kcchongnz blog
Unit Trust Investment in Malaysia kcchongnz
This is an extract of an article written by someone in his blog.
[I am writing to share with you about investing in unit trust specifically in Public Mutual Berhad which can give higher return or yield than EPF, Fixed deposit and even ASB.
In early 2006, I invested through EPF in a fund called Public Regional Sector Fund. I sold it in mid-2007 when the KLSE was 1,500 points and I made a return of 41%. My other funds (three of them) which I bought earlier also give me a return of average 20% per annum.
After realized how much I benefited from investing in the right unit trust, I signed up as a consultant. I want to be serious in this business because firstly I can help myself and secondly investment in stocks and shares is my passion.
I have done a comparison on the performance of the various funds under Public Mutual Berhad and I can confidently conclude that the returns from some of them are much higher than the return from ASB. Investing in the right fund and with the right timing can give a return of between 20 – 50%.
Rather than leaving your money in EPF or ASB earning only about 5% and 9% respectively, it is better to invest in unit trust with Public Mutual Berhad. Peter Lynch once said, “The mutual fund is a wonderful invention for people who have neither the time nor the inclination to test their wits against the stock market, as well as for people with small amount of money to invest who seek diversification.”]
Personal experience in unit trusts
I attended a Public Mutual Unit Trust agent Introduction day before in a posh hotel. There were thousands of people around. I remembered they had awards given for the top agents, all million Ringgit Round Table agents. The atmosphere was exhilarating, with so many successful unit trust agents around. They would brag about selling the biggest funds and the most number of funds. Yes, they did. They will tell you to join the industry in order to be rich. So is Public Mutual, or more specifically the unit trust industry add value to the public? Or are they actually extracting value for themselves at the expense of the public?
I certainly have invested in managed funds before, one a private managed fund of DBS Bank in Singapore, and the BHLB, or now the CIMB principle equity fund many years ago. I do not remember how well both the funds did. Actually I didn’t bother or even know how to measure the performance of my unit trust funds (more about this later). But I do know one thing, I never get rich, or even close to rich investing in those funds. I think the return was about 1% to 2% a year. Did I complain? No, the funds made money for me, and so why should I complain? That was how naïve and indifference I was with the hard earned money of mine investing in risky assets. That was history though.
I made some high return (>30%) in some overseas funds under the FundSuperMart platform immediately after the US Subprime Crisis in less than a year. I invested in them as I knew nothing about the foreign markets. Yes, one could make good return if he understands the market cycles.
http://klse.i3investor.com/blogs/kcchongnz/74098.jsp
Now before we comment on the opening extract of an article above, let us look at the performance of 118 unit trust funds invested in local equity as at 21st April 2015. These funds were obtained from the FundSupermart in the link below.
http://www.fundsupermart.com.my/main/fundinfo/compareFund.svdo?sectormaincode=EG§orareacode=FE2
Just note before this I have analysed the return of those funds sometime in January 2014 before as shown in the link here:
http://klse.i3investor.com/blogs/kcchongnz/45121.jsp
And below was my conclusions in the above article, the same as that of Peter Lynch as mentioned in the opening article.
“My conclusion is that it may be a good idea for ordinary people who have not much time and knowledge and wish to invest in the equity market to invest in the local unit trust funds.”
Return of Unit Trust Funds invested in Bursa
Table 1 below summarizes the returns of the 118 funds at various periods up to 21st April 2015.
