Chance needs to give to others too.

should ask the new people to continue the version of the thread ma...

We're not dictator, let the new TS to develop the possibilities.

Back to Basics.

Annualized Rates and Service Charges.

... moving on from that recent post... "But the annualized rate (which is Compound Annual Growth Rate - CAGR) is 7.2%"

Yes, the annualized rate of 100% ROI in 10 years is 7.2%. This 7.2% would be in the annual report or product highlight sheet. But what is the actual rate after adding in the service charge?

Let's do some quick calculations on how 2 different service charges would affect the above 7.2%.

The 5.5% is what PM usually charges, and the 2.0% is commonly charged in a investment platform, and often less.

1-year annualized, 7.2%
0.0% service charge - 7.2%
2.0% service charge - 5.1%
5.5% service charge - 1.6%


2-year annualized, 7.2%
0.0% service charge - 7.2%
2.0% service charge - 6.1%
5.5% service charge - 4.3%


3-year annualized, 7.2%
0.0% service charge - 7.2%
2.0% service charge - 6.5%
5.5% service charge - 5.3%

5-year annualized, 7.2%
0.0% service charge - 7.2%
2.0% service charge - 6.8%
5.5% service charge - 6.0%

10-year annualized, 7.2%
0.0% service charge - 7.2%
2.0% service charge - 7.0%
5.5% service charge - 6.6%

As shown in the above figures:
1. It takes a longer time to slowly reduce and amortized the higher service charge and reduces its effect on the annualized rate.

2. If the investment objective is short term of 5 years or less, go for fund companies with the lowest charges.

Please note the above service charges are for equity funds.
Service charges for equity funds in EPF withdrawal schemes are normally charge at a standard rate of 3%.
Service charges for bond funds would be lower at zero cost or up to 0.25%.

Cheers. Keep investing, and keep informed.

==============

And what if the returns is NEGATIVE or barely above water in the first year!!!

This post has been edited by j.passing.by: May 19 2015, 12:46 PM

What so difficult of starting a new topic?

I typed a post... found out cannot post at old thread... so open new thread lor. Took me a much shorter time to type the 1st post than this post and others.

P.S. Now I know how to open new topic... never mind if I don't know how to close... just let it open till...

the % ROI is what we calculated from the variance of NAVs (Assuming no distribution)
therefore the 2.0% annual mgmt. fees (service charge) should NOT be used in your calculation as they had been minused off in the daily NAV.

...the 5.5% Service Charges (initial Sales Charges) is ONE OFF thing...NOT an annual reoccurrence.....IT DOES NOT AFFECT the monies that are already invested. ONLY imposed on NEW monies that invested...therefore the 5.5% is only affected as shown on the above if the investor were to buy in new fund every year and that would affect the (7.2)% ROI calculation.....
Thus the ROI of the previously invested monies would not be affected...example (simple calculation)
previously invested RM 10000
new monies invested RM 1000
assuming 7.2% ROI for that year
The RM 10000 would get 7.2%
The RM 1000 would get 7.2%-5.5%

* just let the readers decide for themselves who is right and who is wrong*, shall we?

This post has been edited by MUM: May 19 2015, 08:42 AM

Please note Post #2 had been edited, yesterday, to clarify further the annual management and trustee fee.

Cheers.

PS. Also just edited post #24... the headings in green...

better to "transfer" post #24 into post #2 or post #1 for convenience purposes / easy reading

First of all, thanks for the respond and support. But we need to understand this is a forum, not a blog - though I'm treating it like one!

Don't you think you guys are asking too much? Already tired writing up some long bs to entertain you guys and now want me to edit here and there for easy reading!!!

no lar, as said in post #1, this is all old grounds covered before... just rewriting some topics to shiok myself. All the posts should be read and forget and move on...

The main purpose is to have an open thread for people, especially PM agents/UTC, to update and inform us of any new developments. Like when a closed fund is re-open for new investments. Or when a fund is about to be closed.

Still very much appreciate that post and info that PIOF was about to be closed last year. Did managed to top up that fund, and still holding it.

