5 Best Performing Unit Trust Funds in Past 10 Years

When it comes to Unit Trust Funds, what is your common perception towards the return? Well, most people would have different answer depending on their personal past experience. Given to the wrong hand of those bad apples will surely yields you a bad return with your hard earned money. So, are you getting the best funds from the market? 

3 Ways to Protect Yourself From Bad Financial Advice

Table from Morningstar

Let's take a look at the 5 Best Performing Unit Trust Funds over the past 10 years out of 540 funds available in Malaysia. You can invest into any of it with minimum of RM1,000, some can even start as low as RM100! 

What is Annualized Return?

Affin Hwang Select Asia (Ex-Japan) Quantum Fund (AHSAQF) seeks to achieve consistent capital appreciation over medium to long-term by investing mainly in growth companies in Asia with market capitalization of not more than USD 1.5 billion at the time of acquisition. The fund has a 10-Year annualized return of 15.32%. However it is currently soft-closing as it almost reaches the maximum fund size, so cash investment is no longer available, but you may still invest in it using EPF Withdrawal. 

Kenanga Growth Fund (KGF) aims to provide Unit Holders with long-term capital growth by invest principally in a diversified portfolio of equity and equity-related securities in Malaysia. Lee Sook Yee is the fund manager as well as the Chief Investment Officer (CIO) since 2013, bringing with her more than twelve (12) years of experience in local and regional equities investment. The fund has a 10-Year annualized return of 14.51%. You can start investing in it as low as RM100! 

Eastspring Investments Small-cap Fund (EISCF) targets to provide investors with maximum capital appreciation by investing principally in small market capitalization up to RM3 billion at the point of acquisition companies in Malaysia which will appreciate in value. The fund led by Chen Fan Fai, where the team continue to adopt a bottoms-up approach in selecting stocks where they prefer stocks with healthy earnings growth and strong balance sheet. The fund has a 10-Year annualized return of 14.02%. However, it is no longer available to invest as it reaches the maximum fund size limit. 

Manulife Investment Progress Fund (MIPF) strives to provide Unit Holders with steady long-term capital growth at a reasonable level of risk by investing in a diversified portfolio of small- to medium-sized public listed companies in Malaysia. Nicholas Tiong is the fund manager since 2002. The fund has a 10-Year annualized return of 12.26%.

Public Smallcap Fund (PSCF) works to achieve high capital growth through investments in companies with market capitalization of RM1.25 billion and below with special focus on growth stocks. To achieve increased diversification, the fund may invest in foreign markets. The fund may also invest in fixed income securities to generate additional returns. The fund has a 10-Year annualized return of 12.16%. However, it is no longer available to invest as it reaches the maximum fund size limit.

***Noteworthy - KAF Vision Fund (KVF)'s  investment objective is to provide Unit holders with medium to long-term capital growth with a mixture of maximum 65% of the Fund’s NAV will be invested in smaller capitalized companies not exceeding RM1 billion at the time of purchase and maximum 30% of the Fund’s NAV in larger capitalized companies exceeding RM1 billion at the time of purchase. The fund has a 10-Year annualized return of 10.46%.

Did you invest any of these?

Conclusion:

Take note that the only 4 funds, namely AHSAQF, KGF, EISC and KVF managed to get DOUBLE-FIGURE annualized return for all 10-year, 5-year, 3-year, 1-year and even Year-To-Date! Although past performance does not guarantee the future return, but judging from the past performance of the fund, one can tell how good is the fund manager in their investment approach, stock selection methodology and even how efficient is the fund manager utilizing the pool of funds from investors. (provided that there is no change in management) 

Anyway, this post is just to show that Unit Trust Fund can yields high return as well (does not indicate any buy recommendation), provided that you have done your research and analysis on which fund to invest in. If the fund recommended by your agent is still not performing after a long period, the reason can only be one - your agent is not managing for you! Time to hire #YourFinanceDoctor!

Why Warren Buffett's Investing Tip for LeBron James May Not Works in Malaysia?

As you may know, Warren Buffett is also friends with NBA superstar LeBron James and he has been giving regular investing tip to the 2016 NBA Finals MVP, whom leads Cleveland Cavaliers to NBA title and ends 52-year drought.