Table 1: Return of 118 unit trust funds in Bursa for various periods
|
Return Period |
1-month |
3-month |
6-month |
1-yr |
3-yr CAR |
5-yr CAR |
|
No. of funds |
118 |
118 |
118 |
118 |
109 |
105 |
|
% underperformer |
57% |
60% |
57% |
47% |
50% |
59% |
|
Av Return % |
3.36 |
6.98 |
5.27 |
2.66 |
8.92 |
9.29 |
|
Median Return % |
3.12 |
6.51 |
4.66 |
2.78 |
8.92 |
9.20 |
|
KLCI total return |
3.73 |
5.25 |
6.73 |
2.79 |
8.91 |
9.72 |
|
Excess Return |
-0.37 |
1.73 |
-1.46 |
-0.12 |
0.00 |
-0.43 |
|
Maximum Return |
8.41 |
18.82 |
19.95 |
17.94 |
25.85 |
21.93 |
|
Minimum Return |
1.42 |
0.19 |
-4.38 |
-14.34 |
-3.06 |
-1.31 |
In general, the total returns of the market for the last three or five years have been quite the norm and in the region of about 9% a year, or a real return of 5% after inflation of about 4%. The average return of the unit trusts funds at various period slightly underperformed the broad market, which is considered as not bad at all. For example, the 5-year average compounded annual return (CAR) of the fund of 9.29% is about half a percent below KLCI of 9.72%, and the 1 and 3-year return of the funds were almost the same as that of the KLCI of 2.79% and 8.91% respectively. This may justify the statement of Peter Lynch that
“The mutual fund is a wonderful invention for people who have neither the time nor the inclination to test their wits against the stock market, as well as for people with small amount of money to invest who seek diversification”
Remember how retail investors investing directly into the stock market themselves have been severely underperformed the market and have lost money while the broad market was up in the past.
http://klse.i3investor.com/blogs/kcchongnz/75376.jsp
But be careful not to use margin finance as the average return you get from unit trust for the past one year at 2.7% can’t pay for the interest expense of 5%, not talking about the setup cost yet.
But certainly there is not a single average return in all periods which is more than 10%, not to mention the 41% as described in the opening article. I searched all over the each individual return, a total of 686 numbers, there is also none, and not a single one has that return of 41% as claimed.
What about the lower bound of 20% as mentioned in the article? Yes there are. But there is only one for the 5-year period, 21.93% of the Kenanga Growth Fund for the 5-year return, and two for the 3-year return; Kenanga at 20.55%, and 25.85% of Eastspring Investment My Focus Fund.
How does the article justify a return of 20% to 50%? Or does it refer to cumulative return for a 10 year period? I bet the writer wasn’t sure too.
Be careful also although the average return is positive, say the 1-year average return is 2.79%, one can lose 14.34% if he was so unfortunate to have invested in a tactical fund, a market timing fund in KAF tactical Fund. Market timing for a unit trust fund seems to hurt, doesn’t it?
And what if investors invested in a growth fund, Philip Master Equity Growth Fund which lost 6.83% the past one year? Growth investing wasn’t spared too, was it?
But why can’t he choose the best fund to invest instead of the lousy KAF Tactical Fund? The question is could he do that in foresight before he invested in it?
Past performance of a unit trust is not a good guide for future return
Let say an investor based on the performance of the funds in the FundSuperMart platform in January 2014 and tried to find the best performing fund to invest for the next one year. He could have chosen one of the best three funds, the Philip Master Equity fund which had a 1-year return of 28.5% then. What happened after one year? His fund would have lost 6.83% as at 21st April 2015 while KLCI had a total return of 2.79% during the same period. What did I say here?
http://klse.i3investor.com/blogs/kcchongnz/75376.jsp
Can you base on the past performance of the fund manager to select a fund to invest in successfully as the research has shown?
The other previous top three performer, MAAKL-HDBS Flexi Fund exhibited the same behaviour as shown in Table 2 below. The following one year performance of 3.35% was not much better than the return of KLCI of 2.79%. It would be worse off if we consider the front end loading of say 2% (not to mention some charge 5%-6%) sale cost, which has not been included in the return calculations.
