DCA is better than no planned method OR entry & exit rules. However, i do beg to differ - value averaging provides a better method in terms of risk management ($ at risk) vs. the returns (risk/reward ratio). Of course there will be Qs like "If the stock / fund drops so much, how can i cough up that much to value average ar?" - please google "TwinVest".

It's a similar discipline to DCA but ALLOCATING, not BUYING a specific amount of $ per period. Then based on the price / NAV, spend buy more or less.

Reasoning behind it is:
When markets are high, risk less (higher probability of heavier fall, lower probability of going higher due to "return to mean" / std deviation).
When markets are low, risk more (less probability of heavier fall, higher probability of going higher due to "return to mean" / std deviation)

Agreed with U on no. 1, monitoring. Buy and Hold (blindly) isn't my cuppa tea, thus, monitoring once a month is good enough for me.

Item 2 - well, like i've mentioned, there are methods to control the "$ to top up the difference compared previous month".
If U've the time - read these books
http://www.amazon.com/Value-Averaging-Stra...s/dp/0470049774
http://www.amazon.com/How-Make-Stock-Marke...05246175&sr=1-1

U may also want to take a peek at a statistical study done on DCA and VCA
http://www.google.com.my/url?sa=t&source=w...iKp9zZOtt2huW4g

BTW, DCA or VCA or a mix of them, does not have to be done monthly leh, it's "per period" - which can be monthly, bi-monthly, quarterly, etc. The main thing is the consistency.
Of course going "too long" or "too short" a timeline per period is nuts.

Yup yup - agreed. Risk management's the name of the game and continuous learning to manage risks is my goal - what to do, no silver spoon.
Some people say stocks (thus Equity mutual funds / unit trusts) are too risky but they do not realize that even driving is risky. A neophyte driving VS a learned & experience driver (especially having survived in India or Jakarta ) has a vast difference in risk due to learning & experience.
Finally a risk mgt bro

Would U be able to share your methods to manage risks in your investments?

Mine's quite simple (though may not be easy).
Step 1 - Asset Allocation (though not buy into straight away for the sake of "balance")
Note: I've squirreled away 6 mths living expenses already, thus the below are the balance
a. Equities exREITs / Rental Properties: 33%
b. Bonds / Money Market / FD / EPF: 33%
c. REITs / Rental Properties: 33%

Step 2 - Methodologies / Entry & Exit Plans
Split the Allocated per Asset into
a. Programmatic (like DCA and VCA for entry & take profit rules if >=50% in less than 1yr OR >=25%pa) where there's no fear / greed in execution of buy/sell/switch
b. Value investing (like entries based on discounted Intrinsic Value OR NAPS/Price OR DY% and exits based on Trailing Stop Losses %)
c. Punting (for the devil in me - trading, a very small %)
These methodologies are mostly applied to Equity assets.

Step 3 - Buy, Hold, Monitor & Tweak
All entries are into filtered stocks/funds/properties
(pre-filter done way earlier based on track record of Company or Fund / Financial Ratios for the past 3 or more years)


Rinse & Repeat Step 1-3

This post has been edited by wongmunkeong: May 13 2011, 12:43 PM

Hi Ghoss.

Based on an average annual return of 8%pa, to achieve $6K per year ($500 *12) = $75K. FYI - assuming 8%pa is a safe long term stats
Based on an average annual return of 10%pa, to achieve $6K per year ($500 *12) = $60K.

Take a look at the CAGR /pa statistics of most of Public Mutual's equity funds - it hovers from around 7% to 10%, median is approximately 8%

You're welcome Ghoss.

Usually, PM's mutual funds pay dividends yearly, IF ANY.
Mind U, the CAGR / pa average returns is based on dividends reinvested AND NAV (ie. price) growth. Some funds may not throw out any dividends. U can of course sell some units to make the profits.

FYI - a lot of folks misunderstand mutual funds' dividends. In a pure cold logical approach, these dividends are paid from the NAV. In simple terms - when dividends are paid out, the fund's NAV falls to the exact amount taken out, thus waffor? heheh. Purely psychological.

