In my previous blogs, I had mentioned that some clients rejected my advice not to time the market. I would like to show that as a result, they incur very huge losses.

In Jun 2006, there was a person who had wanted to invest $750,000. However, at that period is after the May 2006 correction and there was a lot of uncertainty. My advice to him was that the fundamentals were still intact but it was the hedge fund managers that were unwinding their positions that is causing the correction. He did not believe me and hence did not invest From 30 June 2006 to 30 June 2007, his opportunity cost was nearly $140,000. To me he actually lost this amount because he deliberately chooses to ignore my advice. The opportunity cost is based on a Infinity Global Stock Index assuming sales charge of 1% (which is the sales charge from an online portal).

In Oct 2006, there was a man who bought some insurance from me but I encourage him to invest with me. He did not believe me and hence lost more then $20,000 of opportunity cost as today. 

At the beginning of January 2007, there was a person who bought a shield plan from me. He is interested to invest but told me to inform him when there is a “good” opportunity. I told him that I am not into speculative play and my believe is at anytime is a good time to invest. He thought I was joking but I was dead serious. From 30 Dec 2007 to 30 June 2007, he lost an opportunity cost of more then $7000.

In Feb 2007, a friend called me after reading my article in SmartInvestor. He wanted to invest. After meeting him and giving him an investment plan, he hesitated and procrastinated. Up to now, he is still not invested because of fear. His opportunity cost was nearly $7000 based on period 28 Feb 2007 to 30 June 2007.

In March this year, a retiree who came to me. I provided him with a wholistic advice on retirement planning. He said he wanted a good time before investing with me. I told him not to time the market and hence he is still waiting. His opportunity cost based on period 30 March 2007 to 30 June 2007 was $30,000. This “waiting” was very expensive and could have provided him with an additional year of living expenses.

While many would say that it is because of the bull run that is why people are incurring huge opportunity cost for hesitating. My answer to that is even if this is a bear run, it is always a good time to buy because market will recover. My research shows that the recovery has always been more then the downside provided a proper portfolio is constructed. Therefore, I’ll continue to say the same thing that there is large opportunity cost of waiting – regardless of the market condition. For details of why it is always a good time to invest regardless of market condition, see my article in Q under Education Articles on the left menu. My research is published for the May/June 2007 issue.

For those who had listened to my advice, here are the various performance of selected investors I had excluded the following:

1. Those under non-wrap because they did not wish for me to advice them on an on-going basis.
2. I also excluded those who have invested a large sum in money market fund and selling it regularly to invest as a form of dollar cost averaging.
3. For period end March to now because I haven’t the time to compile the statistics.
4. Those that converted from non-wrap to wrap account because they later on changed their mind that it is good to have someone assisting them regularly. 
5. Those who previouslly who were doing DIY but gave up DIY and transferred their entire holdings from other online distributors to our platform to manage. For this group I did not compile the statistics because the dates of transferred and the market value at the point of transfer is not readily available (i.e. I need to dig harder at the figures).

The above table is as at 30 June 2007.  

The “Market Return After Cost” refers the return a person would get if he just buys into Infinity Global Stock Index. I choose this as a benchmark because it is cheap (only cost 1% upfront) and it is a no-brainer fund. Moreover it is a globally diversified fund. However the benchmark isn’t very appropriate because it is a 100% equity fund. All the 7 clients are not totally aggressive. Most are moderately aggressive and one is a balanced investor. Thus their portfolio does contain bonds. The "Actual Return After Cost" refers to the absolute return of the portfolio. This has taken into consideration of all my charges.

Anyway, everyone of them outperform this so called “benchmark” except two clients. Client 4 underperform so to speak because she was using CPF-OA to invest. I had used a dice-and-slice approach and thus one of the asset allocation was to a global small cap fund. Unfortunately CPF-OA only has two global small cap fund which are performing horribly! ( Maybe I should consider a lumper approach.) If she was into 100% equity, the performance will be better but that cannot be done because she is not fully aggressive investor.For Client 7 is because his holding has nearly 50% in bonds as he is a balanced investor.