Table 2: Performance of the previous top three performers in January 2014
|
Return Period |
1-month |
3-month |
6-month |
1-yr |
3-yr CAR |
5-yr CAR |
|
Philip Master Equity Growth |
2.76 |
7.49 |
-1.86 |
-6.83 |
11.83 |
11.95 |
|
Kenanga Growth |
5.7 |
13.89 |
14.22 |
17.94 |
20.55 |
21.93 |
|
MAAKL-HDBS Flexi |
1.96 |
5.37 |
4.75 |
3.35 |
12.28 |
14.18 |
|
KLCI total return |
3.73 |
5.25 |
6.73 |
2.79 |
8.91 |
9.72 |
Out of the three, only Kenanga Growth fund shows consistency in its return.
What would be the return to unit trust investors if he were to go through a financial adviser who charge a wrapped fee, or asset under management fee of say 2% a year? Would the return be better than the return of the almost risk free investment in EPF of 6% and ASB of 9% as claimed by the article, not including the additional risks in unit trust investments?
But what about if one has invested in Public Mutual, the biggest fund house with the most number of funds and the “best” consultants? Let us look at the performance of its 16 funds and examine a comment in i3investors in the thread here for discussion purpose.
http://klse.i3investor.com/blogs/kcchongnz/75376.jsp
Invest in Public Mutual, the best fund house?
[Posted by bsngpg > Apr 22, 2015 10:50 PM | Report Abuse 
I asked my friends who invest in Bursa, 10% beat the broad mktg, 30% making positive return but less than the broad mktg and 60% are losing money to Bursa.
About the same %(1:3:6) was quoted by the 40 year experience sifu in Bursa, Mr Len Yan, in one of his article published in Nanyang sometime ago.
I also asked my friends who invested in Public Mutual, almost all are making 6-10% annual return from Public Mutual in reasonable timeframe.]
Table 3 below shows the average return of the 16 equity funds of Public Mutual invested in Bursa as extracted from the information in the FundSuperMart as at 21st April 2015.
Table 3: Public Mutual fund return Vs KLCI
|
Period |
1-month |
3-month |
6-month |
1-yr |
3-yr CAR |
5-yr CAR |
|
Public Mutual Av Return |
2.19 |
5.70 |
4.60 |
2.99 |
8.61 |
9.33 |
|
KLCI total return |
3.73 |
5.25 |
6.73 |
2.79 |
8.91 |
9.72 |
The average return of Public Mutual Funds for the 3-year and 5-year CAR was 8.6% and 9.3% respectively. These returns closely tracked but underperformed the broad market a little almost for all periods. It would be if the upfront sales fees or sales charged were taken into considerations. We know these “best” funds charge some of the highest upfront fees too.
The last statement above stating that “almost all are making 6%-10% annual return from Public Mutual in reasonable timeframe” is not a misleading statement at all, and that is a fact. In fact except one fund, Public Mutual Islamic Equity Fund which has a return of 4.86% for a three year period, all others have more than 6% CAR, and some have double digit CAR. One fund, Public Islam Opportunity fund even had 15.2% CAR for the three year period, outperformed the broad market of 8.9% widely.
Certainly this is much better than my own experience investing in managed funds before. Most retail investors in these funds did better than more than 90% of them investing by their own as stated by Len Yen in the comment above and as described in my previous article.
http://klse.i3investor.com/blogs/kcchongnz/75376.jsp
But think about it, why not? Those were the return of the broad market during those times and they were also the long range return of the Malaysian equity market. A strategy of closet indexing as described in my previous article for Public Mutual will suffice to give its investors that kind of return. Where is the beef?
Perhaps the following comment answered all aptly.
[Posted by NOBY > Apr 23, 2015 01:19 PM | Report Abuse
Frankly speaking Public Mutual used to be good, but as their market share increase, they need to keep launching new funds to keep up with the inflow. They have so many Malaysian funds which frankly invest in almost the same thing. The only fund which I see may have some value are their small cap funds, but the fund has been closed for some time.
For me, if I’m looking for outperformance, I will typically go for small cap funds as the investment universe of these funds are less efficient hence the long term returns have higher chance of outperformance. If you buy a big cap fund which buys mostly the stocks on the index and charges you a 2% annual management fee, how can you hope to outperform the index?]