Apparently, given that Warren Buffett is one of the richest man in the world, he is probably right about everything he said, and certainly, it could applies to everyone else too! So let's look at some of the investing advice that the billionaire investor gave to the multi-millionaire basketball star.

“Owning the United States, a diversified piece, at a decent average price bought over time, held for 30 or 40 years, it’s bound to do well. The income will go up over the years, and you really can't go wrong with that.” - Warren Buffett

In Warren Buffett's context, owning the United States as a diversified piece means investing in S&P 500 index which includes the 500 large-cap U.S equities that captures approximately 80% coverage of available market capitalization. He always recommends his follower to just stick to S&P 500 index fund by Vanguard 500 Index Fund (VFINX). 

So if you have invested $100,000 in VFINX around 20 years ago (1997, max data available), by now, it would turn into $280,000 (180% return)! A lot higher than keeping in bank! So, Warren Buffet is certainly right about this that you really can't go wrong with it. 

Subscribe to Your Finance Doctor by Email

What about Malaysia?

Let's take a look at the comparison of KLCI vs S&P 500. Given the same period of time (1993-2016), the growth of S&P 500 (390% return) is much more higher than KLCI (150% return)! Which means with an initial investment of $100,000, S&P 500 would turns into $490,000 and KLCI would turns into $250,000.

Given roughly 24 years of period, the annualized return for S&P 500 will be 6.8%, which is still acceptable. However, the annualized return for KLCI is only 3.9%. So, it is safe to say that investing in index fund of Malaysia KLCI may not be workable. 

Another investing advice from Warren Buffett was...

“Through the rest of his career and beyond, in terms of earning power, [he should] just make monthly investments in the low-cost index fund. Somebody in his position ought to have a significant cash reserve."

Warren Buffett is certainly right that everyone should be disciplined enough to make monthly investments, especially for those with significant cash reserve. As per recommended by Warren Buffett, Vanguard 500 Index Fund (VFINX) is certainly low-cost index fund whereby there is 0% purchase fee, 0% redemption fee and a 0.16% expense ratio.  

What about Malaysia index fund?

There are only 6 index funds in Malaysia, namely: 

1. AMB Index-Linked Trust - tracks the performance of the KLCI
2. Manulife Investment Equity Index - track the performance of the FBM KLCI
3. Manulife Investment Syariah Index - track the performance of the FBMS (EMAS Shariah)
4. PMB Shariah Index - invest primarily in the major stocks constituent of the FBMSHA
5. Public Index - attempting to outperform the FTSE Bursa Malaysia Top 100 Index
6. RHB KLCI Tracker - correspond to the performance of the KLCI

So actually there are only 3 funds that tracks KLCI, while the rest like Public, PMB and Manulife track or just benchmark other index in Malaysia. 

Date taken from Morningstar

Besides PMB, the rest of the funds' initial sales fee/purchase fee is outrageous with as high as 6.5%! That's totally out of the league of  Vanguard 500 Index Fund (VFINX)! So once again, it is proven that index fund may not works in Malaysia. 

I have came across a lot of articles supporting the same thing whereby index fund is recommended over mutual fund/unit trust fund. However, one should take note that the article is referring to U.S market rather than Malaysia market which is less efficient. 

In conclusion, whatever you read in the articles, even if is by Warren Buffett, to multi-millionaire LeBron James, you should never follow blindly. 

So here comes the most important question. If not index fund, then what?

I hear you! And I have been mentioning a lot through out my previous post, so here you go:

1. You need to invest regularly with a wrap account. 

2. Construct a portfolio and diversified with good funds. 

3. Here's how to start!

Till then. ;)

Happy Investing!

FAQ - How to Start Investing in Unit Trust Fund?

In my previous post regarding "Start Invest As Low As RM100!", many have come to me and ask how do they actually kick start. So I figured that perhaps I should write "How to Start Investing in Unit Trust Fund". If you are reading this now, that's great because you have the urge to kick start now, so don't let it stop and follow the 4 easy steps below! 

Prospect(s): "How to Start Investing in Unit Trust Fund?"

