Saturday, June 5, 2010


A close friend called me.  He is very learned but risk aversed. The character of a person who thinks and operates by the books.  I have known him since we were in secondary school.

He was complaining about how he felt cheated.  He invested in some equity funds three years ago.  It will mature early next month.  The return on his investment was almost zero.  If inflation was taken into account, he would have made a lost.  To add salt to injury, it can take up to two months after maturity for the cheque to be out.  He then told me he learnt a lesson or two.  Lessson One: always listen to your mother.  His mother was against him investing through the insurance company.  Lesson Two: Never ever invest in with the insurance companies.  They all cheat people.

Late afternoon on the way home, he called again.  This time he went further.  He mentioned that even PNB and EPF pays out more.  He will now go back and eat his shoes in front of his mother for not listening to her advice.

On both occasion, I explained to him.  The equity market took a beating from the US sub prime mortgage crisis.  The world financial markets was in turmoil. It was a year of annus horribilis which continued over the next year and a half before it was contained.

I told him the payouts from EPF and PNB were profits from IPOs issued to them.  Any equity fund given that privilege would be making much much more than what ours are.  I also told him that he would have made eighteen percent per annum if he had cashed out two years before maturity.

They cannot pay you immediately after the maturity because the accounts need to be audited. Everything here follows BNM guidelines and rulings. 

I advised him to invest in properties.  At the right location and right time, you cannot go wrong with what is up in brick and mortar.

I perfectly understand where he is coming from. I know him well enough to understand how and why he reacts that way. 

Whatever we get ourselves into, we know the risks and repercussions.  We know but we choose to tweak and ignore the hard cold facts.    We choose to see and hear what we want to. So when things go wrong like it sometimes will, we blame others and everyone else for our own misdemeanor.

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