There are two extreme kind of clients. On one end is a person who is like a day trader – always monitoring his holdings on a day to day basis. Whenever the market goes down, he will SMS me or email me on what to do. Such a person is quite rare but I do have one client like this. On the other end is a client who believes strictly in asset allocation and buys and holds practically forever. Again such a client is rare but I do have one who held to this believe. He has been holding his investment for 10 years already – with marvelous returns of course. A firm believer in dollar cost averaging through Asia Financial Crisis and dot.com days, his returns via RSP is terribly large! If it wasn’t for me who came into the picture to further lower his cost of investment, he wouldn’t have moved any of his investments.

However, most people will be at in betweens. Unfortunately the in-betweens are what I term as a “confusing” group of clients such as:

1. Thinking the market timing can be perfectly timed. Most of the time they don’t say it directly but they say it another way such as “Please take profit for me after I have earn X% in return”. The problem is that X% is subjective depending on the market condition. If X is too low, the person will be losing opportunity in the bull run. Yet on the other hand, if X is too high, the portfolio may never each this X anyway because the market corrects. So in other words, the client is asking for perfection in market timing.
2. The confusion can also be seen by inconsistent statements. For example, when the market is positively going up, the client will say that “I am a long-term investor”. But when market becomes extremely volatile or in a downtrend, the client reacts as if he or she is a short-term investor with very high risk-aversion.
3. Another kind of confusion is systematically wanting to buy high and refusing to buy at low points. For example, I have a client who says that the portfolio must show good returns before putting more money. Yeah, when the portfolio is showing “good returns”, the market has already run up high and hence buying more is effectively buying at high points.
4. Giving up on the initial plan. For example, I have a client whom I initially propose a dollar cost averaging (DCA) over 1 year so as to ride out the volatility in the market as I had feared that a lump sum investment could be investing right at the peak. When the plan was first initially, I had no idea that the market by end of 2007 can be so bad. Nevertheless, if my plan had been carried out diligently the DCA would have worked marvelously! Unfortunately the client chicken out and gave up the DCA after a few months. Now the portfolio is in total mess because the client tried to do market timing by going in and out of the market thinking he is some kind of day trader. I can see that the portfolio is worst then my rubbish bin.  

I do come across a significantly number of clients who have a very simple request. They don’t really do market timing but they simply wants to be inform when their unit trust they hold becomes a “lemon”. They don’t want to hold a lemon. They had expressed disappointment with their relationship managers in the past who didn’t inform them when the unit trusts becomes a lemon. A “lemon” could simply means that the fund manager had resigned or that the fund has underperformed other similar funds. Well, at least this part is easy for me to do since identification of lemons are not that difficult!