Jean’s

Ok. Here come another common misconception of Unit Trust Investments, or perhaps I can say a commonly used selling line of fellow consultants – ‘invest in this fund because it is distributing dividend by month end’.

In fact, I just met up with a potential Public Mutual Gold investor whom is well pleased with his existing consultant mainly because the consultant offers the service of advising him on which fund to invest in based on the dividend distributing timing. I must mention that this investor’s investment objective is to withdraw the dividend as his pocket money.

So, is this a good idea?  

Well, it surely is a good selling line - “Hey, you put in RM 10k today, you will make RM1k from dividend distribution (assuming a 10% distribution declared) by month end. “ Sound great!

But the point is, is it financially beneficial to the investors by advising them to invest into a fund just days before the distribution declared? 

(more…)

Often we hear investors favoring one fund over the other simply because of its cheaper price. They think that a cheaper fund has a greater potential for capital appreciation.

Unfortunately, this is a misconception.

One should not confuse its actual value based only on the price of shares and unit trust.  For shares investment, the price of a particular share may reflect it value, especially when considering certain other factors like its PE ratio, etc. For e.g., for Genting shares, investing at RM 5 is of better value than at RM 8.  However, for unit trust investment, the price of a unit trust at a particular time does not indicate relative value in the same way as stocks.

Perhaps we should start off with looking at how the price of a unit trust is derived. The price of a unit trust is normally known as NAV (Net Asset Value). Technically speaking, it is defined as the market value of the unit trust’s total assets, minus liability/expenses, and divided by the number of units issued. We can see how NAV is calculated using a simple example: -

Total asset of the fund = RM 10 billion Total number of units issued = 50 billion NAV (Net Asset Value) = RM 10 billion/50billion = RM 0.20 per unit

(more…)

I was reading a fellow blogger’s concern on his falling unit trust investment value.

I can understand how disappointed he would have felt.

Last year, while the market was vibrant and at her all time high, was a great year for investments. Due to most bourses hitting all time highs, unit trust companies delivered very good results which boosted the excitement levels of investors. Many investors may have made quick money from unit trust investments last year. The side effect? - a great level of optimism brings forth a greater level of disappointment.

More so, such optimism and excitement has caused many investors to lose sight on the underlying principal of unit trust investments.

So, why not stay calm and re-look the objective of us choosing unit trust investment in the first place: - (more…)

Since starting out, I have encountered many investors asking me what funds to choose from, and most of the time, they just go along with the choices recommend by me. Well, can’t really blame them, given the many choices offered in the market which could be confusing, and afterall it is indeed my job to recommend suitable funds based on their investment objectives.

So, I have been meaning to write about the factors one should consider when it comes to choosing your unit trust products/funds.

First, we need to understand the concept of Risk vs. Reward Spectrum.

When considering which unit trust fund suits your investment goals, you need to remember that the greater your need for higher returns, the more risk you’ll have to accept.

If your goal is capital preservation, you should choose a conservative fund, accepting the lower anticipated total returns. If you decide you’re willing to take a higher level of risk, you may be more interested in an aggressive fund, perhaps resulting in a better long-term return but also entailing greater risk of a loss.

Examine the fund’s prospectus for information about risk factors associated with its investment strategy. Also, consider how the addition of a specific new fund may affect your portfolio’s overall risk.

The information offered by the article below might help you to identify the types of funds best suited to your particular investment objectives:-

____________________________________________________________

 

Investor Education

 

(i) Asset Allocation

It’s easy to get caught up in the day-to-day headlines about what’s happening in the stock market. And where the “experts” say stocks are headed. 24/7 financial news offers investors benefits. But it’s a drawback when investors become confused or lose perspective. Investment success requires discipline and a willingness to focus on long-term objectives. It’s important to keep the big picture in mind.

Asset allocation is critical for building a successful investment strategy for most people. In simple terms, it involves spreading your assets among several different investment options. Asset allocation can help you minimize risk in your portfolio when market conditions are uncertain. And it may increase your long-term potential for returns.

What is asset allocation?

It is an investment strategy that seeks to balance risk and reward in your portfolio by spreading your investment dollars across several different types of investments for potential financial gain.

A well-balanced portfolio is the key to achieving your investment goals.

What investment strategy is right for you?

A personalized strategy may help you weather all kinds of market conditions and keep you on track to meet your financial goals. Compare risks and returns for each option. Then, consider questions like these when talking to your financial advisor:

• What are your financial goals? Are they long-term or short-term?

• Are you seeking growth or income?

• When will you need the money?

• How much risk can you accept?

• What are the tax implications?

Things to Keep in Mind:

• Asset allocation is the way in which you spread your investment portfolio among different asset classes, such as stocks, unit trust funds and bonds

• When prices of different types of assets do not move in tandem, combining these investments in a portfolio can help reduce the variability of returns, commonly referred to as “market risk.” For eg, when equity market moving downward, often the bond market will be on upward trend.

• Unit Trust funds are pools of securities, usually offering diversification within a single asset class. Some unit trust funds may include several asset classes.

• The asset allocation that is right for you depends on your investment time frame, goals, and tolerance for risk.

• As your investment time frame and goals change, so might your asset allocation. Many financial experts suggest re-evaluating your asset allocation periodically or whenever you experience a milestone