Recently, equity mutual fund local or especially global one all should perform quite well due to recent surge in worldwide stock market, should be at leat double digit gain, if not consider quite poor already. But you can't expect every year the stock market will perform like this for consecutively non-stop.

If the world economy is not well managed or unforseen event happens then might enter into recession then stock market will plunge also. Bare in mind, as previous forumer said, there is no such thing of park your fund into it for 3 or 5 years then expect xx% return from it -> wrong mindset in investing in mutual fund or stock market. Market/company condition can change drastically from time to time as well as its fund. Just like previously, year 2000, everyone said technology stock is the future, then everyone rush into tech company, but dotcom bubble burst afterwards which still not recovered until now.

The return rate might xxx% after few years, might also mean -xx% (negative, losing) after few years, so there is no certainty, don't be fooled by previous track record said that xx% return since past track record does mean or guarantee future return rate. But past track record has its usage to show how well the manager is managing the fund.

UT or MT goes together with stock market (for those equity one) so if stock market go higher then it will generate handsome return to you but if stock market doing poorly then your UT or MT will lose money as well, there is no guarantee return rate.
For advertising or promote UT, they always based on past track record but it does not mean future will generate the same result (might be better or poorer).

Previous 2-3 years, stock market is on the way up and recovered from low during 2002 which Sars virus has plunged the market, so base point is low, that's why you see quite good return rate 10-20%. But if you compared back to about 9-10 years time when market booming before financial crisis, it will not surprise me if a fund just breakeven or perform as same as FD rate, it depends how to make comparison and you base point. I am not saying UT is not a good investment tool but invest in UT is not as same as FD, it carries its risk.

Btw, it is better investment to those not familiar with stock market and want to participate in it since it is much better to invest in UT rather buy those chapalang penny stock or 'goreng' stock/warrant which has no fundamental at all.

Seems like a lot of people don't understand how UT works.

Actually, monthly contibution to buy UT is sometimes not worth but it depends on market situation.

Example,
Recently, market is on the way up for last 3 years, so UT price (equity) become higher and higher, so if you apply monthly contribution then your buying price become higher and your average cost become expensive. If market plunged then high probably your UT will suffer loses unless market keep on rising non-stop for years, is it possible? No one knows. If you believe it will, might as well throw whole lump sum together at the first place.

However, if the market is on bearish mode, become lower and lower each day, then monthly strategy might be good to bring down your average price since no one can guess correctly when is the lowest point.

Don't blindly believe the aganets sometimes, monthly contribution mean that monthly steady income for them only. Sometimes I feel those agents (but not all) are irresponsinble and what they are more concern is their commission rather than assist customer in investing.

Buying equity UT is almost as same as share since you are indirectly buying shares also, so the most important is timing. If buying at a too high price when stock market is bubbling then your UT might struggle to give your a good return, worst still might as well losing money.
But one doesn't need to buy the lowest point and sell at highest point since it is almost impossible to do so. Just when it is low then it might be a good opportunity to buy and when market is unreasonably high then it is time to sell. If after you sell then it goes higher, (often happen) let it be, at least it has generated you handsome return rate already. When market is expensive, it can't stay long, it will correct itself, after all valuation of stock market can't run away its most fundamental factor.

Bare in mind, buying equity UT is same as buying share! Just indirectly, there is no guanrantee return!

This post has been edited by cherroy: Nov 26 2006, 10:32 AM

I think he/she probably said regard the divided/distribution. By default, the dividen/ cash distribution if any (normally got) is reinvest back mean that the dividen money given is taken to repurchase the unit at current price (the time dividen given out not your original bought price). So your total unit become more but you can also opt to take as cash which you have to mention it when you bought the UT at the first place, there is a section in the form for you to choose but I know some agents/banks has tick the section for you (they said by default) to repurchase without asking at all. With repruchase, agents/banks will earn commission from it, if you take cash then they gain nothing.

But if the UT declare as unit distribution then you can't take cash but if they declare as cash dividen then by law you have 2 options to choose.

