Cos really... it's psychological.
Let's say I bought DBS when it dropped to $10, then it went up to $27, then dropped to $20.
I never sold it.
I feel, ok, not so bad, I didn't lose money. Cos I bought it at $10. I am sitting on lots of buffer.
But in reality... AUM is AUM.
When it dropped to $20, I did lose AUM.
Think about it this way...
Someone invests $100,000, he manages to buy something with 10x return.
So end of the year, he is sitting on $1 million AUM.
Is he a millionaire?
Most people would say, yes. He is a millionaire.
Why? Cos mark to market.
Turn it around.
Someone invests $1 million and it loses 90% of it's value.
End of the year, he's left with $100,000 AUM.
Is he a millionaire?
No right? No one is going to say he's a millionaire when he's sitting on $100k AUM.
Why? Cos mark to market.
So if someone bought DBS at $10 and the current price is $20.
Then good.
BUT... there really is no reason to pat oneself on the back when the price drops from $27 to $20.
That's a 35% loss.
It is what it is.
There's really no point to say... oh I bought it at $10. So it's not so bad.
Cos the truth is... your AUM dropped.
End of story.
It doesn't matter what price you bought it for. The original price you paid for the investment is irrelevant.
Yes... markets move up and down. No one knows when is the peak, when it the bottom.
Some investments are held long term.
But everything is marked to market. Unless we are talking about accounting and some assets can be listed at historical value. But most of us who buy listed investments... everything is marked to market.
After the moment of purchase, the historical price becomes irrelevant.
It becomes just a mental, psychological issue.
Cos... the asset can only be sold at the current price. And your AUM will float based on current price.
What you tell yourself as realized or unrealized gains or losses... Doesn't mean anything.
That doesn't mean I'm against long term investing. As I said, no one will know the market top or bottom.
Some days there will be gains, some days will be losses.
What I'm saying is, there's really no point in anchoring our prices based on our past purchase or historical price. Cos, it's over.
If you made money, then today's AUM is higher.
If you lost money, then today's AUM is lower, and hopefully it recovers.
The millionaire who lost $900k can't say... oh I'm still a millionaire based on the price I paid for my investments.
He is the same as any other person who has recently bought $100k worth of the same stock.
Even property is similar. Someone can say, "Oh I dictate when I sell it and at what price."
Yea sure... but if it's not near the market rate, then no one is going to buy it.
Else I can say, "I wanna sell my HDB at $5 million." And I tell myself my AUM is worth $5 million.
Doesn't work that way right? My HDB has an average price based on the recent transactions and my AUM is based on that number plus minus a bit due to variation.
The point is... our AUM is based on current mark to market prices.
Whether you made money or lost money. Our AUM is what it is.
The past is history.
Realized or unrealized profit or loss, it's all the same.
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