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Encik Ahmad has been investing in unit trust since year 2000. He has seen the markets up and down, made a few mistakes along the way. When he first started, he was influenced by his friends who had made money when they started investing end 1997 to 1999. They encouraged him, “Ahmad, look how much money we made, we sold at a profit and it is better than the banks’ fixed deposit rates. We are now going in again, for the second round of profits”.
Caught up with the excitement and euphoria of his friends gain, he quickly signed up with an agent who approached him at the shopping mall a few days ago. “Oh, Encik Ahmad, this is our latest equity fund, recently launched. If you invest with me during this launch period, the company is giving a bonus of extra 5% units of your original investment. Plus, if you look at all our previous funds, see how many awards we won for our funds’ performance!”
That day, Ahmad was happy, he had put in RM10,000 of his money which he took from his savings in fixed deposit which had matured. Expecting good returns, he waited for a year. The markets dropped and the gains did not come.He decided to wait another 6 months, the market fell a bit more. By then, he started to worry and called his friends.
“Alamak, Ahmad, we are caught too. The market doesn’t look good and we are thinking of selling off to cut losses.You may want to do that. Take your money first, than when the timing is right, we can go in again”.
Flustered, Ahmad called his agent to let him know of his intention to redeem his investment. His calls went unanswered. By then he panicked, thinking something may have gone wrong. He quickly went to the unit trust management company’s office to check on his account.The customer services personnel helped him check his investment and notified him that the value had dropped by 15% due to the drop in the share market. The agent servicing his account had resigned. Apparently the market drop had affected the agent’s income and he went back to employment. Ahmad’s case is now re-assigned to the resigned agent’s upline, Ann. The customer services personnel called Ann to inform her regarding Encik Ahmad’s case. Within minutes, Ann called Encik Ahmad’s handphone and made and appointment to see him the next day at his office.
The next day, Ann called at Encik Ahmad’s office. “Thank you for your time, Encik Ahmad. On behalf of my resigned team member, I apologize for the short break in contact with you. Customer services informed me of your concern with your investment which had dropped because of the share market. I appreciate your meeting with me before carrying out your decision to redeem”.
Encik Ahmad nodded in agreement and told her what had happened and now he wanted to redeem and get whatever he can back as his friends are doing so. It is such a bad experience for him. Ann agreed that it is natural for Encik Ahmad to feel fear as it is his first time in unit trust investment. She took out a prospectus and showed him how unit trust investment works. She then walked him through the proper process for unit trust investment in terms of investment goals, time horizon for investment and how they can work together. When she asked him whether he is comfortable with the process and would like her to carry on, he agreed.
She asked him what was his objective in investing, to which he replied to make more profits. She decided to delve a little deeper by asking him what he would do with the profits. Encik Ahmad gave a quick thought and said that since he is still single and intends to buy a house, this investment can be earmarked for it.
Understanding and identifying your investment goals
Ann very quickly helped Encik Ahmad to calculate how much he needed to buy his dream home and together they worked out how much he needs to save and the duration required to save.
Selecting the right investment portfolio
With the objective identified and worked out, Ann then went on to uncover Encik Ahmad’s ability to take risk using a Risk Profile Questionnaire. From there, she was able to determine a suitable portfolio which consisted of various unit trust funds with different asset classes to build the portfolio. She even showed him how the percentage of different asset classes of unit trust funds he should have in his portfolio and how she would help him to systematically re-balance his portfolio when the share market changes. She explained that portfolio management is a systematic way of taking profits and averaging down cost of his various unit trust funds.
Encik Ahmad felt better with what Ann has done for him,but he still had concerns over his current loss. Ann then went on to patiently explain to him that she will help him to switch at no extra cost, his current investment, to the suitable portfolio and over time, he will recover his loss and go on to make gains.She even showed him case studies of similar situations,to help him understand about unit trust investment. She explained the power of ringgit-cost-averaging, combined with the strategy of building a portfolio to mitigate short-term risks and focus on longer term gains to achieve his financial goals. Encik Ahmad and Ann then discussed the level of service he would need and how often they would meet to review his investment portfolio. By then, Encik Ahmad felt more confident in his investments and arranged with Ann to meet up next week to start his regular savings so that he can have that dream house of his.
Know your rights and responsibilities
Ann praised Encik Ahmad for taking the initiative to contact the unit trust company when he was unable to contact his previous agent. She explained to him that as an investor, he should always issue a cheque or bankers cheque in favor of Unit Trusts Management Company and avoid giving cash or banking money into the agent’s account. This is to ensure his money is invested in the unit trust funds instead of going astray. She also clarified that he should get a confirmation advice from the company within a week of his investment and in the meantime, the agent should let him have a copy of his application form duly stamp received by the respective unit trust company.
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How to be an informed investor
Encik Ahmad asked Ann how he can know more about the funds he has invested in and whether the agent he is dealing with is genuine. Ann then referred to the Master Prospectus again and showed him pages where there is a summary of the funds and flipped to the respective pages which had full description of each fund and investment strategies. She also informed him of the interim report and annual report on the funds he has invested in, which will be sent to him either in the form of a booklet or CD and he can always call her for clarification in any areas of the review. Encik Ahmad wanted to know how to find out the value of his investments without having to keep calling Ann. Ann took out the newspaper and turned to the unit trust quotation page, then took Ahmad’s ledger and showed him how to calculate the number of units against the latest price to determine the value of his investments. She also reminded him that his investment is for a longer term, so he need not check it frequently as she will be calling on him for their agreed review intervals.
She also informed him that he can always check whether a unit trust agent is registered through Federation of Investment Managers Malaysia (FIMM) website and also if he is working with a financial planner, then he can check with the Securities Commission of Malaysia whether the financial planner is certified. Also, planners and agents do carry their authorization card, so he can always request to view them if need be.She showed him her FIMM authorization card so that he knows what it looks like.
Ann then checked with Encik Ahmad whether there is anymore clarification he needed and set the appointment for the following week to get his regular savings plan started. “Thank you so much for your time, Encik Ahmad, when we meet up next week to do your regular savings, we should discuss about how to protect your regular savings plan. I will share some ideas with you, is that alright?”
Shaking Ann’s hand, Encik Ahmad replied “Sure Ann. I am glad I met up with you. I feel very relieved and have a better idea about my investment now. I will be sure to call you if anything about investment comes to my mind. Appreciate your help and yes, we shall meet again next week. Let me talk to my group of friends and see if they will meet up with you. I think they can do with your advice. I only hope they have not sold all their unit trust investments yet”.
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