Put in after divvies. Divvies get taxed @25% by our beloved Bolehland govt.

Xuzen

I've just make a bet with 2 of my buddies who are a bookies whether it will rain or not in a weeks time. So how to determine whether it will be rainy or sunny. I made the bet last week. How will my profit look like. Please give me your expertise advice and thank you.

Xuzen

Puny/Tiny/Miniscule/negligible investment will get taxed a few pennies.

Xuzen.

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Added on January 28, 2011, 5:43 pmReason being unable to provide serious/tangible/intelligent answer to your earlier question:

i) You did not specify which two funds.
ii) How long have you invested?
iii) When was your entry date?

Xuzen


This post has been edited by xuzen: Jan 28 2011, 05:43 PM

The next best bond fund in terms after the closure of PIBOND & PBOND is PSBF. I am saying this from the Sharpe Ratio point of view.

Xuzen.

Sharpe Ratio named after Prof William Sharpe (a Nobel laureate) is simply Rate of return divided by the Standard deviation of the fund over a specific period of time.

S = (Ri - Rf)/SD

where
Ri = Rate of return
Rf = Rate of return of a risk free rate asset class
SD = standard deviation of the fund over a time, t

Xuzen

Sharpe ratio for past 3 year period for
i) PB Islamic Bond (PBIBF) = (7.24 - 2.86)/2.70 = 1.62
ii) Public Islamic Select Bond Fund (PISBF) = (4.67 - 2.86)/1.80 = 1.01

The higher the ratio the more risk adjusted better performing the fund.

So PBIBF is a good one that is still open for subscription. Kindly take a number and queue up at your nearest Public Bank to subscribe.

Xuzen

Endowment plan is down the road kid...from an insurance company. You've knocked on the wrong door, sonny.

Endowment's usual IRR is in the region of 3-4% p.a. Wrong product if you're looking for 7-8% rtn.

If you are conservative and looking for 7- 8%,

then...

take a high beta fund with volatility >20 %SD percentile it to abt 50% mix it with 50% low beta fund such as bond with volatility 3%% SD you might get a low/comfortable beta around 10-15% SD with a rtn of 7-8% . Mix and match with it until your happy. (If you think I am talking nonsense...)

then...

just buy a balanced fund; sit back & enjoy the journey to retirement.

Xuzen

No. Since I am an agent of PBMutual, PBIBF will not give me any commission, it is not justified for me to go PBIBF.

Xuzen

Folks,

pay the 5.5% (this is the renumeration) to the fund manager for looking after the money.

If you are unwilling to fork out that much, then

be an agent yourself and buy at agent price or (2.75%)

use KWSP money (initial charge cap'ed at 3%)

or if you are an UTC then you are paying 1%.

Is that music to your ear?

Xuzen

Must be the Portugal re-rating effect. Portugal cannot meet their debt obligation and is asking Godfather (aka EU) for a bail-out.

Xuzen.

Annualized compunded return formula is (425)^1/10. Not 425/10.

Xuzen

Let's go back to Unit Trust Basic 101:

Lets say 10 investors pay a company (e.g Public Mutual) RM 1,000.00 each. Hence the total fund size is RM 10,000.00 and PubMut will take a 5.5% commission which leaves RM 9,478.67 to invest in various stocks. To make things easier, PubMut will assign a arbitary unit lets say 1 unit = RM 10.00, so investor has 100 units now and each units Net Asset Value, NAV (at the time of inception) is RM 9.4787

Lets say the the basket of stocks increase by 10% (inc dividend received from the stocks) in one year's time, then your total fund size becomes RM 9,478.67 + 10% = RM 10,426.54 and its NAV becomes RM 10.4265.

Lets say at the Pub Mut decide to give our RM 200.00 as dividend. So each investors get RM 200.00/10 =RM 20.00 as dividend. So the total fund now becomes RM 10,426.51 - 200 = RM 10,226.54 and the NAV drops to RM 10.2265.

So you see, declaring dividend or not, makes no difference... your NAV is reflected accordingly. It only increase cost as more paperwork such as postage for sending cheques and issuance of cheques. All these incurs cost which will be deducted from the fund.

Sometimes, Pub Mut to attract new investor may split the unit to make the NAV smaller. So for example Unit Split 1 for 2 means 1 original unit will become two. So the original investors who held 10 units will now have 20 units but the NAV now will be RM 10,2265/2 = RM 5.1132. Please note the total wealth is still the same. It is all playing with numbers.