Some banks can offer as high as 3% bonus unit if buy at a bigger amount which is negotiable.

Timing is also an important factor to maximise the yield, if the fund buying at the high then surely yield will be lower than those buying at low. When a fund is setup and money is collected from the UT investors, the manager has to do his job to pick up the stock based on their intended portfolio, they just can't collect your money and put in the bank wait for market become lower, even though they know market is high now, but due to their obligation they still need to keep on investing, just may be cash level ratio is a bit high than normal if the market is too high.

Also, different fund has different portfolio and strategy so there will be differences their performance.

Local bond market is not exciting at all, yielding at about 3-4% due to high liquidity in domestic banking system.
If really interested in bond market then better look for overseas through global bond fund which provide better yield than local. eg. US treasury yield at about 4.5-5%. Australia gov bond yield at about 6-7%.

Bond fund is a stable, long term income fund type, typical yield ranging from 3-9% depends on interest rate movement. If interest rate is on the way up then bond generally will perform poorly but if the interest rate has peak is on the way down (as happened in US) then bond will perform quite well.

But don't expect bond fund can generate the return rate as same as equity fund since investing in bond mean that you are taking less risk so less risk less returns.

Fair enough, if using the advantage of saving on entry fee through switching.

One thing I don't like about the UT is the entry charges of 5-6% (equity type). Why need to charge so high, 2-3% already can cover their cost. No wonder UT in this country is not so popular compared to developed country.

Bond fund entry fee is only at around 1% so normally they don't give any discount/offer while entry fee for equity normally at 5-6% so giving out 1% is no big deal.

This post has been edited by cherroy: Dec 13 2006, 03:12 PM

Bond fund or bond won't generate high return rate, most of the time it is slightly above interest rate. You can't compare the return rate with equity fund since they are in different league and risk exposure.

But having said so, bond will perform well when interest rate is on the way down and economy is having recession. So bond fund generally get the return from interest paid out + bond price appreciation due to loweing interest rate. But if buying at the wrong moment then depreciation of bond price will eat up the interest paid out, so bond is a very sensitive to interest rate and economy movement.

It depends, If someone got extra fund then there is no harm to diversify some into bond especially current interest rate situation is on the way down (for US). But bare in mind, you can't expect high yield from it, generally about in the range 4-7%.

Generally, it is not worth to invest in local equity fund due to high entry fee of 5% and annual management fee of 1.5%. You already lose out 6.5% when first bought compared to invest directly of maximum commission of 1.2% (assume commission rate 0.6, can get lower with some online trade).

If you are looking at dividen fund then might as well invest directly into those high dividen stock like Carlsberg, Guiness, BAT, Tanjong etc. since those fund also buy these kind of stock. But if one has less knowledge about stock market and don't know how to monitor your investment, UT is the only and better choice since it is better for one to buy UT rather than blindly go into stock market and don't know what he/she is doing.

Actually, the 5-7% charges has hindered the development and raise the popularity of UT. Also, the performance of the funds depends on the fund managers, if you look into details of some of the fund managers, some of their portfolio is awful and performance is quite worst and always underperform. I said this because I made a study previously on some of the underperformed fund and feel a bit shock found out some of those without sound fundamental counters also included in their portfolio.

So choosing which fund or fund house to invest also an important criteria. If not, you pay 5-7% charges and ended with some portfolio than I or you also can outperform them which make the UT investors like a fool. Sound a bit extreme.
Not to pour cold water, just to highlight there is still some bad fund out there.

No doubt, UT is better for those newbie want to venture in stock market but picking a better fund or fund house to invest also an important factor. Another point is the timing is also important factor that make your return rate become more impressive, never buy when market is high.

UT is not as low risk as claimed, equity fund tracks the performance of the stock market while bond fund track the performance of the bond market. Going into an equity fund is as same as buying stock, just you hire a more professional company to do it for you.
But for long term (in term of decades), history tells us stock market (for those blue chips and good managed company, not applicable to those chapalang poorly managed company) is always on the upside together with inflation.

