You have to compare it with multi-year because mutual funds are a long-term (at least 5-year) commitment right?

Yeah, I understand that. Our forumers were replying based on what I mentioned, buying regularly every month.

So, it is "sales charge of 5.5%" on EVERY "buy" you make. Yeah, now that you pointed that out, the yearly charge would be "sales charge" + "management charge" = 5.5% + 1.5% = 7%!!!!! Come to think about it, that is high!!!! Hmmm.... if you buy only one time e.g. 10k, it would be 5.5% initial charge and subsequent 1.5% every year.

However, if you buy say 10k yearly, that would be 7% every year!!!! Like what wodenus asked, that means they have to make at least 7% + 3.25% to beat FD????

Having said that, the representative showed me true figures of clients who profited from the fund. If I'm not mistaken, the initial "deposit" was already doubled by 7-8 years........

This post has been edited by kmarc: Jan 3 2010, 03:37 PM

@lwb

doubt any honest PM agent will tell you that. So now u are at the crossroad, do you want to share 7% of wealth every year to your PM agent and PM in exchange of their service. This you have to decide yourself.

@woodenus

the current fd rate is 2.5% per annum.If economy pick up. the fd-rate may increase.the fund have to take further risk to break even.

@kmarc

past result does not indicate future performance.Your PM is misleading you,sorry to say.I would not care if the fund make 1000% return for the past 10 years.What I am certain I will lost 7% of my wealth to PM for the next 10 years.

it's not a fair comparison per se.. a contract like an fd has some sort of exit penalty added to it, especially those multiyear ones.. on the other hand, there isn't any obligation for an investor to stick permanently to a single fund for a consecutive number of years..

so, in terms of mobility and how maneuverable(sans penalty) are one investment cannot be compared vis-a-vis between multiyear fd and pm funds..

in an updated investment paradigm.. "long term" is still being used, albeit differently..

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Added on January 3, 2010, 3:36 pmbond funds/fixed income is a very important component in one's investment portfolios.. i can only assume that your gung-ho approach lightly reveals 2 things..
1. you're still at a young age in relative speaking.
2. you've not been spite by the ravages of a downturn that can wipe off more than half of your asset worth.

if you've not discovered about fixed income funds.. i wonder how have you weather through the 'dive' of march-2009? yes, you may end up better by the end of the year.. but imagine, you've switched away from equities by early march-2009 and
switched back in.. say, at a later stage(for assurance).. in may-2009..

not only your capital is preserved by the 'dive'.. your gain later is fantastic!! > 40%..


This post has been edited by lwb: Jan 3 2010, 03:36 PM

5-year FD rates are 3.25%. Most mutual funds are long term (5-year) investments right? so we can compare it to 5-year FD rates.

jasonkwk,
probably i shouldn't catagorized 'all agents' in all context.. i've came across some agents(whom without any ties to me as an investor) who spoke strategically about fixed income funds.. these agents not only sells but have their own portfolios of fund to take care off as well..

i believe i've mentioned in this thread before.. the entire bulk of my investment in pm is classified as '99'.. and i've other channels of charity that i participate in than providing it through as sales commission..

let's say that this is out of shrewdness that i've avoided the use of an agent thus far..

He's not my PM. I just met him yesterday at the supermarket where the PM booth is!!! I just sign one form and is supposed to go to Public bank this week to open account (I think) and make the necessary arrangements to buy the fund. Was thinking of putting in 10k as an initial "deposit" and then RM500 every month. Now that I think about the 7.0% yearly charge, it makes me think twice.

Why I want to go into this small cap fund? It is because the past returns looks good and hopefully future returns are the same. Besides the stock market, would there be any other investment instruments that can beat this fund?

This post has been edited by kmarc: Jan 3 2010, 03:48 PM

woodenus,

as lwb said before, you are comparing apple and orange, mutual fund and FD are totally different thing. I would compare mutual fund to stock market . Mutual fund dont have lock in period like FD. u can invest any amount u want every month(minimum RM100), for FD, after the lock in, you cant put any money in.Some time u gain more unit, sometime u gain less unit, depend on the NAV. If the FD rate increase during the lock in period, you would have incur opportunity cost. The advantage most UT agent will tell u about is DCA(dollar cost averaging), which FD don't have.

that's why if you have alot of money.. i mean, really alot of money.. eg. those that instantaneously make you a mutual gold (elite) member status kind.. you'll have to buy into pm in a shrewd/smart way..

or else, pmutual will have additional monies for their annual dinner, thanks partly to this sort of commissions.. (and of course, not forgetting the fortunate pm agents who brokered that deal for you)..

imagine.. $500k initial investment can generate a commission of $27,500! (i'd definitely like to stand at the receiving end of that payout too for making you fill-in & sign 5 copies of forms *lol*)

lwb, I believe those agent you mentioned are in minority. I seldom visit this thread, what is the meaning of '99' ?

Errr... I don't think I have that kind of money la. Mutual gold needs how much? Plan to start off with 10k first.

Errrrmmmm.... how to buy into pm in a shrewd/smart way? Pray tell!!!

wodenus,

if you have a huge capital of investment to manage.. maneuverability without incurring too much cost is an advantage to have.. by saying so, a 5-year fd is by no means the same as being able to "optimize" by maneuvering around with pmutual funds (given within this same 5-year period in scope)

the moment you liquidate that 5-year fd, you'll face a punitive penalty..