I would just like to add what do you think is Public Mutual and his agent’s interests, to build big funds and lots of funds to get more fees for assets under management, or to try hard to earn more return for unit holders by investing in small capitalized stocks and risk being wrong?
But what about the claim of 20%-50% as mentioned in the opening article? Well it actually depend on how return is measured. I am sure he was not talking about compounded annual return, or CAR, which is the only relevant measurement, and not others.
Volatility Gremlins
Let us assume you invest RM10000 in Public Mutual Fund three years ago, and further assume that your return each year is +40%, -35% and 43.6% for the next three years as shown in Table 4 below.
Table 4: Investment return
|
Year |
0 |
1 |
2 |
3 |
CAR/Av |
|
Principal |
10000 |
14000 |
9100 |
13068 |
30.7% |
|
Return |
40.0% |
-35.0% |
43.6% |
16.2% |
|
|
Amount |
|
4000 |
-4900 |
3968 |
9.3% |
The table shows the total return for the three year period is 30.7%, i.e. you make 3070 in three years. The average return is 16.2% for the three years. But the CAR is only 9.3%. Which is the appropriate measure of return, the total, average or the CAR?
Don’t be disappointed if you are not sure, I wasn’t sure some years ago too, and I believe most people are not sure as many are experts of their own field, but not in finance, albeit some simple finance. And I can tell you many unit trust agents, including licensed qualified financial advisers are not sure about it too. Am I too critical about the industry? I don’t think so; been there, done that.
So don’t be surprised the claim of 20%-50% return is the total, or may be the average, for a 3 year or 5 year periods, and not the appropriate CAR, and the 41% return he made a year in 2007 in the opening article was just his luck in timing and pure noise, and not the normal return. Can you figure what would be his return if he had sold it a few months later when the US Subprime Crisis was at its full bloom? I would guess a negative return, a big negative too. I bet that unit trust agent wasn’t even sure what he was talking about.
What about his claim here?
“I have done a comparison on the performance of the various funds under Public Mutual Berhad and I can confidently conclude that the returns from some of them are much higher than the return from ASB. Investing in the right fund and with the right timing can give a return of between 20 – 50%.”
For me, I stay far away from this snake oil salesman. Sorry folk, just want to be direct.
"When you locate a bargain, you must ask, 'Why me, God? Why am I the only one who could find this bargain?'" - Charlie Munger
Conclusions
Unit trusts in Malaysia does provide a good opportunity and a much better option for retail investors who have no knowledge or time to invest on their own to obtain real return after adjusted for inflation from Bursa. They must be able to choose a fund manager who can do a good job for them, for a long-term period of at least five to ten years. However, they must realize not to expect market beating return as it is simply not easy and highly unlikely, given the operation of this industry; fees, costs of play, market efficiency, competitions, agency problems etc. It is not so much a matter whether they have good fund managers or not. In fact I believe every fund has qualified, knowledgeable, skilful and experienced fund manager.
If one intends to get better return from the market by doing on his own, it is not easy, but I believe it can be done. Please refer to the post below.
http://klse.i3investor.com/blogs/kcchongnz/59971.jsp
But there is no free lunch in this investing world. There is no sure thing too as the investing world is full of uncertainties. It is a jungle out there.
For questions and discussions, please contact me at
KC Chong (23rd April 2015)
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Discussions
8 people like this. Showing 33 of 33 comments
KC, btw I must say this is a very good informative article... thank you...
Realistically, I think most investors who invested in unit trust will probably do worse than average because they may switch in and out often and try to time the market. Worse still they may not stick with the same fund and may move around year in year out trying to find the best performing fund. Personally, this is my experience and the money that I withdrew from EPF to invest in these Public Mutual fund is actually not earning much more than the EPF returns due my actions.
2015-04-23 17:53
thx for kcchong mutual fund myth debunked.
Actually no one including researchers wanna to conduct the study, our common knowledge is so poor on mutual fund area.
