Pub-Mut business model gets chanllenged more and more as the days pass by.

I pity those who still want to get in.

Imagine in future zero percent sales charge.

What will the Pub-Mut UTC do then?

--------------------------

No need to see too long into the future, I know for a fact that Pub-Mut will charge 3% for PRS scheme, where the PRS-UTC will get 1.5% commission.

Some Service provider are thinking zero sales charge.... I wonder how will Pub-Mut PRS-UTC counter this chanllenge?

More NSC trip? Free gift? Lucky draw? Cash back?

Xuzen



This post has been edited by xuzen: Aug 13 2012, 08:04 PM

Yes, I am a Pub-Mut UTC mainly to access the internal data for better decision making (e.g. Fund beta, Standard Deviation) and to save on Sales Charge.

I use Pub-Mut for KWSP funds since I get sales charge of only 1% after deducting the agent commission. This is still bearable IMO.

Mois, I have been using the Multi-Fund platform such as FSM since 2008 mainly for cash investment because I will never pay 5.5% for SC.

In the near future once I get my CUTA license, I will be looking at zero sales charge.

Xuzen

Corporate Unit Trust Advisor....one license to sell them all.

Xuzen

If you buy from bank, the bank earns the comission.

If buy from an agent, the agent earns the comission.

2) won't answer coz too many variables.

3) Yeah, wait after election if you are thinking about local funds per se.

Xuzen

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Added on August 14, 2012, 3:56 pmHe he he WMK is quick to notice my parody.

Anyway, I have access to Pub-Mut fund data, FSM's data and soon.... to add to my little collection, Phillip Cap's internal data for better data comparison.

Xuzen

This post has been edited by xuzen: Aug 14 2012, 03:57 PM

And don't foget... the ZERO sales charge, is that attractive enough? Also off-shore funds. Labuan anyone?

and and and not to mention....

Very low cost Mega-index funds like Vanguard S&P 500. How does 0.1% annual management fee sound to you? Still want to pay 1.5% AMF?

Xuzen

This post has been edited by xuzen: Aug 14 2012, 04:11 PM

Step 1: Get the required academic qualifiation e.g. CFP, RFP, ChFC

Step 2: Get minimum 3 years relevant working experience in the financial industry.

Step 3: Apply to Sec-Com for CUTA lic.

Step 4: Sell them all.....

Xuzen

Lulz @ -baby.

Xuzen

This post has been edited by xuzen: Aug 14 2012, 06:10 PM

The operative word is the "IF". If the Fund manager return an alpha greater than benchmark fine and dandy to me as well.

However, the operative word is can the Fund manager consistently return an alpha greater than its benchmark? If yes, can its risk be lower than that of the benchmark consistently?

It was this question that prompted John Bogle the fund manager to set up this ultra low cost fund that utilizes passive investing.

Also, if you have read A random walk down Wall Street by Burton Malkiel, the author also come to the same conclusion.

I also have another book All About Index Fund by Richard Ferri in my personal library which also advocate low cost index fund for investor.

On a parting note, I agree that low AER is not the only parameter for choosing a fund, but it does play a part. For me, it plays a big part in choosing a fund. Why the heck you think I become an agent if not to reduce the cost of investment.

Also, by being CUTA, I have access to off-shore funds where the AER is much lower and zero sales charge.

I am first and foremost an investor, hence I think like an investor, not as an agent.

Xuzen.

This post has been edited by xuzen: Aug 14 2012, 09:54 PM

The "IF" I said was in reference to your own writing at post #44 of this thread. He he he... sometimes in the internet, things get lost in translation.

To me, Profits is related to trading. You buy low, sell higher and the excess you call it Profit.

In investment, there are other parameter to consider such as the excess return (alpha) above the benchmark taking into consideration the function of co-relation between the fund volatility and that of the benchmark (aka beta).

I do understand the function of PROFIT, but the question is, do you?

Profit is a function of sale minus cost, and if you do not care about cost, you are missing a parameter in the equation. Since cost is positively co-related variable in the profit equation, you lower the cost, the better your profit.