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Added on January 3, 2010, 4:06 pmif you look at it from a 'forest perspective'.. it doesn't matter if you have lots of money to invest now.

if you've diligently invested the same sum of money over a period of time.. say, you've managed to accumulated the $500k over 5-year period.. you would've cost you nearly the same $27,500 of sales commissions accrued to the fortunate pm agents..

i said nearly because.. over the time period, if trends can be of a good reflective use.. fees/commission will eventually go down..

if you want to find out more about mutual gold (which their benefits are getting less and less over the years), you can read about them via their webpage at pmutual.. hear it from the horses' mouth, ya?

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Added on January 3, 2010, 4:08 pmjasonkwk,

ask your agent.. he/she has a code, right? ask him/her what '99' is.. if you're unable to get an answer from them, let me kown.. i'll tell you (although i've mentioned it here before)

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Added on January 3, 2010, 4:12 pmanother thing i'd like to mention is... there's alot you can do with pmutualonline..

i was happy to find out that i can even buy into new funds from there.. and thus eliminating from having; an agent/walk-in to do so..

you guys should make use of it.. get in control with your own 'sweat & blood' investment..

This post has been edited by lwb: Jan 3 2010, 04:12 PM

Understood. So, how to buy into PM in a shrewd way? I'm interested to know about '99' too.

Whether you buy one time or 20 times, the sales charge is a one-off charge of 5.5%. It is not recurring yearly unlike the management fee of 1.5% which is a yearly charge.

To use your example of 10K. The sales charge is 5.5%.

scenario 1: if you stay invested for 5 years, the yearly equivalent sales charge is 5.5 / 5 = 1.1% per annum. The total effect yearly charge is 1.1 + 1.5 = 2.5% per annum.

scenario 2: if you stay invested for 10 years, the yearly equivalent sales charge is 5.5 / 10 = 0.55% per annum. The total effective yearly charge is 0.55 + 1.5 = 2.05% per annum.

The longer you stay invested, the lower the effective sales charge per annum. Whether you go for monthly or lump-sum investments, the effect of sales charge is practically the same.

I understand that. That is provided your final amount is the same e.g. 10k one time or RM500 each month until 10k total.

However, if I buy RM500 every month for 10 years, the service charge would be RM500 x 12 x 10 years x 5.5%. Right?

fuuoo.. amortization of cost. that's a nice way to see it (but i would rather marked it to market and realized the cost in the same financial year and keep the rest of the yearsss.. clean)

but it's a nice way to look at it..

i wonder if we can equate sales charges/commission as a sort of deduction of our income tax as agent fees? (how nice if we're able to do that.. lhdn more motivated investors, going by such rulling).. just like how i can deduct an agent fee from a rental(property)

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Added on January 3, 2010, 4:22 pmyes, you've got it correct!! just multiply the total invested amount with the commission charges (regardless of period invested)

try not to complicate a simple issue.. (if you throw in amortization, it starts to get creative and thus confusing *lol*)

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Added on January 3, 2010, 4:26 pmkmarc,

a shrewd way to investing is not solely about profit.. it's also about cost. because at the end of the day.. it's not how much you make, but how much you get to keep and grow it.. that counts..

think both sides of the accounting equation.. what i've invested in pmutual was done at zero cost/commission. that's how i preserved my cost..

This post has been edited by lwb: Jan 3 2010, 04:26 PM

500 x 12 x 10 = 60000

60000 x 5.5% = 3000 3300 total

PS: Is it NOT 12 x 10 x 5.5 = 660% if that's what you are saying.

This post has been edited by howszat: Jan 3 2010, 04:39 PM

Errrmmmmm.... you mean the shrewd way to buy PM is through armortization of cost? I'm not in the financial field so I don't know what it means (even after googling) !!!!

So what's '99'?

I have always been put off by the service charge and that's the reason I have not bought any unit trust yet. Just that the PM small cap fund "looks" interesting.

One day I will write a guide on "Unit trust" and you can be my consultant.........

I think it's the same in terms of "where can we put this pile of money?". For instance you have 100K. You can't put the 100K in FD and mutual fund, you have to choose. I know you can split it, but even if you do, the 50K you put in MF, you can't put in FD. So we need to consider both and determine which one is better, since we can't put the same money in both at the same time. If you make the wrong choice, even if you make money, you will have lost the opportunity to make more money with the money you invested, so its important to compare both FD and MF and other investment ideas that are competing for the same chunk of cash.

kmarc,

sorry the amortization is referring to something else..
talk to an agent and ask them about code 99.. if they're not telling you, i will (fair?)
i'm not sure if i can be your consultant.. afraid of conflict of interest may arise. you may be advised, but never forgo doing your own due diligence..

hint - agents are doing too!

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Added on January 3, 2010, 4:38 pmi think i see your point from your perspective.. you're correct by the very factors you include in, to substantiate those point.. i think what i use is, a different sets of factors.. and because of it, we have a differing outcome.

i see you view..

This post has been edited by lwb: Jan 3 2010, 04:41 PM