Full Info of Public Mutual Funds

Public Mutual has 88 funds which is not easy to analyse all of them just by browsing around. Investing base one word of mouth (the company, the agent, friends etc.) is really not a good practice. So its best to put all the basic info into a spreadsheet and analyse from there.

Below is a link to a spreadsheet I have compiled for my own use. All the info is gathered from Public Mutual Online yesterday. I plan to add more info to it as I go along so you may want to refer to the link instead of saving an offline copy.

link to google doc

For example, I want to know which bond fund I want to switch to ...

• so I use filter to show only Bond 'category'
• show only 1,000 initial investment
• sort by Total Cost

I got these to choose from: (all have the lowest fee at 1.035% )

PB Islamic Bond Fund

PB Fixed Income Fund

Public Bond Fund

Public Select Bond Fund

list of Public Mutual Funds

Public Mutual is the largest mutual fund company in Malaysia, they have 88 funds !! HOW to choose wisely from 88 choices !? Its CRAZY !! If one can analyse all those 88 funds, one must be good at investing in stocks directly too!

Anyway below show the list sorted by Shariah compliant, followed by category of funds and lastly by fund name. This is the best way I can take a peek by the purpose of investment. Hope this is useful to you too ...

Fund Name	Fund Abbreviation	historical diff	Shariah	category
PB Islamic Cash Management Fund	PBICMF	PB	Shariah	Money Market
PB Islamic Cash Plus Fund	PBICPF	WHOLESALE	Shariah	Money Market
Public Islamic Money Market Fund	PIMMF	PUBLIC	Shariah	Money Market
Public Islamic Income Fund	PI INCOME	PUBLIC	Shariah	Fix Income
PB Islamic Asia Equity Fund	PBIAEF	PB	Shariah	Equity
PB Islamic Asia Strategic Sector Fund	PBIASSF	PB	Shariah	Equity
PB Islamic Equity Fund	PBIEF	PB	Shariah	Equity
Public Asia Ittikal Fund	PAIF	PUBLIC	Shariah	Equity
Public China Ittikal Fund	PCIF	PUBLIC	Shariah	Equity
Public Islamic Alpha-40 Growth Fund	PIA40GF	PUBLIC	Shariah	Equity
Public Islamic Asia Dividend Fund	PIADF	PUBLIC	Shariah	Equity
Public Islamic Asia Leaders Equity Fund	PIALEF	PUBLIC	Shariah	Equity
Public Islamic Dividend Fund	PIDF	PUBLIC	Shariah	Equity
Public Islamic Equity Fund	PIEF	PUBLIC	Shariah	Equity
Public Islamic Opportunities Fund	PIOF	PUBLIC	Shariah	Equity
Public Islamic Optimal Growth Fund	PIOGF	PUBLIC	Shariah	Equity
Public Islamic Sector Select Fund	PISSF	PUBLIC	Shariah	Equity
Public Islamic Select Enterprises Fund	PISEF	PUBLIC	Shariah	Equity
Public Islamic Select Treasures Fund	PISTF	PUBLIC	Shariah	Equity
Public Islamic Treasures Growth Fund	PITGF	PUBLIC	Shariah	Equity
Public Ittikal Fund	PITTIKAL	PUBLIC	Shariah	Equity
PB Islamic Bond Fund	PBIBF	PB	Shariah	Bond
Public Islamic Bond Fund	PIBOND	PUBLIC	Shariah	Bond
Public Islamic Enhanced Bond Fund	PIEBF	PUBLIC	Shariah	Bond
Public Islamic Infrastructure Bond Fund	PIINFBF	PUBLIC	Shariah	Bond
Public Islamic Select Bond Fund	PISBF	PUBLIC	Shariah	Bond
