Dennise Williams, Staff Reporter
Chen
"THE FINANCIAL sector crisis didn't happen because of policy, it happened because of individual decisions. Individuals decide whether they are going to operate with honesty and integrity," said Oliver Chen, vice-president of GK Funds, a GraceKennedy subsidiary.
Mr. Chen said, "Be very knowledgeable about the products you sell or recommend. Jamaica is a small country. If you give a man bad advice and he loses, he will remember you and then tell his friends. Your reputation will be ruined. Stand up for your principles and do not allow yourself to be dragged down with others. Many people went down because they were not strong enough to stand up when they saw something was going wrong. A classic case of that is the FINSAC story."
Mr. Chen was the guest speaker at Fitz Ritson and Associates' Portfolio Management training course held at the Courtleigh Hotel and Suites on March 16. The audience was comprised of financial sector employees seeking to upgrade their technical and analytical skills. Mr. Chen spoke to them about his adventures in managing money; it was a cautionary tale of thinking for yourself and not following the herd.
"I have been around in the financial sector since 1979 and let me tell you that the top traits needed to be successful are integrity and education. You have to understand the environment that you are operating in."
Mr. Chen knows of what he speaks. After graduating from the University of the West Indies with a degree in chemistry and biochemistry he started his career at Paul Chen Young and Associates (PCY). He stayed there for 15 years as a stockbroker before going on to the Jamaica Unit Trust. From there he went to GraceKennedy Remittance Services and then to First Global Financial Services, a GraceKennedy subsidiary.
"Good investment practices involve looking for value and not being ruled by your emotions. Numerous studies have shown that most investment decisions are driven by greed and fear. But those emotions, if controlled, can be very rewarding for the smart investor. Looking back, if we were not paralysed by fear, the financial sector crisis of the 1990s offered one of the best periods for investment. Just look at the performance of the equity market and in recent times in the growth in real estate." Many investors who had the stomach to buy stocks in the 1990s when they were at rock bottom prices, enjoyed hyper profits in 2004's bull run.
Basically, Mr. Chen advocates that when emotions are suspended, buying assets when there is 'blood on the streets' creates major opportunities. He continues, "During the 1990s everybody was saying the country mash up. Emotions ruled. You even can find examples of this in the United States. Image a scenario similar to September 11 where there is a panic and stocks and bonds are being dumped. How would you respond? Would you panic and join the crowd or would you allow greed to cause you to jump in and buy bargains?
"But greed is just as deadly as fear. It clouds our minds forcing us to think that everything must go higher. You have to follow the fundamentals of the particular investment, and again, know the environment that you are operating in.
"One of my mentors at PCY preached 'always leave something for the next man. Don't try to pick when stocks will go to the top. When you make 100 per cent return, sell. Don't try to reach the peak'."
Mr. Chen then admonished the future portfolio managers not to blindly try to hit sales targets and keep clients' money inside the firm. "You have to be careful of the advice you give your clients. History has shown that long-term investing can be very long. Consider that in 1968 when the Jamaica Stock Exchange (JSE) index started it had a base of 100 points. By the October 1980 general election, the JSE was at 67 points, or 33 per cent down after 12 years. As portfolio managers, should we tell a client to hold for the long term when the market is already high? Is this the response we usually give when we are not sure? Remember, long-term investment can be rewarding if we have a plan that we are willing to stick to and have a disciplined approach."
