#196. Losses In Investment

An anonymous UTC posted a question in the Ask A Unit Trust Question page:

i am a new utc.a potential client asks me- 'if the fund experience losses instead of profits, will i lose my money that i have invested?'--> how do i answers this questions?.

The simple answer is of course, yes. Yes, you will lose money when the fund experiences loss. However, it is only a paper loss. It becomes real loss when you redeem it to cash. Then you will see your losses are very real.

The further answer lies in Timing. I will explain further.

But first, this question troubled me. However, not on a personal level to the above UTC or Unit Trust Consultant asking this question.

From the early days of my first purchase of unit trust funds, I have known the ugly side of this trouble. Read my previous article #193 on Investment Guru. Read about the part where my friend who was a UTC advised me to buy but not on when to sell.

UTCs are not fully trained on investment matters. They do not know when to buy and when to sell. See another article #161 discussing on Does Your Unit Trust Agent Know What Time It Is?


In property investment, it is all location, location, location. In unit trust investment it is all timing, timing, timing.

If the UTC knows when to buy and when to sell, profit is very highly likely. Therefore the answer will be "The loss is very minimal because the time to buy is right now. And I can show you why I say the time is right." Then you can proceed to bring out your chart and show your technical analysis skill.

Well, I guess not all UTCs have that kind of training in the first place. Their uplines don't teach them any chart reading methods not technical analysis techniques. As a matter of fact, not many uplines know about charts and technical analysis. They only say the market is going up, buy. When the market crashed, they will still say, it will go up, buy.

There is another way to avoid heavy losses if one does not know the timing.

Article #91 on When To Cut Losses will explain to you.

On the same day you buy a fund, you must know when to sell. You should have a target of when to sell when the price goes under. Set a 5% to 10% loss target. If your price has gone under 5%, sell. No question about it. Sell.

If the price goes up higher, move the 5% based on the new higher price. Of course, if the price goes down, you stick with the earlier 5% target. Article #91 explains in more detail.

Decide the stop loss target with your client. Ask them what is a comfortable level for them - 5% or 10% or 7% or 8%. Remember this is excluding the 5% sales charge they have already incurred. If your stop loss target is 10%, that means the client has lost a total of 15% (10% plus 5%)!

I would suggest any UTC to learn up all they can about technical analysis and chart reading. Do this first before you even start selling any fund. Learn about investment techniques too such as stop loss method. Do not start selling when you have no knowledge on any of the above. Trust me. Or else you will have sleepless nights when your clients lose money. Think about it, these are their hard-earned money!. Nobody wants to lose money.

The number one job of a UTC is to protect the client's wealth and grow them. Don't make them lose any money. It will also help you to build up your reputation when you are able to grow their wealth and investment. New clients will automatically come to you.

Imagine if you start selling to so many people without any knowledge on investment techniques, what will happen when the price comes down? You will lose all your clients overnight and your career as a UTC will also leave with the darkness of the night.

Treat the client's money as if they are your own. Remember this always. Don't lose their money.