Public Islamic Strategic Bond Fund	PISTBF	PUBLIC	Shariah	Bond
Public Sukuk Fund	PSKF	PUBLIC	Shariah	Bond
Public Islamic Asia Balanced Fund	PIABF	PUBLIC	Shariah	Balance
Public Islamic Balanced Fund	PIBF	PUBLIC	Shariah	Balance
PB Cash Management Fund	PBCMF	PB		Money Market
PB Cash Plus Fund	PBCPF	WHOLESALE		Money Market
Public Money Market Fund	PMMF	PUBLIC		Money Market
PB Capital Protected Dragon Fund		PB		Fix Income
PB Capital Protected Resources Fund	PBCPRF	PB		Fix Income
Public Capital Protected Select Portfolio Fund	PCPSPF	PUBLIC		Fix Income
PB ASEAN Dividend Fund	PBADF	PB		Equity
PB Asia Equity Fund	PBAEF	PB		Equity
PB Asia Pacific Enterprises Fund	PBAPENTF	PB		Equity
PB China ASEAN Equity Fund	PBCAEF	PB		Equity
PB China Australia Equity Fund	PBCAUEF	PB		Equity
PB China Pacific Equity Fund	PBCPEF	PB		Equity
PB Euro Pacific Equity Fund	PBEPEF	PB		Equity
PB Growth Fund	PBGF	PB		Equity
PB Singapore Advantage-30 Equity Fund	PBSGA30EF	PB		Equity
Public Aggressive Growth Fund	PAGF	PUBLIC		Equity
Public Australia Equity Fund	PAUEF	PUBLIC		Equity
Public China Select Fund	PCSF	PUBLIC		Equity
Public China Titans Fund	PCTF	PUBLIC		Equity
Public Dividend Select Fund	PDSF	PUBLIC		Equity
Public Equity Fund	PEF	PUBLIC		Equity
Public Far-East Alpha-30 Fund	PFA30F	PUBLIC		Equity
Public Far-East Consumer Themes Fund	PFECTF	PUBLIC		Equity
Public Far-East Dividend Fund	PFEDF	PUBLIC		Equity
Public Far-East Property & Resorts Fund	PFEPRF	PUBLIC		Equity
Public Far-East Select Fund	PFES	PUBLIC		Equity
Public Far-East Telco & Infrastructure Fund	PFETIF	PUBLIC		Equity
Public Focus Select Fund	PFSF	PUBLIC		Equity
Public Global Select Fund	PGSF	PUBLIC		Equity
Public Growth Fund	PGF	PUBLIC		Equity
Public Index Fund	PIX	PUBLIC		Equity
Public Indonesia Select Fund	PINDOSF	PUBLIC		Equity
Public Industry Fund	PIF	PUBLIC		Equity
Public Natural Resources Equity Fund	PNREF	PUBLIC		Equity
Public Optimal Growth Fund	POGF	PUBLIC		Equity
Public Regional Sector Fund	PRSEC	PUBLIC		Equity
Public Regular Savings Fund	PRSF	PUBLIC		Equity
Public Savings Fund	PSF	PUBLIC		Equity
Public Sector Select Fund	PSSF	PUBLIC		Equity
Public Select Alpha-30 Fund	PSA30F	PUBLIC		Equity
Public Singapore Equity Fund	PSGEF	PUBLIC		Equity
Public SmallCap Fund	PSMALLCAP	PUBLIC		Equity
Public South-East Asia Select Fund	PSEASF	PUBLIC		Equity
PB Fixed Income Fund	PBFI	PB		Bond
PB Infrastructure Bond Fund	PBINFBF	PB		Bond
PBB MTN Fund 1	PBBMTN1	WHOLESALE		Bond
Public Bond Fund	PBOND	PUBLIC		Bond
Public Enhanced Bond Fund	PEBF	PUBLIC		Bond
Public Institutional Bond Fund	PINBOND	PUBLIC		Bond
Public Select Bond Fund	PSBF	PUBLIC		Bond
Public Strategic Bond Fund	PSTBF	PUBLIC		Bond
PB Asia Real Estate Income Fund	PBAREIF	PB		Balance
PB Australia Dynamic Balanced Fund	PBADBF	PB		Balance
PB Balanced Fund	PBBF	PB		Balance
PB Indonesia Balanced Fund	PBINDOBF	PB		Balance
Public Balanced Fund	PBF	PUBLIC		Balance
Public Far-East Balanced Fund	PFEBF	PUBLIC		Balance
Public Global Balanced Fund	PGBF	PUBLIC		Balance

There is NO such thing as Passive Income !?