Back to Basics

DCA (Dollar Cost Averaging) and VA (Value Averaging): the difference between them.

Much had been written before on these 2 methods of investment in a regular fashion. In this post, I’m attempting to re-write the concepts in simpler words, so I apologies first if it turn out to be more convoluting and confusing!

DCA is most often used and the most common method of investing, and most people are using a variation of it without knowing DCA. Though I mentioned “investment in a regular fashion” in the opening sentence, it can also be in an “irregular” way.

DCA is a concept; and it does not means that one must strictly adhere to a rigid regiment of buying a fixed amount of mutual funds in a fixed length of time.

If one is buying in an irregularly way, where the amount of money spend can be sometimes less, and sometimes more (due to various many reasons), sometimes at the end of a month, sometimes earlier, or none at all for several months, before continue buying again the next year; in my eyes, it is still DCA, or a loose variation of DCA.

In a nutshell, DCA is open-ended and VA is closed-ended.

Closed-ended because VA is based on a set of calculations, on how much to invest each time, and the calculation is on a predetermined and fixed financial objective or a fixed sum of money.

On the other hand, DCA is open-ended, very similar to our objective of saving towards retirement... we may have a minimal target, but it is not written in concrete, we invest more when we earn and save more, invest lesser when we have more obligations on our incomes.

How to use VA.

It is easier to understand what VA is by showing an example on how it is used.

Let’s say we have a sum of 7k at hand, and we have an objective goal to have 16k in 3 years, as this would be... well, a holiday to Paris?

We can’t save till the last day just before the holiday, so we decided the saving period to be 2.5 years or 30 months. Which means, we have to save and put aside about (16k – 7k at hand / 30 months) = RM300 each month.

We also decide not to put the savings into FD, and selected an equity fund (or maybe a bond fund).

So, using VA, we must invest (16k / 30 months) = RM533 each month.

Step 1: We list out the expected amount of money that we should have in each month:
1st month = 533, 2nd month =1066, 3rd month = 1599, 4th month = 2132... etc. etc. till the 30th month.

Step 2: We make our first purchase of the fund. If the minimal amount to open a fund is RM1000, it is okay. So we bought RM1000 worth of units in the fund.

Step3: We are about to make another purchase in the 2nd month. We checked the value of our fund, and compare it against the above list. In the above list, we should have RM1066 in the 2nd month. So, if the value of the fund is less than RM1066, we purchase the difference, topping it up to RM1066.

If the value of the fund is more than RM1066, we should sell the difference, selling some units so that the value of the fund is more or less RM1066.

Note: this is the important feature of VA - to ensure that we: “buy low, sell high”.

Step 4: Go back to step 3 and check the value of the fund, and compare it against the listed value in the next, and following month. Make purchase or sell accordingly to the difference in value.

Step 5: Exit when financial target of 16k is reached. Happy holidays!

Note: Step 5 is the closed ended feature of VA. If the market rally like open sky with no limit, and the fund rocket to 16k much earlier in, say 12 months... then bye-bye boss, and Allô Paris.

Cheers. Keep investing.

PS. More confused? Never mind... just keeping investing, and called it long term DCA.

===============

Update: Having said that VA is "closed-ended", it can be made "open-ended" by adding inflation into it; and then only decide when to end and stop the purchases at a latter time - same as in the decision when to stop the DCA purchases.

For example, increase the targeted savings by about 5% every year... 1st year - RM300/month, 2nd year - RM315/mth, 3rd year - RM330/mth, ..... 10th year - RM470/mth, 15th year - RM600/mth.... etc. etc.



This post has been edited by j.passing.by: May 2 2016, 09:19 PM

PRS is an investment product similar to unit trust but with a lock-in feature for retirement and tax deductible. There are 8 companies selling PRS and Public mutual is one of them.

good reading..

thanks j.passing.by

The Senior Investor

Okay, this post is for the more senior investor. And also to bump up the thread as it was getting lost inside this forum.

