Friday, April 04, 2008

Professionally managed funds

Dear Mr. Tan,
Is it better to buy a long term investment portfolio offered by banks or to buy company shares directly from a broker? What's your advise?

It is better to invest in a professionally managed fund, provided that the expense ratio is kept below 1%.

The advantages are:
a) Diversification. You are invested in a large number of shares, and not in a few shares
b) Stock picking. You do not have to worry about stock picking. It is done by the fund manager
c) Transaction. You do not have to take care of collecting dividends, subscribing to rights issues, paying for share purchases and other tedious tasks. They are done by the fund.

Let the professionals take care of the investments (if the fees are modest).

However, if you have a large sum to invest (say, more than $1 million) and you can afford to spend the time to take care of the investments, you can buy the shares through a stockbroker. You will save the fees charged by the fund, but you have to do the work on your own.


Anonymous said...

STI ETF is now $3.17 from $2.96 on 19/3/08. 7% increase in 3 weeks!
Problem is volume is not very high so it may not be easy to buy and sell many lots fast to gain a good profit.
Any comments?

Anonymous said...

To anonymous 3:59pm -

Mr. Tan's advise was to put in long term, not "easy to buy and sell many lots fast" ... it's not trading.

If you get STI ETF, you should consider putting it for long term results, whereby you do not have to "buy and sell fast" to gain a good profit.

If you like trading, then considering the amount of capital needed just to gain 7%, STI ETF is a bad choice. Many penny stocks can do the same with much less cash.

The right thing to do now is to stay CASH. I mentioned many weeks ago, do not invest. G. Soros also reiterated that market heading for bigger fall.

For those who was late last time to unload their holdings, now is the best time, at least to break even and hold CASH (for another two years). The worst is yet to come. We are in a downtrend, bear market with global recession just around the corner.


Blog Archive