So now, after one year, Pub Mut will take 1.5% some more from the collective fund for administrative charges. Hence the fund now becomes RM 10,2265.54 - 1.5% = RM 10,073.14. Hence the NAV now becomes RM 10,073.14/200 = RM 5.0366.

So dear investors, if you do not wish that your investment, the minimal your fund manager must increase your fund by 1.5%.

Some ask, how much savings you get if you are the agent yourself?

Out of the 5.5% Pub Mut will pay half of it to its agents. So if you are the agent yourself, you save 2.75%.

And there is an annual RM 100.00 reccurent license fee which is paid to FIMM (Federation of Investment Managers which is the governing body for Unit Trust Agents).

Look out for Unit Trust Advance 202 in my next posting.

Xuzen

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Added on May 21, 2011, 3:11 pmAnd my next posting will try to answer some of the question posed to me by a fellow forumer in my PM inbox. So here's looking at you kid.



This post has been edited by xuzen: May 21 2011, 03:11 PM

Unit Trust Intermediate 202:

i) Basic Return = ([Exit Price - Entry Price - Initial Commission]/ Entry price) x 100

ii) Exit price, FV = (1+i)^n
n ln (1+i) = ln [Exit price]
From this equation, you can solve i, which is the annualized rate of return. The higher the i, the better the rate of return.

iii) Funds will have volatility, i.e, how much they swing away from their average mean (average). This swinging away is called Standard Deviation and is calculated by this formula SD = (Sum of variance squared)^1/2. The higher the SD, the more volatile is the fund and is deemed more risky. Lower SD means lower risk.

iv) Total return is not the total answer. We have to take into account how risky the fund is as well.
Sharpe Ratio is the measure of the Return of a fund in a risk adjusted environment.
Sharpe ratio, S = (Rj - Rf)/SDj. Where Rj = Rate of return in a period of a Fund J, Rf = Risk Free Rate of return. SD = The Standard Deviation of the Fund J.

A higher Sharpe Ratio is more desirable compared to lower one. However, this Ratio can only be compare btw funds of similar class. I.e., only an equitiy sharpe ratio can compared with another equity fund, not with another bond fund.

v) Jessen-Alpha ratio, J-A-R attempts to quantify how well that a fund perform that is not conrtributed from market perform.
JAR = Rj - Rf x [Betaj(Rm-Rf)], Rj = Return of Fund J, Rf = Risk Free rate of return, Rm = Return of the benchmark & Betaj = Beta of the fund J. Beta is another mathematical coefficient to measure volatility.
So a JAR that is positive mean that the fund manager created wealth and if negative meant that the fund manager loses wealth.

Look out for my Unit Trust Advance 303 for more advance knowledge on Fund Selection.

Xuzen

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Added on May 24, 2011, 5:16 pmUnit Trust Advance 303:

i) I mentioned that Sharpe Ratio is a measurement of Fund performance that is only comparable btw funds of similar type e.g. An 100% equitiy based fund vs another 100% equity based fund. Therefore a Sharpe ratio of PIBOND although is higher than PAGF, but comparing them would be meaningless, because you are basically comparing apples and oranges.

So many a times, investors have only a finite resourses and they would definitely get the best out of their money. So what sould an investor do?

Along came Franco & Leah Modaglini from Morgan Stanley and this dynamic duo produced a formula known as Modiglini-Modigliani (Mx2) ratio or its formal name Risk Adjusted Performance Ratio to dispel this dilemma.

Mathematically:

RAPj = Rf + [SDm x Sj]
where:
RAPf = Risk Adjusted Performance of a fund J
Rf = Risk Free Rate (e.g 10 year MGS)
Sj = Sharpe Ratio of the Fund J
SDm = Standard Deviation of the benchmark

This ratio will bring the different funds along the risk spectrum to common ground. Basically RAP allows investor to evaluate funds as comparing apples with apples; oranges vs oranges.

So if you as an investor have a finite amt of money, you would definitely get the best bang for your buck, hence you want to select a best performing fund but at the same time exposes to the least amt of risk.

On a last note, portfolio optimization is function that analysis / financial planner/ fund manager uses to optimize the return with the appropriate risk exposure. It is too tedious to do by hand and one needs to have specialized software to do it. Not available to lay investors.

