Many people were speaking about it then, as rise in cost of some of them was 120-140% and more in 2007 and many experts were forecasting not that big but still good profit of 40-60% in 2008. But the picture turned out to be the opposite, since the beginning of the year fund index of the country has dropped by almost 45% having reached its minimal level of 610.2 points in the middle of July. Fortunately, the price of purchased shares appeared to be less influenced by financial scrape, and during 7 months my stock got cheaper ‘only’ by 10%. And it is not the limit as many financial analysts are estimating market fall potential by 10-20% more, and the number of skeptics doubting in unit investment fund certificates in autumn has been increasing day by day.
Real state of things on the fund market made me think over investment strategy, and to be precise, whether I should sell my shares or wait till better time comes. My concern grew up when my friend didn’t sustain the aggressive attack and decided to sell his certificates in favor of deposits, fixing by this the loss of 10%. But to my luck I found needed answer in the book by Bodo Sheffer ‘A way to financial independence’ where the author described so called strategy of ‘a royal way’. According to this strategy an investor should wait, first of all, for a financial decrease. It means the stock rate must be at least 10-30% less than their maximal rate.
But even then at the first deal the investor puts up not more than 50% of his money, given to purchase, into stock. The next important precondition for ‘a royal way’ is for you to always have enough reserve capital. It is essential as it gives you an opportunity to buy more stock at even lower prices, if they continue to decrease after the beginning of a buy-up. Although I, unfortunately, didn’t buy certificates during period of their maximal cost, amount of the deal was rather small, thus, out of two first conditions of a ‘successful strategy’ mine satisfied one of them.
Bodo Sheffer believes the first additional buy may be accomplished not earlier than the stock falls 30% in comparison to the initial purchase rate. Besides that, between the first and the second purchases six months must pass. This rule is unfortunately neglected by many investors, which leads to buying stock in a rush, and at a really deep fall there is nothing to buy with. The same thing happens at the second additional purchase. If the first additional buy tool place at a too high rate, the second one may follow only when the stock has fallen by 30% more, and not less than half a year has passed.
Thus, current Ukrainian market fund situation fits the best ‘a royal strategy’, as unit investment fund certificate index fall was around 45%, and since the moment of the beginning of the fall a little more than six months have passed. If this trend continues – it will only play in our hands as there will be assets for buying certificates at a lower price which will increase the profit at a rate rise. Of course, certificates are less voluntary than the stock, and investment shares fall was around 10% (in some cases – 25%-30%), possibility to increase profitability of the operation up to 30% will be a nice bonus next year, which is especially actual in case the stock cost fall continues in the near future. However, many people can say that German strategy might appear ineffective in Ukrainian environment, and that we have to work under conditions of high political, economical and legal risks, that UIF certificates might be ‘closed’ soon. But I still believe in Ukrainian people and in our economy which has been underestimated yet, and the fall is always followed by the growth! So, to my mind, we should have a go, and in the end I will quote the German guru, ‘The crash is bad for you only in case you are selling in panic what you got. As the rise will definitely come. So, you have to keep your stock and then you will not incur a loss. Remember, if you act the way the others do, you will have the profit that the others have’.