21st century personal finance is moving away from saving and focus into the income arena. In short, the gurus are now educating public that saving is NOT good enough, hence sourcing for passive incomes on the another hand is a BETTER solution, than just saving alone.

While the concept is definitely true and correct but unfortunately as the hypes go bigger and bigger, the idea of passive income has been abused and more scams started to appear in the market, as if they were the gurus as well. Except the 'passive income' they refer to is barely promoting their own original same old products. The personal finance market has become so competitive that even some real gurus have no choice but to go beyond the line in their marketing effort - Robert Kiyosaki is no exception in spreading "Saving is bad".

Although passive income is very well defined here using income ratio 1:100 but is there really such thing as Passive income ? When I looked up dictionary, these words come up

PASSIVE : not participating, inactive, not reacting, inert or quiescent.

None of these words correctly describe a well implemented passive income. I use my best judgement to find a good location, a value property and a pay master tenant. I setup a profit take target and an exit strategy in my investments before I leave and let them auto pilot. All of these are very participating, actively applying my knowledge and experience, reacting appropriately when necessary etc.

The word "Passive" also gives people a psychology of No Need To Do Anything; As if an easy to get rich scheme with a better cover.

Hence this article wants to pursue all readers to stay away from the term Passive Income. Its negative, misleading and now abusive by the over-stress marketing effect. Instead, think of Smart Income !

There is no hard and fast rules for Smart Income. Any income can be earned the regular way or the Smart way !

An employee can use minimum of his time effectively to earn the highest salary or benefits. A self employ can easily leverage on Internet to earn income repeatedly. A business owner can employ a system to run his business. An investor can setup an autopilot mechanism.

So no matter which income quadrant you are in, it is possible for you to turn that income into a smart one. Its a matter of HOW you earn your income, NOT WHAT you do.

Are you pursuing smart income ?

21st century Economy Politic Quadrant

The Economy-Political Quadrant may seems like telling where to keep or invest your money despite good or bad time.

It indeed works very well during 20th century. Unfortunately comes to 21st century, not only has the year changed, personal finance arena has changed drastically as well.

Gold has been speculated so much that it MAY no longer be the standard of money.

There used to be only 'property' in the city. Now there are satellite towns, suburbs ... agriculture lands and even dust bins ( recycle ) have become valuable estates too. While property remains the right category to invest into whenever economy is booming, but predict the right future seems like tougher than buying lottery.

Government bonds used to be de-Facto action when a country is stable. But in today's world, a country is as smart as a taicon's finance. One day they are the LARGEST, the next day they are GONE.

Stock market used to be the back bone of a country's economy. However, the market of derivatives has become so HUGE that the REAL and PHYSICAL is NO LONGER more real than VIRTUAL

So in 21st century, the element of Stock-Property-Funds-Gold is really questionable. However, one fundamental that doesn't change is that

you will have to identify what to do at what time that is BEST for YOU !

Hope you will find your own very best Economy-Political Quadrant soon !

Economy Politic Finance Quadrant

There are 2 BIG main external factors affecting our investment decisions

• Economy
• Politic

When the time is really bad (economy downturn and politically unstable), its best to park your money under something that is really stable, ie Gold. Which is by definition usable anywhere you go in anytime.

When its good time, invest direct to the stock market would yield very good return.

When the economy is not so good in a strong country, the government bonds or related money market would be able to yield higher return than just gold.

However, the most dispute solution in good economy unstable country is investment in property. This is mainly due to easier rental and higher chance of capital gain.

By simply moving money around depends on the political and economy situation, one was able to achieve more than 12% compound return for the past 20 years. That is equivalent to a 10X return.

But by no mean this is easily done. Some of the concerns include;

• how would one know exactly when economy/politic turns good/bad ?
• is Gold the ONLY option ?
• property may not easily liquidated
• how to choose which property or stock market ?

. . . which can be explored further.

Mutual Fund of the year 2010 ? By the numbers ...

In 2009, about 10 mutual funds thats worth looked into were selected out of 530 choices in Malaysia.

Today lets take a look at how they performed in the past 6 months. Below chart shows their respective return in percentage. From past 1 day, past 1 week, past 1 month etc.

