Saturday, July 26, 2008

Difficult to time the market

Hi Mr. Tan,

In view of the market volatility, I have been advised by my financial adviser to switch to commodity related fund (Pru Global Basics ). I invest in a wrap account and am entitled to free switching. I am not sure if i have made the right decision because the value of this fund keep dropping. I hope you could enlighten me.

REPLY
I am not able to advice on selecting the right market sector at any point of time. I normally advise people to invest in a well diversified fund comprising of all market sectors and to invest for the long term.

Read my FAQ at www.tankinlian.com/faq "Investing your savings".
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3 comments:

  1. WayneJuly 26, 2008 12:21 PM

    Try to exercise these for your portfolio management:-
    a) allocation: are you exposing too much of your portfolio in any one sector/ country? If your commodity fund makes up 50% of your portfolio, a 20% drop in the fund will cause a 10% drop in the overall portfolio value.
    Personally, I find the core-satellite approach to be feasible and logical.

    b) In these volatile times, any new money to be invested or added on to new or existing portfolio should be done in "drip in new money" method i.e "dollar-cost-averaging".
    You can check out my blog on the above 2 topics: http://www.waynekoh.com/search?q=drip

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  2. zhummmengJuly 26, 2008 1:16 PM

    The commodity class has gone up in risk.It is a bad time to switch.
    You should have included a small percentage in commodity when it was out of favour but not now.
    Be careful of switching. It is not meant for you to time the market, in and out of sectors. It will stifle the growth and unintentionally increase the risk of your portfolio.
    In the wrap account you get 'free" switching which is actually not free.It is already factored in.

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  3. ymJuly 27, 2008 3:07 AM

    some of my readings from independent economists (not those working for some stock broker or investment bank) :
    - the recession will go global and commodities (especially consumptions commodities like oil and copper), will correct 20-30%.
    - the crisis can last until 2010
    - DOW will come of 40% at least from their highs ie < 9000
    - the SEC curbed short-selling recently, which means there is a high likelihood of a crash
    - cash is king for 2008
    - risk is very very high now...

    switch to a money market fund (but make sure no CDOs, MBS, etc)

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