If they are capital appreciation type fund, then Distribution is secondary. The money should ideally be reinvested to gain capital growth.

If large Distribution is your cup of tea, then go into fixed income fund like bond or dividend play funds.

Xuzen

@Xuzen
You are right on this. I was looking at the history e.g. PIBF which declared at least 1 cent and compared with the current distribution.

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very interested with public mutual!!
anyone can guide me??
can explain more details?
what shud i do at the 1st stage?
tq~

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Hmm...PB Mutual is growing very good and consistanly even since economy downturn.

Glad it is performing well

Hmm.. interesting... I invest in PB by myself, in which i go to PM HQ at Damansara to start the account. In all my statement i have a UTC name on it which i have never met and never seen before. So far invest 7 years liao, also never receive phone call before although already dump tens of thousands in 3 funds. Yet I have to pay the 5.5% at every transaction. Wonder where the money go? since I have contributed thousands in fees already, yet never got anything, I am beginning to move my funds to cheaper options.

gark,

Just ask yourself if you would set up a company and provide free services. It is our policy that every investor must have a consultant, that was why the system randomly chooses a UTC for you. In the 7 years, if you have not been serviced by the consultant, why didn't you make a report? Because you were enjoying good returns from your funds, so you did not even bother. Look back at your returns, what was the 5.5% compared to it?

A statement which I always share with my clients: "You get what you paid for".

I have a public bank islamic equity fund and also public china ittikad fund..

Scenerio 1
Assuming one low entry fund (Fund A) charge at 2%, and PM charge at 5.5%, you put rm10K each for Fund A and PM fund for 1 year, after 1 year u sell the fund.
Assuming both funds give u the same gross return of 10%, Fund A will give u 8% net return (10%-2% initial charge), while PM net return only 4.5% (10%-5.5%), so u see the effect between the low initial cost fund and hight initial cost fund? Pls dont tell me PM fund return is the best in the market that is why they charge 5.5%, or u shd pay 3.5% more, low entry cost fund doesnt means low return.

Scenerio 2
Assuming u invest RM10K in Fund A, after deducting the 2% initial charge, ur net invested amount will be RM9800, while the net invested in PM fund will be RM9450, asuming u invest for long term, say 10 years, average return of both funds are constantly at 10% p.a. for easy calculation. On the 11th year, Fund A will give u a total return (with principal) of RM25418, while PM will fund only give you RM24510, u r worst off by RM908 in 10 years time.

Either u invest for short term or long term, low cost fund is still better off.
Note: i dont work for any UT company, just a layman investor.

This post has been edited by cheahcw2003: Dec 23 2009, 09:08 PM

cheahcw2003,

IF your assumptions are true, then I agree that the net return for Public Mutual is lower. But for the past 10 years, how many funds with lower entry are beating funds with higher entry (in the market, Public Mutual is not the only company which still charges 5.5%).

If ur not going for long term then please do look elsewhere

No doubt PM is one of the pioneer in the industry with long history, 10 years ago there were not many Mutual fund companies around, so PM can easily outshine the others if u r talking about 10 years ago with less competition.

However, if u look at http://my.morningstar.com website (an independent website that track unit turst performance in the country), look at the 1 year - 3 years catagory, many funds performance are overtaking Public Mutual funds, including OSK series (with 2% initial charge invest via Fund supermart), and CIMB/RHB/Am Mutual series (if subscribe via CIMB Click, initial charge is 2.5% for equity funds). If Public Mutual do not do anything to reduce the initial cost, it will loosing the market shares, investors are smarter and cost sensitive now.

Note: i am still an existing customers/supporter of PM, with PM Gold Elite Status

This post has been edited by cheahcw2003: Dec 23 2009, 10:41 PM

cheahcw2003,

Thank you for your continuous support. Perhaps you would like to check the latest statistic on the bold part for this year

I will not be biased, but statistics show that consumers are smarter not to choose companies with lower service charge. If you would like to prove me wrong, please do

i will not prove you wrong as i do not want to affect you and many agent's rice bowl. Those who choose to invest in PM may not have information on how and where to invest in lower service charge funds. PM is using the personal touch service/ agent service to approach those who are busy, do not read and research around, and do not have much knowledge on investment, not cost sensitive investors. So it got a niche in the market.

I guess i have provided sufficient info on how low/high cost funds will affect the return of the funds in short/long run. I am not here to debate with u, perhaps Public Mutual will reduce its cost, i have no complain on Public Mutual except for their initial charge.