Thx for kcchong's generosity to conduct the study, and hope that theEdge can buy n post up this useful post on their paper
2015-04-23 18:29
Thanks for the article KC, very informative indeed. I guess that's why more and more people just buy a low cost index tracking fund (as per Noby's comment) rather than make their fund manager rich.
2015-04-23 20:13
As Warren Buffet advises, just buy an index fund and you avoid paying all the unnecessary costs and expenses.
2015-04-23 22:02
There are only a few ETF traded in Bursa, just like other shares, including a bond fund and a couple of foreign indices etf. FBM KLCI etf is one of them. The choice is very limited. The annual fee charged for FBMKLCI etf is 0.5%, bond fund much less, and foreign index etf not cheap, I think.
The main problem is very few of them and you can't get what you want to invest in certain sector as you wish.
2015-04-24 13:52
I bought some CIMBC50 ETF earlier this year to get exposure to China mainland stocks. Their management fee is about 0.6%p.a and the performance of the ETF is better than active managed funds.
One of the problem with ETF is that there are limited number of units and there could be liquidity issues when you are trying to sell vs normal open ended fund. I know that there are more ETFs listed in US or Singapore with more exposure to other regions and also with lower operational costs. One of the areas I intend to explore to diversify out of Malaysia.
2015-04-24 14:00
Some claim they outperform unit trust. For example 30% return in one stock counter. But probe further only realised they actually did not all in their capital to the counter. Maybe put 30% this stock, 40% that stock, 30% cash. So overall, it actually less than if they put all their capital into a good unit trust.
2015-04-24 23:10
Posted by NOBY > Apr 23, 2015 05:53 PM | Report Abuse
KC, btw I must say this is a very good informative article... thank you...
Realistically, I think most investors who invested in unit trust will probably do worse than average because they may switch in and out often and try to time the market. Worse still they may not stick with the same fund and may move around year in year out trying to find the best performing fund. Personally, this is my experience and the money that I withdrew from EPF to invest in these Public Mutual fund is actually not earning much more than the EPF returns due my actions.
Noby, you are not alone.
This is one of the biggest reasons for individual investor under-performance. The study done by Fidelity Investments should highlight this. Investors in Fidelity, one of the most successful mutual funds lost money during a period of time where the fund made 29% annually. Investors would pull their money out of the fund during periods of poor performance, and send it in during good periods.
I have the feeling that individual stock investors do the same thing, buy stocks (may be good stocks) when they are already chased up sky high by selling stocks (good stocks with fundamentals still intact) which have been beaten down,may be because of just a poor quarterly report, only to experience the power of mean reverting.
2015-04-25 11:36
Www.. To calculate return, one must use profit/total capital to calculate, should not use a solely counter earning to measure...
If they use one counter earning to Tell the earning of his year.. U probably dont need to listen to his word anymore.
2015-04-25 11:49
Invest UT with Wrap Account, pay lowest fee, increase the probability of high return.
Open Wrap Account with Financial Adviser, they are independent from fund houses.
www.AskChong.com
2015-04-25 12:03
Posted by CHONG Kong Hui > Apr 25, 2015 12:03 PM | Report Abuse
Invest UT with Wrap Account, pay lowest fee, increase the probability of high return.
Open Wrap Account with Financial Adviser, they are independent from fund houses.
www.AskChong.com
Kong Hui, how much do you charge for the wrap account per year? And how does this wrap account fees impact on the return?
My opinion is the value of a professional adviser should be his sound advice to his clients with a fee, not from any value added from unit trust investment with him. Wrap fee only extract more value from investors.
2015-04-25 12:31
Hi KC,
If a guy to invest RM1,000 and the UTC (unit trust consultant) only makes RM50 (if sales charge 5% all goes to him/her).
If that guy invest RM100,000 and the sales charge stays at 5%, then it is RM5,000 (a lot of money).
UT investors can make good return if
1) The Fund perform well AND
2) The cost of investment is low.
Wrap Account helps to achieve # 2 above.