Hm.. put EXTRA $ into mutual funds, to gain the returns and pay for a property's mortgage. It's a loaded Q leh
Personally, i'm doing these:
1. Loan from SCB Mortgage 1 - totally flexible. Plonk any extra $ into to knock off principal amount, thus saving interest to be paid. Anytime, write cheque / online transfer to pay stuff like credit cards, investments, etc.
Heck, no bank gives me 4.3%pa daily rest, thus, i use my M1 a/c as a storage for ammunation

2. When there are value buys (REITs, Stocks) i draw down from the allocated amount in M1.
When i invest quarterly into PM's funds, i also draw down from the allocated amount in M1
Note that i ALLOCATE my $ in M1 for items via personal spreadsheet tracking.

3. My buffer $ is placed in:
3 months' expenses in M1
3 months' expenses in Public Bond Fund (only if crazy emergency i'll touch this mar, thus Bond now makes more % than M1's mortgage %)

Personally, i'd not wager big sum of $ into mutual funds (i ass u me cash?) to generate consistent $ yearly to pay for mortgage.
I'd rather put it in REITs or good public listed Companies (Nestle, Digi, LPI, PBank, etc.) at value buys or at high DY% rates. The DY% must be at least 2% difference from my mortgage % - just in case - it's a calculated risk.
Y all these instead of PM's equity funds? Simple - COST. Cash investment = 5.5% for PM's equity & balanced funds. EVEN if U can get a "discount" at agent's level (like me), the cost is STILL more than 3X the transaction cost of buying REITs or stocks. Lower cost = faster Break Even = Higher probability of profits & higher profits

This post has been edited by wongmunkeong: May 16 2011, 01:23 PM

Oops - sorry Ghoss for the "short forms". M1 a/c = Standard Chartered's Mortgage One account. A totally flexible home loan with overdraft cheque + online + ATM services.

Er.. "I asked as might as well I invest money and get the returns to pay on the mortgage rather than paying the mortgage and still need to pay the installments afterwards ."
whatcha mean?

If U want to "invest to generate yearly $ to pay for mortgage", most prudent method IMHO (just an opinion) is to go into investments where it NEARLY (nothing is 100%) SURE PAYS NET DY% >= mortgage % +2% (just in case).

Me - if i've got say $200K lying around doing nothing in FD, i'd plonk 50% in REITs (split into shopping, hospita, plantationsl & commercial/industrial) to get net DY% of about 6% to 7% and another 50% into Bond Funds (personally i'd do AmDynamic Bond Fund + PBond) netting about 6%pa
These are all "ass u me-ing" my mortgage is at 4%pa lar. If my mortgage is at 6%, forget it - i'll drop the $200K into my Mortgage One account and knock down the principal first (thus dont need to pay interest on the $200K) and at any time market crash, take out and go on a buying spree

Ghoss - my apologies but i beg to differ. Low risk = high profits IF done right
Imagine it's end 2008 (end Oct 2008 onwards) to 1st or 2nd quarter 2009. That's the time where risk is extremely low + profits is extremely high. Imagine buying LPI ($8+ to $9), PBBank (at $7.50), DIGI (at $19 to $20), TWRREIT, BSDREIT, STAREIT, etc. U will be laughing all the way to the bank, even if U had enough guts to put in 33% of your full ammunition.

Which one are U more comfortable with? the "style" i mean
eg. Forex - U better watch it carefully, especially if U r running with a 100:1 leverage. Read-up in the same LYN forum -there's something on FOREX. Horror stories and Good stories.
eg2. Stocks - U good at telling / reading financial ratios if U doing investments? OR good in technical analysis (fear/greed/volume/candlesticks/ etc.)?

Me - i'm a slow fler thus i like slower stuff - aint looking to replace my main job leh, thus i'm more into Stocks, REITs, Properties, Bonds (and the equivalent UTs / MFs).
Personally - i'd prefer to OWN an asset generating $ VS. owning the $

CheahCW, hehe - Category A shd read as "Equities exREITs / exRental Properties" hhehehe. paiseh, typed too fast, just did a "/" I baka.

Yeah - saw PB's offer UNIFLEX for levering on pledged Mutual Funds from PM. I've got a hair trigger with leveraged investments, especially when the supporting vehicles are Equities (eg. Equity Funds). I've yet to calc the spread if I pledge my bond funds though - may be worthwhile hehe. However, with OPR thus BLR, going up and up.. i suspect i wouldn't be doing it any time soon until another CRASH and then.. BWHAHAAHAH I'LL JUMP IN (1 foot only lar, not 2 - risk mgt man, risk mgt )

ETFs in KLSE is er.. hm.. how to put it nicely.. not worth my time so far. I can't use it for trading, can't "see" the details for direct investments control, can't really save much Vs mutual funds (fundsupermart 2% only! and i'm my best customer for PM funds ) if U think longer term and using SWITCHING instead of selling and buying.