Answer:

By now, you should be convinced on why you should start investing now, otherwise, here's a quick recap:

4 Reasons to Invest NOW:

1. Snowball Effect

2. Compounding Effect

3. Dollar Cost Averaging Effect

4. Start Now Effect

Step 1: Choose your channel
There are a few channels that you could go through to invest in unit trust fund:
1. Institutional Unit Trust Advisor (IUTA) - Usually those in banks
2. Unit Trust Consultant (UTC) - Agent that attach to only one Principal
3. Corporate Unit Trust Advisor (CUTA) - Independent Financial Advisor
4. Online - FundSuperMart

Each has different sales charge and level of service. Check out this post, you will be able to tell the difference of UTC and CUTA. So choose the one that best suits your needs. For more info on the clarification of IUTA, CUTA, UTC and so on, check out Securities Commission Website.

Subscribe to Your Finance Doctor by Email

Since #YourFinanceDoctor is an Independent Financial Advisor under CUTA, hence the following steps are only applicable if you have decided to choose #YourFinanceDoctor.

Step 2: Read thru FIMM Pre-Investment Form
Like I always said, knowing what you invest is utterly important! So read through as you will need to sign this form before investing in unit trust fund (that's why it's called Pre-Investment Form). No worry, #YourFinanceDoctor will explain to you again as well during the appointment.

Step 3: Fill up the form



Step 4: Voila! That's all!
Congratulations for taking the first step to your better future!

That's all for now, Happy Investing!
Coming up next, "Why your Agent does not find you anymore?" Stay tuned for the next post!
If you have any question to ask #YourFinanceDoctor, feel free to email here.

FAQ - Any Fund Performs Better Than 6.4%?

Following the well response from the previous FAQ post on how #YourFinanceDoctor charges in Unit Trust Investment (read here if you haven't), I have decided to write on this first before the "Why Your Agent Does Not Find You Anymore?". So as usual, here's the question:

Prospect Teoh: "Any fund outperforms 6.4%?"

Answer:

YES OF COURSE! But first let me go through some introduction to Unit Trust. Unit trust fund may not be well known enough in Malaysia as compared to other countries due to the lack of financial literacy among Malaysians. As of 31 July 2016, statistic from Securities Commission Malaysia has shown that there are a total of 636 approved funds from 35 management companies which amounted to RM352 billion of total net asset value (21% of Bursa Malaysia Market Capitalization).

Subscribe to Your Finance Doctor by Email

Captured from Securities Commission Malaysia website

So the question is, are you aware that there are a total of 636 funds from 35 different management companies for you to choose from? Probably not! Most of the people #YourFinanceDoctor came across only know a few of them which are well known (company with strong marketing) such as Public Mutual and probably a few others like CIMB or RHB. Hence it is normal to jump into conclusion that unit trust doesn't perform well when you are not expose to all the available funds. 

Instead of telling you what are the Top Funds with Highest Return, here's how you can learn to fish for yourself! ;)

Step 1: Go to www.my.morningstar.com/ap/main/default.aspx and Click "Fund Selector"

FYI, Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. Take note that it is important to go for independent website to get unbiased/neutral data. 

(Ads: Just like you should hire Independent Financial Advisor like #YourFinanceDoctor !) 

Step 2: Click "Search" to see all the available funds in Malaysia

When you are familiar with the website, you can then play around with the filters like sort the funds by categories such as fund type, base currency, local representative, investment provider and so on!

Step 3: Click on "Performance" tab and Click "10 Years Annualized(MYR,%)" to sort

Don't be overwhelmed by the long list of funds! Good thing about this website is that you can get all sort of information of the funds. So sorting by 10 Years Annualized Return will give you a list from highest to lowest. As you may see, Kenanga Growth Fund, Eastspring Investments Small-cap and Affin Hwang Select Asia (ex Jpn) Quantum are the top 3 funds. Their return? Easily more than 6.4%!

Step 4: 10 Years too long? Click 5 Years Annualized then!

Step 5: 5 Years is still too long? Click 1 Year Return then!

Upon this step, you may realized that why in short term the return could be as high as 69%?! Well the truth is anyone in the market can tell you how good they are to earn 2 or even 3 figure return in percentage. But how many of them can continuously and consistently doing that? RARE! So same goes to unit trust fund, you may required to do research on each funds. 

(Ads: That's why you pay #YourFinanceDoctor to do all the hard work!) 

