Thursday, January 24, 2008

Cutting Losses

Today I made the difficult decision to sell off all my loss-making investments in all the unit trusts. Those unit trusts are all bond funds or income funds which are supposed to be 'safe' and a hedge against a stock market crash. Unfortunately in my case, these funds have something more than you thought they should have invested in.

For example, DBS Shenton Income fund in fact has some CDO exposures, and it also invested a substantial amount in REITs. When the REITs were doing well, which coincides with good times of the stock market, the fund did well too, but then when the stock market crashes down, so do the REITs. REITs are, no doubt, defensive. But 'defensive' is just another good name for losing money.

Remember Warrent Buffet's investment rule #1? NEVER LOSE MONEY!!!

With the appalling performances of all the funds, I have lost all my faith in them. I want to have an income fund? I will build my own income fund! A growth fund? I will build it on my own, too! I don't want to pay the fund managers to lose my money.

If I fail, what is the worst case scenario? I will lose ALL my money. But if I leave my money in the fund manager's hands? They still will lose my money, and I have to PAY them to do that! It is outright ridiculous!

Cutting loss is a painful experience. I didn't sell all those funds off when they were making money, my greed. The current rebound in the stock market gave me a good opportunity to sell off at a smaller loss.

Anyway, I am looking forward to a better future, without the fund managers!

1 comment:

  1. Hi there - came across your post whilst researching the pathetic performance of some funds that I own, particularly my DBS Shenton Income Fund and Schroder East Asian Yield fund (ranked 39 out of 39 in its sector by Yahoo!!!) Am still digesting some of the poor performance and trying to make sense. I note that there are some funds out there that did show a stellar performance - unfortunately I don't own any :( My feeling is that I should have done more research before plunging into buying funds. Another thing, what they say about past performance not being a predictor of future performance - how true. My rule of thumb is to hold funds for at least 3-5 years...especially those prone to volatility. So whether I "cut loss" or not depends on whether there's some other more profitable investment out there...and taking into account the sales charges etc

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