A more elderly investor would behave differently than a younger investor, maybe because he has a much larger pool of money or savings.

If he has started late and still in the accumulating stage as a younger investor, I hope he has had started reading, and done more research into the relevant investment issues into mutual funds. And please feel free to share your thoughts or worries in this thread.

This article from MarketWatch (one of my frequent visited sites) addresses one of the concerns: Should I sell now or hold on when the market is at record-breaking levels?

http://www.marketwatch.com/story/retirees-...13-01-31?page=1

(A younger investor who is still in the accumulation stage should not have this concern of buying or holding in high levels. I presumed he/she is wise enough to do DCA, and invest as he/she earns his/her living, and doing adequate and proper money management, namely putting savings separately for different specific purposes.)

As rightly said in the article, the senior investor should not have this anxiety to sell.

Why? Because, in the first place, he/she:

1: Should already have the correct amount of risk in the portfolio of funds. The level of risk or volatility of the portfolio is not only depended on the bond/equity ratio; but also on how conservative or aggressive those funds in the equity side are.

2: The senior investor who is in retirement is no longer looking for high growth but more on income distributions to finance his/her cost of living. Dividend and Income funds will have distribution even when the growth rate is negative.

No doubt the fund will be lowered and give lower distribution the next year when the investor holds onto the fund; nevertheless, there would still be some distribution next year, and statistically, the fund (if it is a “trusted” fund with a good and long record) will rebound.

3: Apart from bond and equity funds, the investor should also have some savings in FD or money-market funds to act as reserved pool of money to dip into when the income distribution is lower in that particular year.

Cheers. Keep investing... and keep holding - the right asset and risk allocation.

Please note the "sell" as in 'sell, sell, sell" or "buy low, sell high" in previous posts is NOT actually referring to selling back the fund to the fund company. It should be read as "switching from one fund to another fund".

It would be silly to exit and sell back the fund to the fund company, and later buying it again. It is silly to pay the entrance fee or service charge again.

There could be a switching fee to pay when switching from one fund to another, but the fee is usually lower than the service charge, since the switching fee is usually a flat fee of xx amount per switch, whereas the service charge is a percentage based on the switched amount.

Now, don't try to figure out what is the minimal amount that should be switched that will make the transaction more worthwhile to exit and re-enter. If you do, I would say that the switch is not necessary in the first place, and just adding unnecessary expenses into the mutual fund investment.

Try to have a plan: how much to buy each time, and what funds to have. This will avoid over-buying a fund, and the need to "sell" it.

Cheers.

PS. Selling back the fund to the fund company is also known as "repurchase".


This post has been edited by j.passing.by: May 24 2015, 06:09 PM

dear forummers
if you have 100k to invest into a mutual fund
would you 1) purchase in 1 lump sum or 2) DCA over 12 months? and why?

this is a hypothetical question -answers will be provided after the exercise

Big pix answer - it depends (asset allocation, time line needing that $, etc.)

Short answer (ignoring all else except time-line of needing the $):
No time-line of needing that $?
ie looooong time away, say 20+ to 30+ years? (add balls of steel if that $100K is the only savings)
sai lang - lump sum in
Reason: Statistically, in the long run - equities goes up. Thus why bother pecking in bit by bit

This post has been edited by wongmunkeong: May 24 2015, 06:32 PM

well DCA for period of 12mth..

why.. we don't know if the price would be up or down..

if lump sum & price drop kaw2.. u lose a lot

If 100k is small percentage of your liquid fortune. Then i will sai lang...

This would need to depend on a few factors such as the expected time for investment, risk tolerance and investment objective.

If the investment is aiming for long term (more than 10 years), lump sum would be a better choice provided client have moderate to high risk tolerance with clear investment objective that he/she wants to grow the capital is high as possible.

If the investor is just aiming for short-term investments, or have conservative to moderate risk tolerance, plus don't mind settling for lower returns as long as her/his investment is safe, might as well go for DCA.

I'm curious as to why people use PM agents when you can do it online at FSM or eunittrust for less than half the commission?