The actual percentage return is NOT important here. We are comparing fund performances across different fund managers. What we are looking for is a graph that consistently stay above the others. That would give an indication of "consistently outperform the others".

The most apparent winner is OSK Equity Fund and the worst is Public Ittikal. However, this does not imply anyone of them is better than another. The market has been trending up generally. OSK is well verse in stock market and therefore able to catch most of the up trend. Public Ittikal on the other hand only deals with halal and safe instruments. You can be assured that both of these funds are very strong in their fundamentals.

However, one clear message from this chart is that we can take TA away from this list. As you may see, their chart patterns show as if they have no clue how the market will move and don't even have any good strategies in their fund management. They are supposed to be as good as OSK.

So if you think the market is continue to be bullish, exercise DCA on OSK-UOB Equity Trust. Else if you prefer safer haven, try AMB Ethical Trust and Public Saving.

More Info : invest your EPF money in stock market direclty.

It was mentioned before that you can use your EPF money to invest directly in the stock market, especially through Jupiter and Amara. The main selling points are;

1. cheaper than invest to Mutual Fund ( 5.5% ) vs 3% charged by Amara
2. freedom to invest in any particular stock and not a whole portfolio.

Although Jupiter only charges 0.1% or minimum RM 10 brokerage fee but actually Amara, the licensed EPF withdrawal facilitator, have more charges other than the 3% one time drawn down fee.

The significant ones are

• Transaction fee : 0.1% or minimum RM 15 per contract
• Custody fee RM 0.005 per 1,000 shares per month

Add together with Jupiter's fee, your total brokerage fee may effectively be at 0.2% or minimum RM 25. So each MOTS (Minimum Optimized Trading Size) is RM 12,500. With RM 25,000 you can only make 2 transactions.

Assuming you fully load all your investment in the market and average price per share is RM 1. Then 25,000 shares /1,000 x 0.5 cent = RM 0.125 every month. 1 year would be RM 1.50. That would be 0.006% of your initial RM 25,000 investment.

At the end, you may still be paying 4-5% fee in the whole process. In contrast to mutual fund's 5.5%. If saving fee is your main target, perhaps becoming a mutual fund agent yourself could end up saving more. On the other hands, most of the EPF oriented mutual funds are charging less fee.

So if EPF gets a 5% return, you should be able to do more than 10% in order to 'invest yourself'. Else you may just be depleting your ASS - Automatic Saving System.

Also be reminded that if you make a lot of transactions, you may end up paying more than 6% fee.

Malaysia Unit Trusts 5 years Return

Below table shows the return of Unit Trusts in Malaysia from 2001 to 2006. I added two columns to the right.

Average return per year is simply return divided by number of years, in this case, n / 5 years ie. 25.9 / 5 = 5.18

Equivalent Compound Return Rate is using the FV formula to calculate what the interest rate would be if you save $100 5 years ago to get the same return. This is the number you should use to compare with Fix Deposit interest rate.

Pit falls ? Not so much on that but some key concepts when reading numbers like this ...

These numbers don't mean much by themselves. You should compare them with other numbers to make more senses and decide course of action. For example;

• Compare with Stock Market indexes. Mutual funds are suppose to outperform certain benchmarks. So a fund is only really doing well when it is BETTER than ....
• Compare with Fix Deposit interest. Are these rates significantly higher than FD through the same period ?
• Compare with Inflation rates. Similar to FD comparison but from a different angle.
• Compare with itself. How are the performances 2002-2007, 2003-2008 etc ? 2007 to 2008 are losing years. If one uses 2001-2006 as the 'BEST' years, then numbers of 2007 to 2008 should also be analysed as the 'WORST' years - as in comparing reward and risk ratio.

Lastly, match past record to today's situation. Index Tracking funds did the best during economy recovering years from 2001-2006. Is today's economy like 2001 ? If yes we should buy ! Or is today more like 2006 where economy is booming but due to doom ? If yes we should probably cash out. Or is today in between ?

Don't know what this is all about ? Apply Dollar Cost Averaging.

Remember that if you apply DCA, above mentioned returns do not apply to you neither.

What you can do with mutual fund's high fee ?

