Another reason for lower SC is how come only savings from EPF get the lower 3%? Nobody to protect and speak on behalf of investors with normal savings? Is our money not good enough or is it that EPF-related funds are less expensive to manage?

I don't mind the annual management fee. If the fund is poorly managed (performing lower than its benchmark), we can pull out of the fund. That's the way market determines inefficiency. But how to pull out when you already sink in a big fee upfront?

Performance-driven is already there... a good fund with better returns will have more subscribers... the annual management fee is usually a minimal fee and then based on some percentage when the volume is higher than the minimal. Higher performance, higher volume, higher fee.

It is the high upfront SC that stuck investors to the poorer performing funds; and it leaves the market without a fair choice to vote with its feet.

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Added on June 17, 2012, 11:01 pmThe above applies to Public Mutual - the largest unit trust.

This post has been edited by j.passing.by: Jun 17 2012, 11:04 PM

It should be clarified that dividends (or distributions or unit splits) do NOT increase or decrease the Net Asset Value (NAV) of the fund.

Is there any unit trust agents or fund managers recommending that the best time to buy into a unit trust fund is before its financial year-end before it makes any distribution declaration? Any inside information that the fund managers can help their friends?

Or is it more likely that the standard recommendation is that buying into a fund is the same at anytime (except market conditions, of course) ?

"hold it at least until 5th July because u will get a big amount of DIVIDEN. so, why cash out when u can get more?"
By this reasoning, we should only buy into a fund just before its financial year-end. No need to do any hard selling, just mark into the calendar all the financial year-ends, and approach clients to invest at the appropriate dates. Sure winner one.

(still on the topic of whether a distribution will dilute the net asset value...)

AFAIK, since my experience is with Public Mutual (as an investor, not employee), the NAV price per unit is calculated everyday at the end of each business day, and the total assets and liabilities includes the projected management fee, trustee fee, etc.

Repeat, it is calculated everyday, thus a financial year-end day is not any difference from any other day in calculating the NAV.

(The extra calculations on the year-end day is adding the extra units (in the declared distribution) proportionately to every units; and then divide the NAV by the total number of units. Of course there are other works done, like making cheque payments, tax, etc. but the point is that the calculations are immediate, and the effects of the distribution on the NAV price per unit and your total number of units is also immediate.)

The value of your investment in the fund will not increase or decrease the next day due to the distribution.

The total size of the fund is changed (as some of the distributions may not be re-invested back into the fund), but not your investment if your portion of the distribution is re-invested.

Okay, allow me to pull out a "Statements of Final Distribution for Financial Year Ended xxxxx"

Units entitled for distribution: 33,318.87
Reinvestment units: 1,913.50
Units Balance after reinvestment: 35,232.37

NAV per unit (RM):
Before distribution 0.3590
After distribution: 0.3395

Multiply the units against the NAV per unit, before and after distribution, if you care to, and it should be the same. (Rounding would result in slight insignificant several cents difference.)

A distribution is mainly to bring down the NAV price per unit for marketing purpose. For example, a bond fund will have a NAV price per unit at RM1.0000 after a financial year-end distribution.

Another purpose is to provide an annual income to investors who do not re-invest their distributed units.

This post has been edited by j.passing.by: Jun 28 2012, 01:41 PM

"if opt for cash distribution then different story a bit, as opt cash distribution = selling a portion of unit before distribution"

It is not easy not to be confuse when the logic is not consistent in every statements... this is akin to saying that it is better to sell before the financial year-end distribution.

"There is little benefit from distribution, more unit /= benefit."
Yes and no. Actually, there is no difference, there is hardly any benefit.

The benefit is in marketing; distribution lowers the NAV price per unit, and make it easier to sell.

Why easier to sell? If 2 different funds increase by the same amount, say 1 sen, the fund with the lower NAV price per unit, will have gained more percentage-wise.

But this logic is, very often, wrongly applied such that a fund with low NAV price is a better buy since it will gives more value and will increase more percentage-wise.

This is flawed logic. Every gain or lost in a fund is in "percentage" and the NAV of the fund is divided proportionally in "percentage" to all the units. But people likes to see the gain or lost in absolute terms in number of units or ringgits.

Say for example, if a fund has a straight incline of 8%, it does NOT matter whether you buy at the lower end, middle, or higher end since it will gives you the same 8%. But psychologically, it is wrongly thought that that the lower-end buy with cheaper NAV price giving more units give better value. People sees the absolute numbers (more units) and thinks more value...

This post has been edited by j.passing.by: Jun 29 2012, 12:51 PM

No, you're mixing up 2 different concepts. Slowly re-read what you wrote, they are poorly constructed... you will see the right logic when you take them apart and reconstruct the sentences.

Say, 2 persons with investment in same fund, person A holding more units will gain more in absolute numbers than B. But percentage-wise, both A & B gains are the same.

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Added on June 29, 2012, 1:31 pmoh.. Pink Spider has posted an example with 2 different funds... thanks for the support.

This post has been edited by j.passing.by: Jun 29 2012, 01:31 PM

I watched that lawyer-kicking-client video last night... wondering what went wrong... could it possibly be communication? Since it was 2 chinese guys taking in english... and the client can out talk the lawyer... or could it be that people no longer got the time for proper communication; talking in short forms as they write and assuming the other party understands?

I digress... but reading back some posts, I got the same feeling here. So allow me to re-answer the same question... if not, readers would be thinking that some of us are ganging up and trusting down our opinions down their throats.

To be clear, this is not "opinion" or "perspective". Distribution does not increase or decrease the the net asset value of a fund; and it is a basic fact.