But back to answer to the question, YES OF COURSE there are plenty of funds outperform 6.4%! A quick sort on 1 Year Return from Largest to Smallest, you will see that the outperforming funds stop at Affin Hwang Select AUD Income with a 1 year return of 6.43%! Take note that it is on page 9, so with 30 funds per page, that will be [(9 x 30) - 13] = 257 funds outperform 6.4%! Which means, out of 670 funds, 257 funds or equivalent to 38% of chances that you will earn more than 6.4%! 

And if we want to see which funds consistently outperform 6.4%, then let's sort by 10 Years Annualized Return Largest to Smallest. Again as you can see, it stops at Public Asia Ittikal with 6.43% 10 Years Annualized Return on page 5. So that will be [(5 x 30) - 14] = 136 funds outperform 6.4%! However, out of 670 funds, there are only 277 funds that are existed for more than 10 years. So that means out of 277 funds, 136 funds or 49% of chances that you will earn more than 6.4%! 

P/S: Do take note that funds that are approved for EPF Withdrawal for Investment will be much lesser (Please refer here for more info)

Example:

Take example of the top fund in the list of 10 Years Annualized Return, Kenanga Growth Fund. If you have invested a once-off lump sum of RM10,000 in 15th September 2006 (10 years ago), with 10 years Annualized Return of 17%, you will now have RM48,533.92! (Yes without doing anything!) 

RM10,000 -> RM48,533 (10 years in KGF)

RM10,000 -> RM14,802 (10 years in Bank FD)

Chart taken from Morningstar!

So you see, this is why, again and again, #YourFinanceDoctor would urge all of you to start investing! One question that you should always ask yourself... 

Yes you may be hardworking,

But is your money hardworking than you?

Slide taken from one of #YourFinanceDoctor talk

Disclaimer:

Do take note that all the above does not indicate any recommendation to buy. You are advised to do your research before investing into any particular funds. Otherwise, you should get a Independent Financial Advisor like #YourFinanceDoctor (Contact me here!)

That's all for now, Happy Investing! 

Coming up next, "Why your Agent does not find you anymore?" Stay tuned for the next post!

If you have any question to ask #YourFinanceDoctor, feel free to email here.

FAQ - How Do You Charge in Unit Trust Investment?

Sorry for the long hiatus as #YourFinanceDoctor was lack of time and effort in blogging, but here I am, trying another new approach of writing, by answering some of the frequently asked questions. So long story short, here's the first one:

Prospect J: "How do you charge in Unit Trust Investment?"

Answer:

Unlike typical agent that you frequently came across on the street, you will be investing with #YourFinanceDoctor thru a Wrap Account. This may sounds new to you as it is not common in Malaysia yet. But let's take a look at the definition given by Investopedia. 

So instead of charging just a once-for-all upfront sales charge like what typical agent does, #YourFinanceDoctor would charge a much lower sales charge plus annual wrap fee. To make things simple, here's an illustration of how it works.

Subscribe to Your Finance Doctor by Email

Imagine if you have RM100,000 to invest and here are two options for you to choose!

Surprise surprise! The return is a lot higher even when you are investing with the same amount of money in the exact same funds at the same time and same price. Most importantly, I think the biggest advantage of #YourFinanceDoctor is to have the same objective as the client, which is to earn more for client so that we earn more thru the annual wrap fee too!

That's all for now! Happy Investing!

Coming up next, "Why your Agent does not find you anymore?" Stay tuned for the next post!

If you have any question to ask #YourFinanceDoctor, feel free to email here.

3 Reasons to Maximize Your EPF Savings

One of the questions that people always asked #YourFinanceDoctor if they should opt to take out their EPF to invest in Unit Trust Fund. (In case you have no idea about this, read here) My answer will always be YES. Here are 3 reasons why you should totally do that!

1. EPF wants you to do so! 

If you visit to EPF website (click here), there's a list of different types of withdrawals. "Members' Savings Investment Withdrawal" is one of it whereby the purpose is to allows members to transfer a portion of their savings from Account 1 for investments in order to maximize retirement savings. 

2. EPF is not stupid too!

As always, EPF put your best interests in heart! In order to safeguard the members' retirement savings, EPF only allows members to invest not more than 20% from the savings in excess of the Basic Savings amount in Account 1 through the appointed Fund Management Institutions approved by the Ministry of Finance. So that is just a small portion of your EPF savings! FYI, there are a total of 234 trust funds qualified and approved by EPF effective 31st April 2016. (EPF will carry out fund evaluation, funds will be suspended from time to time if fail to meet the strict specified selection criteria)

3. You deserve BETTER! 

Take 2 of the EPF approved funds as comparison. A starting withdrawal of RM100,000 for investment with no additional contribution, after 8 years, the return could almost double the figure of those do absolutely nothing about it! Check out the chart below! 

