Hot funds and hot cakes

The Shanghai Composite Index broke below 2500 on Monday (11 Aug 08). This is 60% down from the historical high set in October last year. How different a few months make. The China market has transformed from the best performer last year to the worst year to date. The commodites market has also corrected recently after a flurry of fund launches trying to catch the hot commodities market. These are just 2 out of the numerous examples of ‘hot’ funds.

Has any adviser you met tried to sell you some ‘hot’ funds without taking into consideration your portfolio? Hot funds are easy to sell with all the hype and media reports. They could sell like hot cakes. But like hot cakes, hot funds can turn cold very quickly. And often, it does.

A portfolio approach to investment is still unpopular with many investors. Portfolio approach is not ’sexy’ and exciting. There isn’t much story to tell. But investment isn’t about excitment. Gambling and speculation are.

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Tags: Mis-selling