this KLCI chart, where are the resistance and support?" If the agent doesn't have a KLCI chart, walk away. How can you talk about an investment when you don't have a chart?

If your agent can answer you what 'resistance' and 'support' mean, then ask further: "Which wave of the Elliot Wave are we in now on the KLCI?" 

This will make most of them go "huh?" and they will quickly change the topic to something else. 

Well, you see, most of the unit trust agents out there are just into the money. Most are too lazy to learn the real stuff of investment. Even more are too lazy to even read books on investing. Some do not even care whether it is uptrend or downtrend. They will just tell you: "Just do dollar cost averaging on a monthly basis. Invest regularly." 

Again, dollar cost averaging is a good technique. You can make it more effective by buying more when the price is low. Not when the price goes up so high.  

I have met many agents that are new and are very eager to close some sales. They say things that doesn't make sense to me. However, to an unknowledgeable investor, their words sound like wise words of investment simply because people think they are dealing with a 'unit trust agent'. And these 'agents' are supposed to be knowledgeable in handling their investments.