EPF - 100,000 => 158,761

KGF - 100,000 => 302,104

EISC - 100,000 => 304,373!

Conclusion

Don't get me wrong, EPF is one of the most efficient fund manager. Given such a huge amount of members' savings that EPF gotta handles, it is not easy at all! But there must be a reason why EPF allows us to withdraw for investment right? Well, simply because EPF believes we could do better if given a small portion! So bottom line, always invest in funds that generate higher return than EPF (2015 = 6.4%), otherwise what's the point of withdrawal right? Trust me, #YourFinanceDoctor have seen those that putting in those lower return ones! But do take into consideration on your time horizon as well! So now the question is... can you do better? 

Retire Earlier, Wealthier, and Happier

It's never too late to start maximize your EPF savings and you can get a head start by contacting #YourFinanceDoctor for the latest EPF approved fund tips, retirement planning advice, and the tools you need to make the most of your retirement savings! (click here now)

What You Can Invest Instead of An iPhone 6s?

As the clock turns to October 16th, Apple iPhone 6s and iPhone 6s Plus are available in Malaysia. Sure enough that they are all so much more expensive now than their predecessor by crunching an upwards of RM3,000!  

Wait what?! Yes but I bet many would still buy it anyway. Sometimes it got me thinking, so many people are complaining about the recent toll hike, petrol price hike, goods with GST price hike and whatever hike, yet they could afford the hike in iPhone? But of course, they could be giving a lot of explanations or excuses on how it shouldn't be compared together. 

Nevertheless, do you know that the price is almost equal to the median monthly income of Malaysian based on the latest survey in 2014 by Department of Statistic Malaysia? It could easily costs more than a month of salary for most of the young Malaysians especially the fresh graduates. But why would they still buy it? Instant gratification? Peer pressure? Keeping up with the Joneses?  

Malaysian Monthly Household Median Income : RM4,585 

Taken from http://gstmalaysiainfo.com/

Taken from http://gstmalaysiainfo.com/

What You Can Invest Instead of An iPhone 6s?

For whatever reason it is, here's a list of What You Can Invest Instead of an iPhone 6s! Let's follow the life cycle of wealth namely, wealth creation/accumulation, wealth protection and wealth preservation/distribution.

Wealth Creation/Accumulation

Invest RM3,000 in Private Retirement Scheme (PRS)

Wake me up when September ends, yes it is the last quarter of 2015. Which means it is time to invest in PRS for the sake of RM3,000 tax relief for YA2015 as well as a small contribution to your own retirement fund. And if you are the first timer and below 30? Bingo! Government will top up for you the youth incentive of RM500! (Read More)

Invest in Unit Trust Fund
Based on the statistics from Securities Commission  Malaysia, currently there are 641 approved unit trust fund from 37 asset management companies up for you to choose! Unit trust fund is a very popular investment vehicle as it is quite affordable where you could invest as low as RM100! You should not be surprised that there are 17 million of accounts out of 30 million of Malaysia population. Total net asset value (NAV)? A whopping RM340.6 billion! (Read More)

Invest in Shares
Prefer to trade on your own? For RM3,000, you can open a trading account at any brokerage firm. Using your own money to buy shares will let you experience the pain and joy and of course greed and fear of investing (trust me the emotions that you will go thru will be a lot more than what iP6s could offers). One simple strategy is to act like a boss to buy a company that you are familiar with. (Sunway, BJTOTO, STAR, COCOLND, NTPM, PADINI and so on)

Wealth Protection
Buy or increase life and medical insurance coverage
Insurance plays a major role in wealth protection in term of transferring your risk, be it for yourself (critical illness and TPD) or for your family to sustain the living expenses (death). Don't be surprised as it is getting very common that people buy a million dollar of coverage, especially those with high debt on their own house.

