#161. Unit Trust Agents And Your Investment 2

Does Your Unit Trust Agent Know What Time It Is?

Following up from the previous article, here is another story.

My sister-in-law told me that she has lost money in a previous bout of unit trust investment. Tsk tsk. What a pity. 

I can only sympathise with people who have put their money with 'clever' unit trust consultants. Then I moved on and said, "It's all about timing in investment. The keyword is timing." 

Do you know that many unit trust agents don't really care about 'timing'? 

Put yourself in their shoes. I can't blame them. They are in this profession full time and depend on the income to live their lives. Money has to go into their bank account every month. Who wants to go dry for months when the market is not conducive to buy? As such, when market is swinging downwards, they will still tell you to keep investing and buying. 

Buying in a down trend disguising as dollar cost averaging technique

I know in my previous articles on dollar cost averaging, I have mentioned that it is to be used for long term investment. However, I realised that people are not always keen to invest further

 when they see the market crashing down. And it takes a long time for the market to recover to the previous pristine prime level once it hits the bottom. People just lose that kind of patience and sell their investment at a loss. Thus, people like my sister-in-law says she lost money in unit trust investment. She may even vouch not to invest ever again in unit trust.

Can't really blame them. Both the unit trust agents and those like my sister-in-law.

The unit trust agents will ask you to continue buying and say that you should apply the dollar cost averaging technique. This will guarantee that income keeps pouring into their bank account. Again, timing is not a friend for them. 

Now, I am not saying all unit trust agents are like that. Some really go for timing. Look for these agents if you want to be profitable in your investment.

For investors, not all of them are fond of dollar cost averaging. In fact, I don't believe in the put-your-money-in-monthly dollar cost averaging anymore. As mentioned by W.D.Gann, in a bearish trend, price can dip lower. He said it would be quite foolish to keep putting in your dollars in a losing investment. I can't agree more. When a price goes lower, there is a reason for it. And that reason can be because the whole world's economy is going down. Would you want to keep adding money to a losing investment? The better choice is to cut a quick loss and move the funds out.

Where are your unit trust agents?

Another story I heard is about a relative who is a unit trust agent. He confessed that the current troubled times have taken a toll on his income. His clients are losing money. People are scared to invest at this moment. No one to invest, no income for him. How would you sleep at night when your clients are losing money? I certainly can't sleep easy. 

Well, during the last few years when times are good, unit trust agents will call you and say "See, I told you. Good thing you listened and invested. You are making yourself fat profit now."

Now the times are bad, where are your unit trust agents?

Do you hear them calling you and saying, "I am terribly sorry, it's my fault. I should have advised you to sell your investment while it is profitable." They will never admit that. They take the glory when you make profit and curse the market when you suffer a loss.

Most likely you will only hear, "Hey, don't worry. Market is down now, it is an opportunity for you to buy at a low price. Continue to do the dollar cost averaging. That is the smart thing to do. We shall see fatter profit when the market moves up. It's all a cycle."

When market is down, they will push you for more investment. Can't blame them. 

A good investment consultant should be a wealth augmentor. A wealth augmentor helps you to increase the size of your funds. Because, after all that is the purpose for investing. You invest to make money. 

Every Tom, Dick and Ali is now a financial advisor or investment consultant. But they are not truly a wealth augmentor. Only a wealth augmentor can still help you to make money even when the market is down. They know when to buy and when to sell. As simple as that.

Timing is crucial in investment

Most unit trust consultants don't read enough and never read at all on investment strategies. They only follow the conventional ways purported by the unit trust industry - to buy at anytime and hold for long term, the longer the better. This method may not always be a good one to follow. You may still lose money even if you hold it for a long, long time. Or make only a very small profit.

Look at the chart above for KLCI from 1.1.2000 to date (January 2009). The arrow shows that if you just listen to the unit trust agent who does not care about timing, you will be suffering a lost despite a long period of investment. The wise thing will be to buy and sell at the right time as shown. 

Invest to make money. Happy investing.