Did We Make a Mistake?

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Previous Week, we have noticed bond fund was dropping under the fear of Malaysia Government bond being kicked out of the FTSE Russell World Bond Index, which will eventually cause a massive exodus of capital fund from Malaysia. At that time, we were not sure why bond investors had such a fear and started running away from the Malaysia bond market and resulted in fund price dropping. 

At that time no one would have known how low bond funds will drop eventually. So, I have suggested that those who are fearful can switch their bond fund to money market funds to protect their long-accumulated profit. 

Bond Fund Stabilizing

However, two days after we have switched our fund, we have heard the news announced that Russell index decided to keep Malaysia government bond fund within their watch list extending until March 2020. Malaysia bond funds responded stabilizing. Some have even rebounded. This eventuality might have caused those who have followed my call to switch wonder; did we or I (as the writer) make a mistake in such a call making such a move? 

Some of Malaysia bond fund prices have been stabilized, some have rebounded.

For those who have switched away from their bond fund to money market fund, might not have seen their ultimate fund appearing in their portfolio yet. Because it usually takes two weeks to wait until it finally settles as what I wrote last week. If you want to switch back again, it will take another two weeks. All in all, it will waste one month to make all the trouble and have them all come back to the original plan. What a trouble, you may wonder. What a lousy investment guide is this blog writer? You may wonder too! 

Well, the answer can be yes and no. 

The answer is affirmative when people’s nature tends to blame people if he makes a mistake. If he wins in a game, he will congratulate himself because he has listened to wise counsel. This kind of conclusion can be a little bit cynical. (That’s the reason why I always advise reader to make your own decision after reading further information before making investment decision, if you follow me and lose money, do not sue me, because I have already warned you in the disclaimer, haha…!) If Malaysia bond fund continues to drop next few days, you will be thankful that you have taken the trouble to switch your fund away.  

Fear and Greed Factors

Just like buying and selling a share phenomenon in the stock market, your greed and fear are always there to trigger your feeling of regret. That’s why it is cynical. I would advise those who feel regret to check your attitude in the area of fear and greed. If this area is not checked properly, we can never be able to accumulate wealth in the long run. We need to know what we are doing in the first place. 

The reason we switch away our fund is to protect our capital from falling. This is the first and foremost principle Warren Buffet taught us. Without capital protection, we will never be able to see the power of compounding our wealth. 

Secondly, in fund investment, the actual loses are not that great as it perceives. Even though it takes two weeks for your ultimate fund to finally appear in our portfolio, but the profit is counted from the day of the transaction, not the day it appears in your portfolio. At most, it probably cost us losing 5 days within the transaction gap period. 

And you will also discover when the time you see your ultimate fund appears, you will also see positive gain there. Because of money market fund never losses. If you have taken this opportunity to revamp your investment direction, you would have actually gained much more advantage. For example, take the case in my son’s investment scenario. Before the switch, his bond fund was with CIMB Bond Fund. After the switch, his capital will be landed at RHB Money Market Fund. In that new destiny, he can eventually choose to switch into Gold related funds or US equity funds depending on the situation arises. 

New Experience Gained

In fact, I have always been preferring RHB Money Market Fund to be my defensive weapon. In using this money market fund, you will never worry whether there is any market wind blowing or thunderstorm arising. This is the reason whenever I refer defensive fund as fixed income fund which includes both bond and money market funds. Whenever a fund house possesses both money market fund and bond fund like in the case of RHB Fund house, always choose to use money market fund as your defense weapon. 

Money Market Funds are always our best defensive weapons.

I believe after this bond fund switching experience, many of you would have gained new insight into investing with the bond fund and understand what the magnitude of bond fund risk is and how to handle them when the need arises. 

As I have informed you earlier, the bond fund carries with risk, though the return is higher than the money market or the fixed deposit in the bank. But such risk rarely happens. If you feel this switching is troublesome and does not worth your effort, then keep your capital there with money market fund. Because after six months, there will be another test when FTSE Rusell is going to evaluate the Malaysia government bond status again. 

But if you are not afraid and feel that the gain you have received over the past months well exceeding the fear of bond fund drops, then you may switch them back after you see the bond market has stabilized next week or so. After all, you have learned the skill of what to do when the bond fund drops again in the future. 

Do you feel regret switching your bond fund here and there? This will be a good test of your heart whether you are investing or gambling. A gambling heart is always looking for winning all the time, any failure will bring frustration or anger. But a heart geared towards investment will feel happy if he learned some lessons even If he loses money. Remember, our slogan is “learn before you earn.” Don’t you think so?

Happy learning on how to maneuver your investment portfolio! 

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The view and opinion expressed are personal views of the author and are subject to change based on market and other conditions.  This write up does not constitute sole advice for investment decision. Investors are advised to do further reading and research to conclude individual decision.

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