- The feature of our investment advisory service is to share the knowledge and understanding on investment starting from risk-return relationship with the clients and pursue profit through quantitative approach. In addition, we aim at offering the interactive communication with the clients unlike other investment advisory company with one-way dispatch of information style.
- At the first step, we put the emphasis to let the clients understand the background why the retail investors make typical mistakes in their investment. Based on such review, we have the time with the investor to have comprehensive discussion reviewing the background of investment and understand the thoughts on both sides. After this stage, we move on to the process to confirm the investment strategy (risk tolerance and return target) and start our investment advisory service to the clients. Needless to say, we constantly review the investment strategy depending on clients’ situation.
- During the process of selecting investment strategy (risk tolerance and return target), we make an appropriate decision to choose the best asset allocation. In case of global multi-asset fund with investment into global markets and products, it is very much situation in which around 70 % of investment result depends on asset allocation strategy. Even though this is telling us how to make the most important investment decision, the most of retail investors tend to downplay the importance of this point.
- Furthermore, we offer investment advisory service to cope with trading of only listed stocks with which the most of retail investor are familiar. In this case, we offer investment advisory service in order to achieve an expected return matching with the taken risks showing the easy-to-follow numerical number (never in abstract expression).
- Hereby, we look at the following examples as the typical mistakes of retail investors.
- 1. – Investors do not think that they have loss as long as they do not sell the shares and realize the loss. It is right in view of taxation, however, it is not true in view of investment and fund management. The investment should be absolutely measured by the market price at time. Even though they understand this point, the most retail investors are not looking at the reality and keep on holding shares with losses.
- 2. – The typical example is so-called “salt-cured stocks”. The salt-cured stocks simply mean that investors are holding assets which value is lower than the acquired price. In another word, it is as if we invest again the same amount of money based on the market value into the same stock. We have to find out in a calm manner whether the current holdings are the most attractive investment choice compared with other stocks.
- 3. – Other mistake which we can often see is that retail investors tend to take excessive risk. As the result of that, they tend to end up with the salt-cured stock and regret their own investment. This is simply because they do not understand the quantity of risk which they are taking.
- 4. – Furthermore, it is not always the case but retail investors tend to trade more than necessary. They have to bear the cost and expense as they have to pay commission and market spread for every trade.
- 5. – In addition, in many cases it can be pointed out that the retail investors use option trade wrongly.
- Our basic stance on the fee schedule is based on NAV (net asset value). We will charge across the board ratio on NAV. We believe that this fee schedule is the most rightful way. It may lead to be “conflict of interest” to charge fee on transaction basis (like “rap account” promoted by some securities houses). Regardless of the fact that the client may win or lose, the fee will be paid to investment advisory companies on transaction basis.)
- However, in case of retail investors NAV tends to be smaller compared with corporate clients. Therefore, we may also consider combine asking the client to pay fee for investment advisory service on time charge basis.
- Accordingly, our fee structure consist of the following two patterns; fixed charge of asking clients to pay certain percentage on NAV (this is basic concept on fee structure) and the time charge.
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