Wealth Preservation/Distribution
Set up a will or trust
Be it to distribute your estate efficiently or minimize taxes on your estate, a will or a trust is a good start for your estate planning. With RM3,000, it is more than enough to write a comprehensive will or even set up a private trust with more than 30 clauses. You would want to ensure you and your family can maintain the lifestyle you have worked so hard to establish and eventually distribute to them and their heirs. Make a difference in lives that follow!

Invest in a Financial Plan
Creating, accumulating, protecting, preserving and distributing wealth can bring a sense of freedom and accomplishment in life. But financial success does not happen by chance, a lot of sound decision making, a plan to achieve your financial goals as well as the discipline and commitment to revisit your plan throughout life as circumstances and priorities would change. Depending on your annual household income, but RM3,000 is more than enough for most of the people in Malaysia. So, begin with the ends in mind, start with a financial plan! (Hire #YourFinanceDoctor)

So unless your current phone is not working anymore, otherwise it would be wise to practice delayed gratification and like the saying goes, the best thing in life is always worth waiting for! Bottom line? #YourFinanceDoctor always in support of...

To put it simply...

Don't wear a big hat without a big head! 

Cheers & happy investing!

Invest with Your EPF!

Recently with all the news related to EPF such as the Proposal of delaying full withdrawal age from 55 to 60 and even the EPF investment in 1MDB, many people have raised their concern towards EPF. Well, regardless of the speculation, here's one thing you should know - Members' Savings Investment Withdrawal. 

What is Members' Savings Investment Withdrawal?

You are actually allowed to withdraw a portion of your savings from Account 1 in EPF for investments with the intention to increase retirement savings. But the investments are only limited to funds that are approved by the Ministry of Finance. (Here's the list of Approved Funds)

How Much can I Withdraw?

You could withdraw not more than 20% of savings in excess of the Basic Savings in Account 1. For the Basic Savings, it increases with age starting from RM1,000 at age 18 to RM196,800 at age 55. Refer to the table below.

Example for Clearer Illustration?

As long as your Account 1 Savings is more than the Basic Savings by minimum RM5,000, then you will be able to withdraw that 20% of excessive amount to invest.

Lazy to do calculation your own? Use this online free EPF calculator.

How Frequent can I Withdraw?

Funds can be withdrawn every three months as long as the balance in Account 1 exceeds your Basic Saving requirement. The three months interval is calculated based on the warrant date given by EPF. 

Can I Take Out the Profit?

No. All the amount withdrawn including the profits are required to return back into Account 1 once the funds are sold. After all, the objective is to maximize the retirement savings. 

Conclusion:

With the minimum basic savings and 20% requirements, the margin of safety is actually quite high. As long as you stick with the investment objective, whereby to maximize your retirement savings, then it should be fine. Bottom line, always invest in funds that generate higher return than EPF (2014 = 6.75%), otherwise what's the point of taking out right? 

To find out more about it, feel free to contact me at henrytcx@gmail.com

Earn, Save, Invest, Repeat!

Till then. Happy Investing! ;)

Start Invest As Low As RM100! Now Everyone Can Invest!

Many people have always thought that one would need a lot of money to start investing. But, contrary to this common belief, investing is not just for the rich people. In fact, it is in investing that could make one rich! Yes, I'm talking about.... 

Start your investment as low as RM100 only!  

This is important, especially for those who just started to work and thinking where your salary could goes to. So instead of putting into your bank saving account with very minimal of interest that barely able to counter the inflation, why not making a regular saving plan in Unit Trust? (Provided that you already have an emergency fund of 3 to 6 months of salary)

Snowball Effect

Snowball Effect is where you invest a small amount of money regularly, eventually the small amount of money will gain in size and momentum and ultimately leads to exponential growth. Of course, this would required discipline to maintain and keep going the good habit.  

Compounding Effect

Apart from investing regularly, reinvesting the gains from your investment is important to grow it even bigger with the Compounding Effect. Take a look at the chart below, 30 years down the road with RM100 monthly, without taking out the interest or gains, the difference could be as big as RM47,000! 

Delayed gratification is needed for this the power of compounding to take effect! 

You gotta resist the temptation for an immediate reward and wait for a later reward. 

Nevertheless, the rates of return is important as well if you wish for a bigger difference at the end of the period. With a 15% of compounding interest, the return could hike up as much as 10 times of the return of 3% interest return. It is all depending on how much you want at the end of the day and how much risk you could take! 

