Early this year in Feb 2008, I met a client We talked about various matters and she finally bought an incomeshield from me. She also showed me her only investment made in year 2000 and this is an extract from the year 2000 statement:

The other fund is a technology fund concentrating in just a single sector. Needless to say the fund has done terrible. The same period the fund returned -55.77 % in absolute dollar.

Here are my comments:

1. It is not true that a buy and hold will always work. One can hold forever and the investment is still underwater. Holding for more than 8 years does not mean returns are guaranteed;
2. Many funds underperform the market. They can underperform the market horribly. Buy and hold this type of fund is like committing mistake over and over again everyday;
3. During the period, her adviser did not advice her on what to do. The products were bought as a one-off transaction;
4. The two products form a very lousy asset allocation. The portfolio was design to fail right from the onset.

Here are some suggestions on how to ensure a good and successful investment:

1. Create a good asset allocation and stick with it forever. Do not change the asset allocation;
2. If using active managed funds, close monitoring is required because of the risk in fund managers’ incompetency;
3. If using passive managed funds, monitoring is minimal;
4. Rebalance the portfolio to the original asset allocation to sell high and buy low;
5. Do regular saving plan to avoid timing the market;
6. Invest larger amount during bear period like now;

That client of mine did not get back to me since Feb this year. One of the key to successful investing is that the client must be willing to do something. Otherwise, investment is doom to failure even before anyone starts to invest.