Unit trusts is not rocket science... the math level in the discussion is Form 1 and the reason/logic is, maybe, Form 2 level. UTC do not need Form 5 education to know the handful of basic facts of unit trust.

So the question again: "i.e. An increase of RM0.0001 in NAV will equate to RM0.15 increase in value (holding 1500 units) compared to RM0.10 for those holding only 1000 units?"

The maths in it is right. On its own (without the "before and after" distribution added into the statement), the logic is only partial. If one spend a little more time, and take it to a next phase of thought - which is how much one has to pay for the 1500 units vs 1000 units. Take the amount paid into consideration, to calculate the percentage...

Secondly, as said, there is miscommunication in that simple sentence. What is meant by "NAV"? NAV is short form for Net Asset Value. NAV in itself has no meaning; it should be NAV of the fund, or NAV price per unit. So what are we talking about in the first place?

"An increase of RM0.0001 in NAV" of the fund would be really, really insignificant when all the funds in the real world is in tens or hundreds of millions.

"An increase of RM0.0001 in NAV" price per unit... now we're talking the same subject. Do I have to explain further, since it is Form 1 maths in calculating the price per unit? Take a few moments and think it through... before thinking it is my "opinion".

My nephew, aged 6, would understand that if I cut a cake in 5 equal pieces and gave him one piece is the same as me cutting it into 10 equal pieces and give him 2. So the logic level is now down to kindergarten, not secondary school...

This post has been edited by j.passing.by: Jun 29 2012, 03:16 PM

wai... are you talking about me?

i was so happy holding hundreds of thousand of units...
now that i had pull out, the market is surging up today.

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Added on June 29, 2012, 4:03 pmNo need to take it personal... that's my 2 cents on why most of the posts are confusing to other readers.



This post has been edited by j.passing.by: Jun 29 2012, 04:03 PM

sigh... not even a thank you... like we are paid to answer the questions.

it makes me feel like changing sides and siding the bruce lee lawyer...

... maybe should have hit harder.

So many posts on same subject yesterday... yet fail to understand... so what level we are talking.

okay, let me make it more confusing & complicated...

NAV - what is this? Normally if just say NAV, it means NAV of the fund - because NAV is "Net Asset Value".
Apa maksud Net? Net = Bersih. So it means the Asset Value has taken into account the liabilities.

Another common word is "NAV price". This usually means the NAV price per unit.
One more common word "UIC"... Units in Circulation. This is the total number of units issued (or sudah jual) to unitholders.

(Who are unitholders? Investors. Or you can direct translate to BM, if more meaningful...)

How you get NAV price? Simple...
NAV / UIC = NAV price per unit.

ok? So far, so good?

Now pakai a bit of logic.

NAV price changes everyday. Why? Because stock market goes up and down everyday. So everyday, fund manager has to calculate the total asset and liabilities to know the NAV. Then do calculation, NAV / UIC to get the NAV price.

So everyday, the NAV and NAV price is calculated. So where got suddenly like magic the NAV become more richer overnight when distribution units is added.

Logic or not? You think fund manager got magic or take money out of his own pocket to pay the distribution?

ok? If not okay, think first... before we move on to maths...

Now simple maths only. No x y z. This one only learn in secondary school. I learned + - x / in primary school.

Also learned % when standard 3. (I think so lah, so long ago already...). 20/100 = 20%.
1/5 also 20%. 2/10 also 20%. All same 20%.

ok. Now this big stone, you got share 20%. Now we make it small small into guli. (So we can play guli.)
If we make the big stone into 100 big size guli, your 20% share is 20 guli.
If we make the big stone into 200 small size guli, your 20% share is 40 guli.

Now big size guli is 10 sen. Small size guli is 5 sen.
So guli big or small, your share is also RM2.
(If you do not take the guli, and let me sell all the guli, your share is also 20% or RM2.)

ok? so far, so good?

So in "distribution", the fund manager gives everybody extra units.
NAV = RM25 million
UIC = 100,000,000 units
NAV price = RM25,000,000 / 100,000,000 = RM0.2500 per unit

Distribution = 1.0 sen
Total distribution = 0.010 x 100,000,000 units = RM1,000,000.
(But remember, fund manager got no magic to suddenly create RM1,000,000 overnight.)

So change to units for distribution:
RM1,000,000 / 0.25 = 4,000,000 units

So now total UIC = 100,000,000 + 4,000,000 = 104,000,000.

So if you got 40,000 units in the fund. After distribution your units is now:
40,000 / 100,000,000 = 0.0400%
0.0400% x 104,000,000 = 41,600 units.

(Fund manger got no magic, also not stupid to take RM1 million out of own pocket, so NAV is still RM25million.)

New NAV price after distribution = RM25,000,000 / 104,000,000 = RM0.240385 per unit.

So, let's calculate what you have:
Before distribution: 40,000 units x 0.2500 = RM10,000
After distribution: 41,600 units x 0.240385 = RM10,000

ok? any questions?

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Added on June 30, 2012, 10:05 amexcuse me, pink, only got to read your posts after i posted...

wah, we got so much free time this morning...

This post has been edited by j.passing.by: Jun 30 2012, 10:05 AM

yeah loh, so much free time... more than that lah, since i had read your unedited post earlier... have to gather my thoughts first and simplified them also...

That's right, simple logic...

I also prefer to buy after distribution... up to us when we prefer to buy; and we can open new discussion whether better to buy just before or after distribution...

But don't to be like UTC simply say to client better sell next month because next month got distribution... no problem if he say next month stock market goes up, so up to client whether to believe or not... but say wait for distribution because distribution will increase wealth - this is so false and tipu client.

why my reply different from others? my reading comprehension fail or what?

is that good or bad?

waiting for hafiez to either rescue me or condemn me...