REITs - may i share a very simple method, see whether worth your time or not?
1st step - filter for REITs having consistent ROE & ROTA of 8% and more every year. REITs need returns to pay dividends mar & i expect 7% to 8% dividend yield.
2nd step - filter from there, REITs with D/E < 0.6 (0.8 if U can stomach higher leverage). D/E = debt to equity ratio used in running the business
3rd step - wait for the filtered REITs to hit a DY% of 9% (coz i want net 8%pa mar) OR Price / NAPS (net asset per share) < 70% (hey, buying $1 of assets for 70cents' good!) hehe.
In end 2008 & 1st quarter 2009 I made a killing (by buying) and still making now due to some which i'm still holding, which is bring in NET DY% ranging from 8% to 10%pa, EXCLUDING price increase (ie. capital growth).

Books? i read about 1 to 2 books every 2 to 3 days (depending on job load & stress).
However, after a while, most of them... samey samey once U absorb the basics. It costs me a bomb testing some of the methodologies with real $ and real time (2 to 4 years) but worth while at the end of the day as "sure-ity" (well 80%+ lar) is there and there's a host of combo methodologies to use as market changes. Yes yes - i'm a NerKy (Nerdy Turnkey)
I'd tip my hat to 1 book which made a heckuva difference for me - T Harv Ekar's "Millionaire Mind", with the % spell out for net income allocation. I used that as a basis and customized to my personal wants/views.

This post has been edited by wongmunkeong: May 16 2011, 09:31 PM

Ah - a Property bro! I need to learn much much more on direct property investments. So far, no matter how i calculate it, it doesn't make much sense to me VS paper assets as i'll be locking up a huge % of my $ in 1 transaction + illiquid. Having said so, like paper investments, i've forced myself to get into it in 2009 also - got a "starter" service apartment with positive cash flow with 16% to 18% down payment & 28 yrs loan fixed rate ING 4.8%pa, in Casa Subang.
I still don't get it - even with the leverage, if i sell now, all in all, i'll get a net profit of CAGR/pa of only about 38%pa (if i compare to personal cash outlay only, ie. cash on cash returns). I'm kinda thick and slow me thinks Is there i topic somewhere in LYN that can point me (i'm a good digger once pointed, digging hungrily ) to the right direction for residential and commercial properties?

Hm.. since i dont believe i've a working crystal ball, i never invest by thinking too high/too low. I buy value , just like my grocery shopping and cash back credit cards.
For trading - i buy value too when volume spikes.
Thus, is KLSE too high to go in? er.. depends lor. Different strokes for Different Folks.
FYI - lots of folks (contrairians?) said 2010 was too high to buy in... i made, several transactions, >=25%pa returns in mutual funds and of all things, in PIX (index fund - though not strictly an Index Fund per se) using programmatic approach of TwinVest. Google that word - you'll find a host of interesting stuff. It's a combination of DCA & VCA & it's one of the tested methods that i've used real cash & time testing (also DCA, Trend, Counter-Trend, etc.) for mutual funds.

Oh.. i dunno if this will be interesting to U and the folks here reading this Fund topic - i've done a compilation and added 2 columns of statistics for Public Mutual funds' historical data.
10, 5, 3 & 1 yr ending 2011
10, 5, 3 & 1 yr ending 2010
10, 5, 3 & 1 yr ending 2009
10, 5, 3 & 1 yr ending 2008 (as a comparison on how bad crashes can be on Mutual Funds - yo yo! WHO said die-worsi-fication is good to protect yr investment take a look at this! Diversification shd be done across different categories of Assets, eg. Bonds, Equities, Alternatives, Cash Equivalents)

Shocking.. and eye opening - especially PSmallCap. Looking @ 2009 to 2011, it's INCREADIBLE. It's CAGR/StdDev is more than 1! ie. it cannot lose!
However, take a look at it for the years ending 2008. I think one of them shows PSmallCap hitting -32%+ CAGR drop

Note - all these statistics were pressed out of Financial Advisor just for idea sharing purposes ar - use at yr own risk