Random who, alpha what... these are financial articles written by award winning authors and they usually have something worthwhile for investors to ponder upon.

Lastly, you want to show me some funds with low cost and losses? Go ahead, I am all ears. Give me also their benchmark return and their corresponding beta vs their benchmark so that I can make objective evaluation. Thank you.

Xuzen

i) PIDF > PDSF

ii) Leave PIADF as it is.

iii) Switch the China Funds and PFEDF to Public Far East Properties and Resort Fund (PFEPRF) or into PIADF.

They are better performing fund without sacrificing your diversification much.

Xuzen

Yay, at last we have some numbers to play around:

i) I prefer option 2 because Profit/sale x 100 = Profit margin. Hence 10/11 x 100 = 90.90% profit margin versus you little puny tiny 90.00% margin. LOL at you.

Not very financial literate are we?

Young padawan, too one dimensional one is, more knowledge one acquire should.

Xuzen

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Added on August 16, 2012, 11:23 amSwitch lump sum from China funds to cut loss first, thereafter DDI to the better fund to reduce volatility.

DDI does not reduces the payback period (aka Break-even), it only reduces the volatility (aka investment risk).

Look after the risk yourself and let the return take care of itself - quote from some investment guru I read somewhere, not sure who, could be W. Buffet.

Xuzen

This post has been edited by xuzen: Aug 16 2012, 11:23 AM

If you have moderate risk appetite, go for PIDF.

If you high risk appetitie, go for PFSF.

PRSF was a good performing fund, but the above two has out-perform PRSF.

The above are the funds under my radar currently.

Xuzen

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Added on August 17, 2012, 12:35 pmOh Howzat, you are darn good ...... at shifting the goal-post to skew your argument eh, brudder/sistah! You have a bright future as a sleazy politician.

OK, let'e put more realistic case under scrutiny:

Lets say two imaginary funds called Howzat's Sangat Shiok Fund and Xuzen Tahan Lama fund.

i) Sangat Shiok fund have a AER of 1.5% p.a. and guarantee a minimum return of 10%, and anything above that the fund manager will take a 20% performance fee. (Very typical of hedge fund)

ii) Tahan Lama fund is an idex fund with a AER of 0.1% and will market perform, and its objective is not to out-perform the benchmark.

Lets say both fund start of on 1-1-2012 with RM 100Million and on 31-12-2012 (one year later) Sangat shiok has a NAV of RM 120M (20% return) and Tahan Lama has RM 107M (7% return)

For ease of calculation, lets calculate the AER as on 31-12-2012.

Sangat Shiok AER will be RM 120M x 1.5% plus (RM120M-110M) x 20% = RM 1.8M + RM 2.0M = RM 3.80M

Tahan Lama AER will be RM 1.07M x 0.1% = RM 0.107K.

So the actual return net of fees for Sangat Shiok is RM 120M - 3.8M - 100M = RM16.2M

For Tahan Lama actual return net of fee is RM 107M - 0.107 - 100M = RM 6.893M

The profit margin for Sangat shiok is 16.2/120 x 100 = 13.5%

The profit margin for Tahan Lama is 6.893/107 x 100 = 6.44%
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Now lets see how the funds turn out when the market down-turn.

Sangat shiok, dropped 20% and the NAV at end of one year is RM 80M.

Tahan lama dropped 7% to RM 93M

AER for Sangat shiok = RM 80 x 1.5% = RM 1.2M;

AER for Tahan Lama = RM93M x 0.1% = RM 0.093M

Hence the loss margin for Sangat shiok = RM (80M-1.2M-100M)/100M x 100 = negative 21.2%

As for Tahan Lama = RM (93-0.093-100)/100 x 100 = negative 7.09%

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So we can conclude that if you do not care about AER and only profit, you will have champange, song and women during the boom time. But when it is bearish environment, you will have none of these.

But if you keep and eye on AER, your capital is greater protected.

Xuzen

This post has been edited by xuzen: Aug 17 2012, 12:35 PM

No problem Howzat,

We are here to share experiences and opinions. Should it does not benefit you, I wish other silence reader may benefit from the information presented.

