Monday, September 28, 2009

Timing the Market?

Many of my clients are sitting on a profit of between 20% to 30% for their investments especially those who heed my advise to invest during the early part of the year. Some of them asked in May, some in June and July if they should sell their investments. I instead proposed to increase equity position and switch from Global bonds to Corporate bonds during May and June. Fortunately, it pays off.

I'm still sticking to the 60% equity position for balanced investors, 75% for growth investors, 85% for agressive investors. I try not to time the market too much and manage risk via the asset classes of equity, bonds and money markets using largely geographical allocation with bias towards Asia and Commodities.
I advocate investment with a longer term perspective. I'll try convince my clients to avoid timing the market. Its hard for anytime to give them the exact time to buy and/or to sell.

To make a market timing strategy works, you must be right 2 times. The time to buy and the time to sell. Mistake in either, you will have serious consequences towards your investments. There is a high risk that you end up locking in the losses you sufered from a fall in the market or missing out on gains when the market picks up.

Its easy to say "Buy Low, Sell High" but are we doing the opposite? We can get very emotional if the market changes direction suddenly with significant gains that can come in short burst, over a matter of days. If we are in, we will say "Take Profit". If we are out, we will say "Invest when its down". Eventually when the market is experience a bull run, most of us are out of the market but when its experience a bear run, most of us are in the market.

Look longer term and you probably be able to sleep better. At current moment, volatility is expected in the short term but I'm positive on the long.


Anonymous said...

What do you mean by not timing the market too much? Isn't it timing also. Timing is timing and there is no such thing as little or too much.
Anyway , investemnt guru like you are plenty in the market. Plenty. All insurance agents are gurus of some kind.They are tipsters, the stock brokers, the analysts and most of all they are the salesmen.

Khiat Han Hwee Adrian said...

When the investment hits a specific target that we had set, I'll give him my view on the climate ahead. He will decide if he likes to rebalance the allocation back to original or to keep the higher equity position.

I help manage their funds within an allocation range. Eg, 60% - 80% equity position for "Growth" investor. 50%-70% for "Balanced", etc.

Its not entirely just buy, hold and do nothing. I give my views and they understand the rationale on why I do this or that for them. They are still free to agree or to disagree.

Anonymous said...

Rebalancing is an ongoing activity and an activity which you and the clients would have agreed at the start. Once any one of the components
appreciates or declines by a predetermined band rebalancing is needed . This is management and of course entails baying and selling.

Anonymous said...

I'm just wondering whether you have a portfolio yourself ?

What is your track record?

If you have not invested for long, how do you know whether you are telling your clients the correct advice? In the first place, how come you can give advice??