Why a mutual fund agent can promise you profit while a fund manager could not?

Have you had bad experience losing money investing in mutual funds? The funds which lose money over time. It is not the issues with any mutual funds, but rather the agents who can promise you the sky but end up under delivering. When they recommend a fund, they would tell you as if they can predict how the market is going. If you are uninformed, agents would have overloaded you with all the jargons of using technical tools to so-called determine buy-sell decisions. Or can tell you that this or that fund can perform 10-20 percent over the next year.

Frankly, no one can promise you “x % return” or say it is “picking up”. Not even myself with CFP or a fund manager with CFA.  We can only say – average return from track record. No one will ever know how market going to perform that’s why we diversify to reduce “concentration risk”. Plus, do asset allocation.

Compare that with humble statements from a fund manager, below – excerpt from CIO of Philip Capital Management (PCM), Ang Kok Heng – latest memo in April 2014

“There are many types of profit available to be made in the stock market. Many investors like to make short-term speculative profit which could provide quick gain when the market surged. Meanwhile, conservative investors would  prefer  to  buy  high  dividend  yielding stocks which are generally safer. The return from speculative stock is exciting for punters. Investors  who  try  to  make  this  type  of  profit  must  know  the  rules  of  the  game and  the potential risk.”

 ang kok heng profit to make

“The potential quick gain  is very tempting  and hence,  some investors may throw away their traditional investment strategy to try their luck on penny stocks. The  stock  market  is  an  exciting  place  to  make money and there are different types of profit that can  be  made  in  this  marketplace.  Bigger  fund houses would prefer  to make capital gains from blue  chips,  while  some  smaller  fund  managers would  go  for  growth  stock.   Nonetheless, investing basing on fundamentals of companies remains the  most common strategy among  fund managers. However,  retail  investors  have  more  avenues. Technical  traders  would  just  rely  on  chart  to provide  for  buy  or  sell  signal.  As  such,  trend followers  will  just jump  into  the  bandwagon  by riding on  the trend of  mid-  and small-cap stocks which have  been performing  very well recently.”

“The substantial gain made  from  the  price appreciation among penny stocks has emerged as the most profitable strategy of late.  Overall,  there  is  nothing  wrong  for  any individual  to  adopt  this  kind  of  speculative strategy  to  make  quick  gain  from  the  stock market.  However, an investor must bear in mind that  investing in fundamental stocks is different from  trying  to  make  quick  gain  based  on speculative  newsflow.  The  risk  of  trading  on these  kinds  of  stocks is different and  hence  the strategies are also distinct.  Trading  profit can be from  penny  stocks, turnaround  stocks,  under-valued  asset  rich stocks,  syndicated  counters,  stocks  under  hot theme play, “insider” recommendation etc.  Just  a  reminder,  trading  stocks  are  only  meant for  trading  and  punters  who  dabble  in speculative  stocks  must  prepare  to  cut  their losses  when  the  market  turns  downward unexpectedly.  The most common mistake made by  punters  is  that  they  like  to  try  their  luck  on speculative stocks but when losses set in,  they will  refuse  to  sell  and  instead  of  being  short term  traders  they  will  end  up  becoming  long term investors.”

At the time of this writing, you can see that probably a lot of speculators are being hit if they dabble in penny stocks – Shocks continue as Malaysian penny stocks sold down

Lastly, this shows a BCI (business condition index) rebound in Q1 2014. This means we would not have recession anytime soon, yet!

BOOSTING START

  • Business Conditions Index rose 103.1 points against 92.0 points in the previous quarter
  • Manufacturing sales picking up
  • Moderate domestic demand and export orders
  • More job openings in the manufacturing sector
  • Business activity likely to accelerate in the next quarter

 bci1q2014

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