The 5-7% is reflected in the differential in the buying and selling price since you buy at at inflated 5% (if the entry fee is 5%) of its NAV at the first place while they bought back from you at NAV price.

So if it makes 10% through investment (already quite impressive at current situation) then you only gain a few % due to the differentiation in the selling and buying. Below are some simplified scenario

First year (assume fund gain 10% through investment each year) & entry fee 5%, annual management fee 1.5%
Return = 10% - 5% - 1.5% = 3.5%

Second year
Return = 10% + 10% - 5% - 1.5% - 1.5% = 12%

Third year
Return = 30% - 5% - 1.5%x3 = 20.5%

That's why there are some people claimed that UT need at least 2-3 years time or a long term investment since you only can see the real gain after 2-3 years time due to high initial/entry fee. But bare in mind, fund might as well lose money if the market go against, not every year surely gain one.

Quite agree, now it is not the time to go in equity since upside is quite limited, might go higher who's know since market is unpredicated, but not much upside room unless economy situation improve a lot then different story.

This post has been edited by cherroy: Dec 25 2006, 12:44 AM

Service charges will remain the same, they won't reduce it since they make million or billion out of it every year. Unless BNM force into or the industry going on a major restructuring, otherwise banks don't want to reduce something that earn millions from it without any risk.
Ya, correct without any risk since if the fund perform poorly then it is the unit trust holders that lose out, bank or unit trust company won't lose a single cent from it, they still charge the annual fee as same no matter what happens.

A banker just said to me last week, why you don't want to invest in XXX fund 3 months ago, it already gain an annualised of 16% for 3 months time, sound impressive, isn't it. So I check back, ya, it did gain 4% after 3 months period so annualised become 16%.
But when you first bought the unit trust, it is RM1.00 with NAV Rm0.94xx (6% service charge) with 4% gain, it is still at Rm0.98xx, you still lose out, not yet gaining. On paper, it sounds impressive but reality is not because of high initial charge of service.

If gov really want to promote unit trust industry then reducing the initial service charges is the key. Otherwise, it is just mean big fat profit for those bank/unit company, no wonder banks are making billions and billions more every year.

Cash managenment fund normally invested in KLIBOR, and money market instrument, yield almost as same as short term FD, that's all. For long term not suitable, better put in FD.

If it said 5% dividen then it is 5%. The service charge has been reflected when you initial buy at premium above its NAV, also annual managment fee has been deducted out from its generated profit.

Totally wrong.
Mutual fund is the money collected from you and invested in stock market or bond by the fund manager. So performance wise is related to the stock market or bond market directly that's why you see everyday the fund publish the price of the NAV which is up and down according to their investment portfolio.

So there is also a risk of loss, not necessary certain gain. Just stock market in the long run especially well managed blue chips normally perform (but not certainly) much better FD rate in the long term.

yup, it is about timing also.

Even nowdays some of the smallcap fund after several years still struggle to break even. It is same as buying share at peak if you enter the fund at that time.

Normally initial investment is 1k and additional add on can be as low as 100.

It is not related to saving or FD!
You just invest that amount you want and let the fund manager to invest for you in the stock market or bond or money market. So how much you earn is accroding the fund performance in the market.

It is just this last 3 years, fund generally can achieved at least 7% or some double digit gain annually due to favourable stock market which has been rising this last 3 years.
But when market crash time as happend during 1997-1998, funds also perform poorly and most of them register negatively return even some loss half of its value.

Sadly to say, no. The minimum all the fund currently charge is 5% which is way too high, not the mentioned the 1.5% management fee as well, there's go 6.5% before you start getting the return (might as well lose since it depends on market situation).

Actually people flocked into global fund because KLSE is one of the major underperform bourse compared others for the past 3-4 years time. KLSE only play some catch up since the end of last year so there is no surprise if it can outpeform others which already rise so much like STI for the past few years. It is just last year KLSE manage to outperforms so there is not much to be happy of.

If for index like to like, STI, Hang Seng, even Seoul Comp, all of them has been rising at it life time high while KLSE is still 100+ than its previous peak.