I recently open an account for a client for RM200,000 he will pay only 1% Service Fee (upon injection of fund into the Wrap Account), and we negotiated a 0% Wrap Fee (Advisory service) and he can choose any funds out of total 300 over funds available in the platform at 0% Sales Charge.
Subsequent switch among the 300 over funds mostly at 0% sales charge, or about 1/10 of normal sales charge.
We help our client make money by giving advisory and setup a way to invest with lowest possible cost.
Wrap Fee may be adjust to 1% if the client's portfolio making good return.
2015-04-26 10:30
Kong Hui,
You are a fair financial adviser. Your type of financial adviser who align the interest of clients' with his own is hard to find. It is a secret recipe for success.
Wish you success. You will.
Good on you.
2015-04-26 11:09
A truly professional financial adviser, one who adhere to the code of ethics of professionalism, who are following a proper process, take care of clients' interest, sense of fiduciary duty,etc.
ks55,your son's problem was a mis-presentation by the planner. A with profit insurance policy can never yield a return of even 5%, considering the upfront fees paid to the insurance agent/financial planner,and the insurance coverage.
Yeah, often the financial himself is in the dark about it. Those who know have their own interest first, not yours.
2015-04-26 18:56
i have invest in UT using fundsupermart platform towards the end of 2012..the return is quite good for my investment.So far i have gain 25.79% and 17.44% respectively for AMB Dividend Fund and Kenanga Syariah Growth Fund..If not due to oil price crash my return would be better..As long as my fund are outperforming EPF return it's good enough for me..
2015-04-27 15:46
Posted by TAFA > Apr 27, 2015 03:46 PM | Report Abuse
i have invest in UT using fundsupermart platform towards the end of 2012..the return is quite good for my investment.So far i have gain 25.79% and 17.44% respectively for AMB Dividend Fund and Kenanga Syariah Growth Fund..If not due to oil price crash my return would be better..As long as my fund are outperforming EPF return it's good enough for me..
Your Dividend fund returned 9.6% a year, certainly not bad.
Your Growth fund returned just 6.6% a year, just equals the EPF dividend last year. Don't forget any fund comes with risk, whereas EPF is almost risk free.
So your Dividend Fund may or may not outperformed EPF in term of risk-adjusted return, but your Growth Fund definitely is not better than EPF, risk-adjusted wise.
2015-04-27 16:29
Hi KC,
Referred to your post on 26/04/2015 18:56,
"A with profit insurance policy can never yield a return of even 5%".
Do you mind to share more details on that? I know it's kinda out of topic, but following the link below,
http://www.investmentmoats.com/budgeting/do-your-insurance-saving-plans-endowment-give-you-3-to-5-returns/
From the research done by Kyith, most of the endowment policies returns stood at around 2% to 4% or even worse, as same as your statement here, does it included those savings plans and investment-linked insurance policies?
Thanks,
2015-07-19 01:12
A lot of people only look at something at superficial layer.
Sometimes when I speak to the elders about personal finance , they would tell me 12% total portfolio return (not a single stock only, overall return) in stock market is enough.
12% vs 6.35% average return of KWSP . Is it good enough ?
As what you state out, stock market has it's own risk. And in order to expose ourself to the stock market, the risk must come with a premium.
2015-07-19 02:02
2015 , KLCI started with opening of 1722 points ; reached highest point of 1864 and currently stand at 1728.
The highest risk possible you suffered is 136 points , which is a loss of 7.296%
While the highest rewards is just a mere 6 points, which is a gain of 0.348%
2015-07-19 02:08
While your portfolio suffered a potential loss of 7.296% to gain a 12% ; KWSP offers zero-risk return of 6.35%.
Note of some risk free investment vehicle.
1. ASB (Bumiputera sahaja) - 7.75% + 1.00%
2. KWSP - 6.35%
3. ASW 2020 - 6.6%
4. ASM - 6.6%
5. ASD - 6.6%
6. AS1M - 6.6%
7. ASB 2 (Bumiputera Sahaja) - 6.6%
Its up to personal preference in calculating desired return, thou.
