Here, i would like to share a real time experience i had with my Unit Trust clients.
6 years ago, i helped my client to invest RM 100000 to purchase an Unit Trust fund. This fund is categorized as Equity and focused primarily on capital growth. Dividend payout is incidental! The fund's NAV (Net asset value) has an asset exposure in South East Asia markets. Client required an above average return on his investment.
The client has conveyed that his investment holding period is at long term period and he was told that there would be volatility in the NAV along the investment period before achieving above average return. He also been told about the strategy of optimizing return via "Buy Low, Sell High" concept.
Okay, here comes the miserable part!
6 years down the road, his return had reached about 6% to 7% annual return. However, due to the pullout of investors funds from domestic capital market, this fund's NAV dropped and the return was now about 4%.
Client has indicated to me that he needed to withdraw all units due to this sluggish return, but i told him that the drop is only temporarily and he should leave the units untouched. I suggested to him that he should wait for the NAV price to surge back before withdrawing. The volatility is normal but my advice was unheeded.
The client had withdrawn all at a small annual return of 4 %. (The client could have exercised to redeem all while the return was at 6% to 7% earlier, but he decided to wait).
This case is a classical example of avoiding to adhere to the basic optimizing strategy as mentioned above, i.e. Buy Low , Sell High!
I LEARNED ONE IMPORTANT LESSON AND IT IS , WHEN A CLIENT CONFESSED THAT HE UNDERSTOOD ON THE APPLICATION OF VARIOUS UNIT TRUST INVESTMENT STRATEGIES, HE ACTUALLY NOT!!
When you invest, think like one and act like one!
Vijaya Devan