Xuzen

P/S just a quick note, some investors want to beat the market. While it is fun and a enable one's bragging rights during some party, it is on the long run, proper asset allocation and optimized portfolio that will be a true winner. Unfortunately, this is a very boring and dry subject and make lousy conversation topic.


This post has been edited by xuzen: May 24 2011, 05:20 PM

What sort of UT is that, can't even get a basic fund name correct. Debbie, be afraid, be very afraid.

If Public Saving Fund, then yes, it is one of the better risk-adjuster top performer in Public's range of fund.

Its ratio (jessen-alpha and sharpe ratios) are ranked quite high among funds of similar type.

Xuzen

Sell on good news, buy on doom & despair...

Xuzen

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Added on June 3, 2011, 4:37 pmWhy are you taking out your FD to put into fixed income fund? Makes no sense..

If you have no time to monitor, Regular Saving Plan is the best.

Just be a passive investor and continue to generate income from where you know best i.e. your healthcare industry.

Xuzen.

This post has been edited by xuzen: Jun 3 2011, 04:37 PM

That is why lar... who ask you to put all in equity funds?

If you have asset allocated based on your risk profile and objective, you would have minimum losses.

Xuzen

Balanced fund = a portion into equities + a portion into fixed income.

What my upline said to me, balance fund is neither here nor there. But you still pay 5.5%

Lets say you invest RM 1000.00 into Public Balance Fund, you pay RM 55.00 as sales charge.

If you were to invest RM 500 into Public Equity Fund, you pay RM 27.50 sales charge.
Then you invest RM 500 into PBond, you pay RM 2.50 sales charge. Total sales charge = RM 27.50 + 2.50 = RM 30.00
and yet you still get your Balance Fund, whilst yet you save RM 25.00.

In the simplest case, a portfolio should contain different asset class. Some example include Equities (e.g. PISSF, PSSF, PRSF, PSF) and Fixed Income (e.g. PBOND, PBSF). What percentage of it will depend on your objective, your time frame, your risk profile.

If you are a little bolder, you may want to expose equities into different region like China, Aust, SG, Emerging Mkt or properties/reits (PRSECF).

The theory of asset allocation is that different asset classes are uncorrelated and if one tanks, the other maintain and hence your total portfolio still remain strong and on target towards your goals.

Now, on my next topic abt saving on charges.

If you rely on agent, you will need to pay them commission... period. If you want to save on it, then do without one. How?
Method 1: Be your own agent. Get yourself licensed by FIMM to be an agent and you can save on the commission.

Method 2: Go through DIY fund distributor like FundSupermart where they do not have any agent. You pay initial charge like 2 - 3% instead of 5-6%

Method 3: Invest using KWSP money. KWSP agreement with fund houses is that they can only charge you a max of 3%. If you are a super smart saver, you become a UT agent and only invest using KWSP money, your charge drops to only 1%.

As for me...

I always maintain a Fixed Income (PIBOND, PSBF) portion of between 60 - 50% of my portfolio because I am a moderate risk taker. The rest are in equities (PRSF, PFES)

So when KLSE turn south, my PFES will hold it up. Like now PFES turn south, my PIBOND, PSBF and PRSF holds up my whole portfolio.

Despite this, I also allocate another chunk of cash to be managed by Lic Financial Planner because I want to have a professional, unemotional party to handle my money as well.

Xuzen

I've received my dividend statement aka tax voucher about two months from the date of dividend announcement. Not PIEF, but another PM fund.

Xuzen

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Added on July 5, 2011, 12:48 pmIf you are investing for long term (10 - 20 years time horizon) , then all these minor up and downs are quite irrelevent. Better to invest regularly in comfortable amt whilst choosing a fund that has optimum risk adjusted return.

What is risk adjusted return? Buy The Edge on Sunday, turn to the Normandy Fund page. Look at the fund's 5 year average Sharpe Ratio. Choose the one with the highest rank.

Got to sleep, collect your bounty at the end of your time horizon. Periodically review your fund (once a year or biannualy should be sufficient).

Xuzen

This post has been edited by xuzen: Jul 5 2011, 12:48 PM

Is there a place where I can view which PMut fund is close or open? Their Homepage doesn't specify which fund is open or close?

Xuzen

thx

Xuzen