MALAYSIAN UNIT TRUST BUSINESS

This is an excerpt of  YM Tunku Dato’ Yaacob Tunku Tan Sri Abdullah, President of FMUTM speech on 31 October 2008.  The content is very relevant in the current weak market.  I hope that the readers after reading this article be able to take advantage of the strategy.

Warren Buffet, the investment guru has a wonderful way of explaining this simple strategy.  Everyone knows the golden rule of making money and that is to “Buy Low and Sell High”.  But how many people know the true secret of investing and that is to answer the key question of “WHEN?- When to buy and when to sell?”  Warren Buffet addresses this “when” question by asking investors to identify their long-term goals.  Depending on your stage in life Warren Buffet identifies two type of people-people whose long-term goal should be to Invest and people whose long-term goal should be to “Dis-invest” (which is the opposite of invest-that is to sell).  Deciding what your long-term goal should be, can in a simplistic way be determined by your age.

For example if I am still reasonably young and earning an income from my job or profession my long-term goal should be as a net Investor.  I should be regularly and steadily investing the money that I have earned from work so that money can work for me to earn more money.

However if I am much older and retired and no longer earning an income from work I will be surviving on my savings or investments. I should be steadily selling down my investments and using the proceeds to enjoy my golden years.  At that stage in life I will enter my Dis-investor mode of my life cycle.

When my  long-term goal is as a Dis-investor I should be happy when stock markets are high for I will be selling high.  Short-term market weakness should not be a concern for me for my Dis-investment mode is a long-term strategy and I know in the long-term market always go up again and I can continue to Dis-invest into a rising market.

Unfortunately most people who have not learn the investment secret of Warren Buffet react the other way.  When they are supposed to be Investors they get excited and happy when markets go up.  They are happy to buy expensive.  Crazy! And that’s because they have been conditioned to have a short-term mentality.  Long-term investors should be happy when markets are DOWN …. Not UP!

But we have to realise that our strategy is long-term.  When we are in our forties and in our Investor-mode short-term markets will go up and down.  We should invest regularly during this period and be happy when markets are down for we will be investing cheaply.  We might even be tempted to buy a little more.

When we are in our seventies and in our Dis-investor mode short-term markets will still be going up and down.  You can be sure of that.  We should Dis-invest regularly during this period and be happy when markets are up for we will be Dis-investing expensively.  We might even want to sell a little more.

This market slump is the ideal way for investors to buy cheap.  In this market Investors hsould invest more and Dis-investors should sell less.  When the markets turn around and go up Investors should buy less and Dis-investors should sell more.