I have to correct my previous post, my sister is not an insurance agent but an financial advisor. Last year, I saw the book "The Intelligent Investor" in her room and is pleasantly surprised. I thought it is for her private consumption.
A few weeks ago, I had the luxury of time to chit chat with my sister. She told me she is rather stressed with the unit trusts' performance and is wondering if she should close the funds to cut loss for her clients. I asked "your client angry with you?" She told me that her client is cool and a nice guy, just that she is worried the fund might continue to under perform, and feel that she is letting her client down. She had checked with her seniors who also advised her to keep to the funds and not "cut loss" I asked if her client is savvy and does his own investment too, or that he might be in need of money soon. Both questions has a negative answer.
I told her since the purpose of the fund is for the quarterly payouts and for retirement cash flow, it is still fulfilling its purpose. I asked what fund is that. She told me bond fund. I had this sinking feeling. I said "If US interest rate normalize, and everything equal, bond funds should continue to under perform, and that problem with funds is there is no maturity date"
When I told her the risk and returns after costs do not tally, she asked me what to buy. I am tongue struck. But I told her there are some blue chip bonds doing 3-4% and the only cost is commission during purchase and sale.
She also told me about investment in Japanese Market, I am not familiar with Japanese market, but I do not think she know more than me, and I wondered if she know about the lost decade of deflation.
I see 3 folds problem in outsourcing your investment to others.
1) Timing. When you visit that representative, and the market is at the bottom, you are in luck. Or the representative has global or deep knowledge to know where is the sector for growth, you are in luck. Otherwise, no representative is going to say: Hold on to your money first, there might be better opportunity later.
2) How much more does the representative know than you? Plain insurance like H&S or even endowments are straight forward, there is seldom a problem of capital loss if you hold to near maturity or maturity. Go deeper...
3) Companies need to eat, and they need to keep pushing out the products to sell, regardless whether they are over, fairly or under valued.
If you do not have enough knowledge, how do you ascertain someone is "Peterlynch" or "Peter Pan"? Does he/ she appear in fairy tale and say "buy this and it will go up?"
My sister told me all her investments products which she sell are unsolicited, meaning the clients ask for it, since she is stressed over the performance of these products. I say keep to selling insurance, it is simpler.
Today, my wife told me that our neighbor gave her a hot tip, a counter that goes from 50 cents to $5. I told her I never heard of that China Counter in SGX (can't remembered now, even I heard it just a while ago), anyway, I cannot remember any counter going 1000%, it would be in the headlines definitely, I told her it is some underground money lending instrument packaged as an investment la, don't bother.
She insisted it is listed in Singapore. I told her forget it, even if it goes to $10, I will have no regrets, because the chances of it going to Zero is higher, it might be a ponzai scheme.
Didn't think my wife will fall into the "hot tip" trap. SO it is that easy??
Also, when I went to a mall, I saw an atrium area full of insurance agents selling products to passer-by. Wow, how come it's so packed? Usually it is rather "pia tan" with passerby shuning these agents. That I realised why. There are 2 boxes of free gifts (not sure what it is) and an animal shaped balloon.
While, they keep saying no obligations. Guess if u want free gifts, you can listen and take them without buying.
But the sale pitch is already a good start.
Maybe I not "gan" enough, I rather not spend time listening for the gifts.
I considered the gifts a "trap" too.