2015-07-19 02:17
Posted by dennisylw > Jul 19, 2015 01:12 AM | Report Abuse
Hi KC,
Referred to your post on 26/04/2015 18:56,
"A with profit insurance policy can never yield a return of even 5%".
Do you mind to share more details on that? I know it's kinda out of topic, but following the link below,
http://www.investmentmoats.com/budgeting/do-your-insurance-saving-plans-endowment-give-you-3-to-5-returns/
From the research done by Kyith, most of the endowment policies returns stood at around 2% to 4% or even worse, as same as your statement here, does it included those savings plans and investment-linked insurance policies?
Me: Endowment policies, saving plans, investment-linked insurance policies won't give you a return anywhere near 4% as stated by you. Bear in mind, firstly they serve other purpose such as life insurance coverage which comes with a cost and part of your regular premiums go towards that, and only part of them go to investment. Secondly the insurance adviser/agent will get a very big junk of your premiums for the first few years as their agent fees, and there are annual fees in the fund management, by the fund managers, as well as the insurance companies. So how much of your premium is left for investment? Even though the long-term return of equity investment is say 10%, your investment return will still be far away from that 4% return a year in the long term. Bear in mind, few funds, including insurance funds can beat the market return.
Insurance agents or financial advisers wont tell you that, a big proportion of them, even those licensed qualified financial planners/advisers don't even understand it.
Am I badmouthing the industry? No, I worked as one before and know it very well.
In this world, there is no free lunch.
2015-07-19 05:45
Hi KC,
Thanks for the sharing, very much appreciated!
"licensed qualified financial planners/advisers don't even understand it", that's the scariest part of all. They're the one suppose to guide and explain to customers at first place. So the issue is not at the insurance plan itself but on the peoples who selling it, as always.
Anyway, thanks again!
2015-07-19 20:33
Just for curious, I couldn't apply CAR calculation on the insurance plan due to the on going annual/quarter/monthly insurance premium payment along the period. CAR only taking initial and final value to calculate the return.
To calculate CAR,
Formula: ((Final Value / Initial Value)^(1 / number of years)) - 1 (X 100 for %)
If you don't have an even number of years, use (12 / number of months) or (4 / number of quarters)
Is there any better way to calculate return of the insurance plan?
Thanks,
2015-07-19 20:51
dennis, you can use the IRR method to calculate the annualized return if there are frequent contributions to the plan.
http://www.oldschoolvalue.com/blog/investment-tools/calculate-xirr-annualized-returns/
2015-07-20 10:05
Thanks KC.I'm a UT agent myself since 2011 and qualified myself as CFP graduate (didn't register for the license though). Found your article since now i'm having tough time 'answering' my clients fund performances especially those who got into the market since the last OnG crash.
I'm a guy who 'feels shxtty' when i could go for the free incentive trip provided by the company due to my 'sales achievement' while the ones who entrust their money with me are losing their retirement savings.
3 years, either stay, DCA or even switchings, still hasn't break even..that's very frustrating for me. I might do it less effectively, well.. 5 years technical and sales experience still having tough times, couldn't imagine those newbies agents, sorry for them and their clients.
My advice to the general public here, not to say UT is a bad investment instrument. However, always understand the calculated risk VS potential return and the strategy to optimize your investment objectives especially your time horizon. Never consider UT if you are going to stay lesser than 5-6 years. (finger cross, if switchings are done very effectively between high volatility funds, exceptional results could be obtained)
but if more, focus on funds that give you at least consistent 'distribution' if switchings are not done very effectively. this is to ensure the DCA principle applies almost 'automatically' by having the distribution reinvested. (just another way, there are other ways to obtained great results though)
All the best y'all. Thanks again KC, really appreciate your article here. keep up bro!!
