Saturday, 15 June 2013

Mutual Fund Must Be Full of Con Men?

That title would have caught your attention to actually read this post, am I right? These are in fact actual words posted by a forum member in in a thread dated 15th February 2012 as shown below:

Click to Enlarge
I believe most of us would have seen/read/heard the same kind of complaints containing key words such as:
1. Public Mutual
2. Drop/Lost
3. Con Men
4. Cheat
5. Lie

In fact reading the forum post above frustrates me a hell of a lot due to the following reasons:

1. Unit trust is designed for long term investment range yet it has been wrongly perceived by investors as a quick way to make quick returns.

2. A unit trust is designed for consistent investment over a period of time. Investors are not encouraged to invest one lump sum at one go. Investing a lump sum into unit trust when the stock market is at its peak due to over optimism (when optimism is at its peak, the stock market tends to crash) is the biggest reason why many investors find themselves losing a large chunk of their original investment. 

3. Unit trust investing is not speculative.Therefore please do not think of buying unit trust today and hoping to make profit by redeeming your units by next week or next month. The investment horizon should be longer then 3 years, at least!

4. Failure of unit trust consultant to highlight the risk nature of a fund to the investor. This problem is mostly caused by consultants whom are marketing unit trust purely for the sales commission. Due to the urgency to convince and to make a sale, some consultants tend to exaggerated the performance figures while intentionally leaving out the risk that comes with the fund.

5. Not all unit trust funds will guarantee profit even over long term. Such is the case of funds that are invested into China or Asia Pacific excluding Japan over the past couple of years. You can check out the performance of the Top 10 funds in China as well as the Top 10 Funds in Asia Pacific excluding Japan in my review HERE

It is of no surprise for an investor to be blinded by the promises of good returns to willingly fork out a large sum of money to invest in a fund that is new with no track record and at the same time disregarding the fact that countries such as China and Hong Kong.are extremely volatile. 

"High Risk, High Return-mah!" A catch phrase so commonly used by consultants that investors tend to forget and forgo the basics of risk evaluation when it comes to investing. Key steps such as finding out what are the risk involved, obtain independent views (not just from the consultant), evaluating and finally deciding if its worth taking or not were neglected.

Every unit trust consultant certified by Federation of Investment Managers Malaysia (FIMM) is responsible to provide correct and proper advice for investors. Lack of professionalism and unethical conducts among consultant is just going to ruin the image of unit trust and ultimately his or her own rice bowl.

Investors on the other hand should take responsibility in knowing and understanding what they are investing. Know and acknowledge that there are risks in every investment. Stop pointing fingers, for every one finger pointing to another party, 4 more is pointing back at you.

Cheers and Happy Investing!

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