I wish to comment a little on your bolded and red-coloured statement:

The uncertainty of IF can be greatly mitigated when a prudent investor has datas such as AER, the fund volatility, knowing one's risk appetite, the benchmark one is measuring against.

Put them into established equation, and compute it. Then compare amongst its peers and select the best risk-adjusted performing funds.

By doing so, it allows the prudent investor to beat the market consistently over time.

Xuzen

Which part do you not understand?

Xuzen

Kparam hit it right. So Debbie, do you understand now?

BTW Kparam, it is xuzen, not xuxen... it is pronunced Susan, actually my wife's name.

Cherroy, UT is a collection of individual stocks and the formula for the portfolio risk aka variance is (W1.R1+W2.R2+....Wn.Rn)^2. Where W is the weightage and R is the stock return.

When you expand the equation, the Std Dev is average of all the weighted components. This is to prevent one from picking the losers but also it prevent one from picking th winner. Hence, from a risk management point of view, this risk trade off with return is an acceptable gamble.

On one hand, the fund manager for Pub-Mut China esp PCSF fund should be dragged out to the courtyard, shot, hung, drawn and quartered (an English Idiom) for the cold blooded murder of their fund. How can one, when actively managing the fund, perform below the benchmanrk i.e. the baseline. Stupid fund manager.

Xuzen

To continue on the topic of risk, this is mainly for the newbie (warning: academic stuff ahead):

Risk can be classify into specific and non-specific.

Specific risk can be diversified out. E.g, you hold Nestle and Genting share in equal portion.

For argument sake, should Nestle being sued because the Ministry of Health found traces of Melamine in their Maggie Mee range. The price drops by 50%, but your Genting share will not be affected. That is call diversifiable risk aka specific risk.

Now, lets say, an earthquake happen and the Genting Resort and Nestle factory got severly damaged... both their stock falls by 50%, this is non-specific risk and you cannot diversify it.

However you can diversified the the earthquake risk by say buying Nestle stock in Zurich stock exchange and Genting Singapore. So what happens in Malaysia will not volate your portfolio.

So, now we expand a little... lets say you buy a mutual fund consisting of 30 major stocks in Malaysia, another mutual fund that consist of 500 stocks in the US, and a bond fund consisting of Euro dominated bonds. Now you are seriously diversified and your portfolio risk is lesser than the individual asset class. Should Euro bond drops, your portfolio is supported by Malaysia stocks and vice-versa.

Should the unfortunate happen i.e., M'sia stock, US stocks and Euro bond drops simultaneously..... than it is called non-specific risk which you can do nothing about. But for that to happen is quite rare.

Just my lil'lecture on risk.

Xuzen

Yeah, I am still baffled on how the PCSF fund manager could perform worse than the bench-mark.

It is not hard to beat the market. This is what I would do. Take the largest 30 cap stock from the various sector. Then another 30 counter in smaller cap. Your portfolio should have 60 stocks. According to the academias, by 60 stocks you would have diversified all your specific risk away. Then perhaps add 10 percent of the remaining portfolio in some money market instrument to stabilize the whole portfolio.

Tadaa... superior portfolio.

Xuzen

This is my take:

If you want to keep this new client for long term, you can redeem the all the pub-mut funds, and when you buy into your own fund house funds, refund to he clinet all the initial sales charge for this first round. Client will be very happy and will follow you gladly.

You still make from the trailling com and subsequent buy in.

Xuzen

PI INCOME
PISBF

Both around 5% p.a. and has little volatility.

Xuzen

0.42% brokerage fee if using online, (RM 28.00 min per transaction), 0.03% clearing fee and 0.1% stamp duty.

Total = 0.55% per transaction.

Still cheaper than 0.75%.

But if you switch after 90 days, then a flat rate of RM 25.00 per transaction.

It becomes cheaper than share trading.

So, if you want cepat masuk, cepat keluar.... go online share trading.

If you only want to rebalance once a year, because you have a life outside your computer screen, then public mutual is a viable option.

Xuzen