2016-12-27 12:54
Posted by Muhammad Faris Idrus > Dec 27, 2016 12:54 PM | Report Abuse
Thanks KC.I'm a UT agent myself since 2011 and qualified myself as CFP graduate (didn't register for the license though). Found your article since now i'm having tough time 'answering' my clients fund performances especially those who got into the market since the last OnG crash.
I'm a guy who 'feels shxtty' when i could go for the free incentive trip provided by the company due to my 'sales achievement' while the ones who entrust their money with me are losing their retirement savings.
3 years, either stay, DCA or even switchings, still hasn't break even..that's very frustrating for me. I might do it less effectively, well.. 5 years technical and sales experience still having tough times, couldn't imagine those newbies agents, sorry for them and their clients.
Muhammad Faris Idrus,
You are a responsible Unit trust agent as I can see. Help your folks in investing in unit trust if they want to invest in equity, with the lowest cost possible, for long-term, but of course, You must be rewarded somehow.
Nothing wrong for losing money for your clients the last three years as the broad market actually has gone down. It is extremely hard for a unit trust to beat the broad market as I have explained in this article.
2016-12-27 13:18
Hi KC its a very noob question.. Is it a good choice if i invest in PM using my EPF. I am 32 yrs old and have excess of 80k (from EPF basic acc1 limit). My monthly EPF contribution is about 3k (me+employer). Is it a good choice if i start with 10k and DCA 5k (every 3months) for 10yrs period? As a starter. I dont want to risk losing my already accumulated EPF and my risk tolerance is also very low. Thank you so much for your kind reply. May god repay ur kindness with great success..
2017-02-20 19:08
Mohd Abd Hafiz Zakaria,
My opinion is No.
I guess you are not good or confident enough yet to invest on yourself. Take the alternatives given below. What we should look at is risk-adjusted return.
Posted by CFTrader > Jul 19, 2015 02:17 AM | Report Abuse
While your portfolio suffered a potential loss of 7.296% to gain a 12% ; KWSP offers zero-risk return of 6.35%.
Note of some risk free investment vehicle.
1. ASB (Bumiputera sahaja) - 7.75% + 1.00%
2. KWSP - 6.35%
3. ASW 2020 - 6.6%
4. ASM - 6.6%
5. ASD - 6.6%
6. AS1M - 6.6%
7. ASB 2 (Bumiputera Sahaja) - 6.6%
2017-02-20 19:58
Thanks for your reply KC. Appreciate it so much. My main idea is to explore the Mutual Fund, and I think to invest using cash that I put aside. But when i met PM agent, she told me that it is better to invest using EPF and in long run with constant DCA, sure will not losing money and will give better return. That is why I am in dilemma wthether to
1) Use EPF or cash as start
2) Is the agent telling me the right things?
3) Is my plan is OK - (if use cash, I have 20k (and my plan is 2k initial, monthly DCA 300 for 5yrs) which I am OK to lose and at the same I will learn about mutual fund.
4) I have also offered by my friend who is an agent of Philips Mutual. Therefore, Where is the best place to start (PubMut, or PhilMut).
I already have ASB1 and ASB2 account with total saving 400k (from ASB loan & cash). I have made a plan years back to maximize my ASB then only try Mutual Fund, in search of slighty higher risk and return.
Thanks for your kind reply.
2017-02-21 10:42
Investment in Unit trust may not give u the high return people aspire, unless PNB guarantee capital guarantee fund like ASB loh...!!
This bcos most of unit trust has high loading and management fees, something like 2% pa mah....!!
Think of individual stock picking better loh....raider say buy hold strategy on good stocks...your long run return will beat unit trust loh...!!
2017-02-21 10:45
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The statistics here are not as bad in the US I guess with 59% of the funds underperforming the benchmark whereas in US more than 80% underperform. But looking at the median and average return of the funds vs the KLCI which is so close, doesnt it make more sense for a person who doesnt want to invest directly in stocks on his own to just buy a KLCI ETF rather than risk underperformance by buying unit trust. After all, there is a 59% chance of him underperforming the market based on your results if he chose to buy a unit trust.
2015-04-23 17:45