This post has been edited by wongmunkeong: May 16 2011, 10:20 PM


Attached File(s)
 PM_10__5__3__1yr_stats_for_years_ending_2011__2010__2009___2008.zip ( 94.6k ) Number of downloads: 297

Transit, thanks for the feedback. I'm just wondering whether anyone out there can actually make heads/tails of a crazed rat's ramblings in Excel bwhahaah. During spare time, i either read or test statistics - NerKy by nature (Nerd + TurnKey Automation kinda person). Any feedback on how it can be more useful is greatly appreciated - it may help adjust my personal methodologies too


This post has been edited by wongmunkeong: May 16 2011, 10:24 PM

Bwhahah - ok ok, best forum on this topic isnt LYN. Can point me to the other forum ar? heheh.

I just used FPAdvisor using specific dates (not the built-in 10, 5, 3,1), then add in my own conditional formatting to automatically highlight certain stuff for my eyes to pick-up + 2 additional columns which i think FPAdvisor needs but tak da (IMHO lar):
a. CAGR/STDDEV for ascertaining how much % probable that investment in that fund could have lost $
b. Total returns / Total Benchmark returns for ascertaining how well that fund did Vs. its benchmark

I think so - not ripe enough yet (1 yr old FULL minimum). Even in Personal Money mag - lots of new funds not listed, mostly belum cukup ripe yet (min 1yr old FULL)

Got ar PFES, definitely in the 2011 and 2010 end files - do a search in Excel.
Bro - the files are named in such a way that the 10, 5, 3, and 1 yr ENDS on 20110512, 20101231, etc.
Thus, PFES may not be in 2008xxxx and 2009xxx for certain years (most probable = 10yrs & 5 yrs)

---

Added on May 17, 2011, 8:04 amHi Double7. Nah - U can get it from Sales Agents or Investment Agents. Banks' "over the counter" pun ada. However, please be "picky" UNLESS U know what U want and have a methodology of investing - mostly are Sales oriented fellows


Transit & fellow investors, 1 last Excel to share - year ended 20071231 for 1, 3, 5. 10years.
Note the CAGR CRAZY returns - would this confirm then when things are far from "average returns", they tend to snap back to average (return to mean)?
Your ideas / feedback would be great - taking into account the other stats ending for 2008, 2009, 2010 & 2011 May
 PM_10__5__3__1_Years_as_at_20071231.zip ( 15.66k ) Number of downloads: 62


This post has been edited by wongmunkeong: May 17 2011, 10:23 AM

Ladies & gentlemen, anyone heard of "Bear Mutual Funds" being run by fund houses in Malaysia? It doesn't matter whether they are foreign or local focus. Google turned up lots of foreign fund houses' bear funds on Malaysia though no results (1st 3 pages) being run by Malaysian Fund Houses.

What are Bear Mutual Funds?
"Bear" mutual funds are a special class of funds that sell short, buy put options, sell futures contracts, use leverage or employ other strategies to increase in value as the underlying assets decrease in value. Conversely, if the underlying assets increase in value, a Bear ETF will decrease in value. Out of a universe of 12,500+ mutual funds and about 2,000 ETFs offered for sale in the US, there ain't many of 'em! (See also Bear ETFs.)

Most Bear mutual funds track the inverse of an index, such as the S&P 500 or the Dow Jones Industrial Average, or a specific industry sector, such as financial or bio-tech stocks.

Thanks RSTusa. That's what i'm planning to do - Asset Allocate a xx% for "IF kaka happens, this automatically...", thus i can focus on other stuff ;P

Hi Megatron. Congrats on choosing to start. May i suggest U take a look at the ZIP file i uploaded here for a big pix: http://forum.lowyat.net/topic/1577849/+413

cannot help it lar - personal financial planning, $ mgt, risk mgt and investment all numerics. If someone tells U U don't need to be numeric literate, be very very careful with that fellow . U know what usually follow the words "Trust me... would i lie?"

Having said that, the numbers aren't rocket science - i'm just an IS/IT fler + my SPM results for general maths is Credit 3 only if i remember correctly, no AdMaths

This post has been edited by wongmunkeong: May 24 2011, 02:32 PM

Transit, it's not subjective - U just need a Crystal Ball to look into the future . Lend it to him lar, dont hog it