Dollar Cost Averaging Effect

Regular Savings Plan actually utilizes the Dollar Cost Averaging Effect principle whereby investing a fixed amount of money regularly will eventually resulting an average price, regardless of the market up or down. Good thing about it? You do not have to time the market on how to buy low sell high! Nobody could do it correctly every time anyway. Without the emotions involved, mentally stress and wrongful decision could be avoided. 

Start NOW Effect

YES you gotta start now! Every year you waste, there will be an opportunity cost for the procrastination. Look at the example given in below table, Investor A and Investor B invested the same amount which is RM6,000, but Investor A started 5 years earlier than Investor B. 10 years later, Investor A richer than Investor B by RM3,568! 

Investor A : RM6,000 -> RM11,171 -> 86%!

Investor B : RM6,000 -> RM7,603 ->  27%!

Okay, at this point you may feel that RM3,568 is nothing right? But do remember that the amount you putting in is just RM100 per month. The more you put, the more you get! So the percentage of 86% is more accurate to tell the return!
RM1,000 per month? That would be RM35,684! 
RM10,000 per month? That would be RM356,836!

How?

Invest regularly in unit trust as low as RM100! Yes, you may just start RM100 per month as initial investment! No commitment on how long it has to be as well! A total of 202 funds available from different fund houses via iFAST. All you have to do is just contribute thru your bank cash account Direct Debit Authorization (DDA) or Financial Process Exchange (FPX). Need no worry as there is no processing/administration/transfer cost. 

Now everyone can invest! 

For more information or if you wish to invest, feel free to contact me at henrytcx@gmail.com

Till then. ;)

Earn, Save, Invest, Repeat!

Can Bond Fund get 13.4% Annualized Return a Year? - AMB Income Trust Fund (AMBITF)

Recently there's people talking about AMB Income Trust Fund (AMBITF) getting an annualized return of 13.4%. As we all know, bond fund is usually lower risk with lower return. But an annualized return of 13.4% is almost as good as the performance of equity fund. So the question is

Is it possible?  

Before explaining, let's have a look at the fund itself. 

AMBITF - source from iFAST

From a scale of 0 to 10, AMBITF belongs to the lower risk of 1, which under the Asset Class of Fixed Income. According to the risk rating, "1-Lower Risk" means fund that invest mainly in Malaysia bonds with limited foreign currency exposure are exposed to interest rate risk. 

So is it possible to get annualized return of 13.4%?

AMBITF - source from iFAST

Yes, AMBITF could get it! In fact, if you look at the total return for each particular, surprisingly most of them are above 10%. 

But, the next question we should ask is why?

Things happen for a reason and we should always find out why, especially when it is too good to be true. Of course, in this case, it is true! But let's see why! 

AMBITF - source from iFAST

Above is the comparison with some other Fixed Income funds.

Risk Rating 1 : AMBITF, AmIncome Plus, KAF Enhanced Bond Fund

Risk Rating 2 : Eastspring Investments Bond Fund, AMB Dana Arif Class A-MYR, KAF Bond Fund

Looking at the graph, you would noticed that AMBITF climb the highest with a few surges, while all the other fixed income funds are climbing at almost the same pace with some doing slightly better. This is where we should begin to be suspicious! So here it is why!

AMBITF Annual Report

If you from read from the annual report, you would noticed that the high return of AMBITF actually contributed by the recovery of defaulted quoted fixed income securities. Tracked back to previous year annual report, AMBITF is actively engage with the defaulted issuers, namely, Kerisma Berhad, Intelbest Berhad, Tracoma Berhad and Ace Polymer Sdn. Bhd. 

How long can it last? 

Again, after finding out the reason, of course we would want to know how long the write-backs would last or can the high return maintain and continue for a few years? From the annual report, the AMBITF management team stated that they will continue to engage actively with the defaulted issuers and take necessary actions, in order to improve the recovery of the defaulted bond. Unfortunately, recovery of defaulted bonds are usually not guaranteed and the recovery rate is not certain as well. So we might not know how long it could last. 

Conclusion?

Lesson #1: Always find out the reason! 

Lesson #2: Always know what you are buying!

Lesson #3: Always know the risk that you are involve in! 

#yourfinancedoctor is just a sharing and doesn't indicate if buy or not on a particular fund. 

Till then. ;)

Earn, Save, Invest, Repeat!