We just look at different point of views, you look at seller point of view and i look at the investors point of view who forms the majorities. There is nothing right or wrong.

cheahcw2003,

You may not have realised that you were the one who bumped into our discussion. I never wanted to debate with you at all in the first place

having read this thread, i have a few questions to ask.
1. What exactly is the function of UT distribution?If it wont benefit investors, why distribute the fund then?
2. If I intend to save for my retirement like EPF using DCA, which fund should i go to in PM?bond?money market?
3. What are the difference between fund focusing on capital growth, fixed income/divident or anti-inflation?seems all same to me as they all focused on value appreciation. Is it only the risk and gain things different?

Hello besiegetank,

I'm no expert at the subject matter but i'll do my best to answer yr questions:

1) there's 2 types of return in UT investment namely, capital growth and distribution. hence, to answer yr question UT distribution is actually a form of ROI. Sometimes, it's the fund manager playing with investor's psychology in distributing the profit from the fund because many unitholders (unfortunately) still associates a fund performance solely base on its distribution.

2) First of all, you need to ask yrself, "what's your retirement number?" once you've got it then a portfolio of UT investments can be constructed based on yr risk appetite and investment time horizon to meet that goal. Hence, the question of which fund to save in will arrive to what are your needs in the first place.

3) IMHO, all investments are focused value appreciation. The terms used above are different types of capital appreciation that would be experienced by the investors. Below are the terms explained to the best of my knowledge:

Capital growth - increase in the value of the units over time. these type of funds usually do not give distributions. eg: PCSF price per unit is at 0.25 sen on 2009 compared with 0.15 in 2008

Fixed income - usually money market and bond funds as these financial products aim to pay a certain amount of interest on the capital every year. their focus is to give distribution every financial year to the investors and not price movement i.e capital growth.

Dividend or distribution - focused on giving distribution every financial year to the investors. how is it different from fixed income u might ask. well, the answer's simple, the term dividend/distribution tells you that the source of that income is not from bond or money market but it's from stocks listed that have a good track record of paying out dividends. hence, it's even more risk to the investor compared to a fixed income fund as the dividend is not given in fixed amount every year.

I hope the above explanation helps a little.

NightCrusader

It didn't help a little, it actually helped me a lot! Thanks ya for your lengthy explanation. Unfortunately, more questions follow
1. If distribution is also a form of ROI, why some investors prefer not to have it?Does that means ROI in term of capital growth will be better?
2. Let say I need a retirement UT investment for 30 years with DCA, which type of funds should be considered?bond?money market?
3. I'm still at a loss on calculating the profits for UT investments. If let say I invest RM1k and the end of 3 years the NAV is RM2k, how should I calculate my gains after considering those initial and management fees?including tax?

The more I read, the more things I didn't know.

Dear besiegetank,

I'm glad the explanation above helped. It's a good habit to always ask and have some information regarding any investment instruments that you would like to invest in. However, do take care not to suffer from a syndrome known as information overload And now to answer your questions:

1) Distribution increases the number of units in the fund and is reinvested at zero charge. Fund managers encourage it to capitalize on the compounding effects over time. for
eg: Mr A has two funds, 1000 unit of Fund A and 1000 units of Fund B. Fund A's distribution is reinvested every year while Fund B is payout.
if distribution is RM1/unit for both funds
Fund A- 1000 units + 100 units from distribution=1100 units
Fund B- 1000 units + distribution payout =1000 units

2nd financial year, assuming distribution is the same and price per unit is RM0.50, we get
Fund A- 1100 units + 100 units from distribution=1200 units (RM600)
Fund B- 1000 units + payout =1000 units (RM500)

The difference in that amount may be small but over long terms like 30 years the difference is very significant due to compounding effect. However, this doesn't mean any form of ROI is better than the other. It really boils down to the investor if they feel more comfortable with distributions or capital growth as long as they meet their investment objectives.

2) A consultant has responsibility to do a retirement planning for you to help you reach the amount desired after 30 years. A half-yearly or yearly review of yr retirement blueprint is highly recommended. Normally the UT portfolio will comprise of a mix of fund types to help u achieve a certain % on yr ROI to help u reach yr financial goal.

3) The fund manager will send a statement after the distribution showing you the net payable after deducting all the relevant expenses like income tax and management fees. Alternatively, u can contact yr agent to know the ROI of yr fund.

Regards,
NightCrusader