May meltdown

By Heinz Bulos

Still traumatized from the May 2006 fund meltdown? In case you haven’t recovered from the sharp drop in prices of and massive withdrawals from unit investment trust funds (UITFs) and some mutual funds, take these lessons to heart:

1. Invest for the long haul. If you need money sooner than you think, park them in a bank deposit. If you can’t handle the market’s roller-coaster ride, stay away. Philam Asset Management, Inc. Head of Training and Marketing Ricky So says, “Investments are meant for long-term while the savings are meant for the short term. Investments carry more risk than just making a savings fund.”

2. Deal with the volatility. Even bond funds invested in government securities and other fixed-income securities are subject to sharp fluctuations. “Investors wanting to get higher returns should be ready to deal with volatility of the asset. A big lesson is that you cannot be conservative and yet make the highest return possible,” notes So.

3. Caveat emptor. Don’t invest to give in to the pressures of a sales agent or just because everyone in the office is into it. And don’t assume returns are fixed and guaranteed. So advises, “Investors should learn to read, research, and validate information verbally expressed. Read the brochures, especially the fine print, which is equally significant to the bold numbers you are seeing.”

4. Don’t panic. Gosh, why join the herd? If there’s one thing that made the May meltdown worse, it’s the mass panic. “If you did not panic, the value of the UITF would have recovered,” points out So. If you just hang in there, you could have avoided actual losses.