It was mentioned that Mutual Fund is one of the few personal finance tools that can provide highest return passively. (A) There are a lot of other venues that can provide higher return but they require much more active effort than mutual fund. (B) There are also a lot of other tools that is more passive than mutual fund, but their returns are not high. (C) There are also some solutions that provide both high return passively but they are NOT personal tools.

However, even the best tool in the world can be a disaster when used wrongly. Mutual fund is no exception. The right way to use mutual fund in your personal finance is;

1. choose the right fund manager

2. choose the largest or most active fund ( In Malaysia, the only choice is Public Mutual )

3. apply Dollar Cost Averaging

4. adopt Buy and Keep, not Buy and Sell. Buy and Switch, however, is a good alternative between the two.

Any activities other than above may stop you from using mutual fund to

1. provide the highest return

2. passively

3. personal tools

With that in place, the only challenge left is its high fee. Although there are many justification on the fee, the future for mutual fund industry is actually the continous effort to streamline this service charge. There are 2 ways to do that;

1. Provide more values from the same high fee or

2. Cut to lower fee by streamlining distribution channels.

The good news in Malaysia is, there are already distinctive winners in both strategies. Public Mutual will continue to provide more values to its investors, the significant threshold is MYR 100,000 where you become a Mutual Gold member to rip those benefits out of the service charges you paid.

On the other hand, Fundsupermart is the winner in low fee funds. However, Fundsupermart is NOT a fund manager. They only provide a trading platform for fund managers to distribute their low fee funds. Buying and Selling funds in fundsupermart is a totally whole new concept comparing to traditional methods. Hence do take sometime to learn and realize what you have given away when paying the lower fee. Whatever result you get in future is the action you take now, its all you now and no one else to blame.

What else can you do if you want to invest with mutual fund but want to minimize the high fee impact ?

Join the industry to promote mutual fund as an agent. All agents get paid in commissions. If you buy from yourself, part of the service charges you paid goes back to yourself. It may not be easy as this actually require a lot more effort to get qualify etc. But the knowledge and experience stay with you.

So in contrast to mutual fund's service charges, you can;

1. rip more values from your fund managers - Public Mutual Gold

2. buy lower fee funds - Fundsupermart

3. buy from yourself - ...

Other related articles

One of the earliest mutual fund articles - an introduction

do you love or hate mutual fund ?

Stock fee vs mutual fund fee

Bad Fund Manager :Force invest or blindly follow rules

Bad Fund Manager: over or under diversify

Size does matter in mutual fund selection

It was mentioned before that when choosing which mutual fund to invest in, it is more important to choose the fund manager rather than the funds. However, most of the times the fund manager is not a single person. In most established mutual fund businesses, the fund manager itself is a team of people. Although sometimes there may be a single person making all the investment decisions but as time goes, business expands, number of funds to manage increase and that person will eventually need to delegate, either to a system or other people.

So how to analyse the fund manager then? Well, in that case the fund manager is actually the company, so we analyse the company itself.

Investment is a money game. You use money to earn more money. If you have the right strategy and little money, you would probably make some money. But if you have a lot of money to start with, you probably make so much more when your investment decision is right. Earning 100% from $1 gives you $2, but earning 100% from $100 gives you $200. The earn ratio is the same, but it is a huge difference between $1 and $100 ...

When you make a mistake losing all your money, you are dome. But if you have more money, you can apply money management so that you have some reserve funds to try again, especially to cover your previous mistakes. So more money gives you more number of investment trials.

As mention before, the higher amount usually also implies lower fee in most investments. You can buy stocks with $100 but your cost can be as high as 8-10%. But if each of your transaction is above MOTS : Minimum Optimized Trading Size ie. $20,000 then your fee is lower than 1%.

So Size Does Matter and the primitif requirment for a fund manager to perform is to have a large sum of capital.

In order to keep mutual fund as a passive investment tool ie. simplest decision making, we can simply pick the largest mutual fund company to invest in. In Malaysia, its has been deadly simple in this aspect, Public Mutual is not the obvious choice but the only choice when size is concern, too bad.

According to Liper Fund, as of 22 June 2009 these are a total of 68 millions of unit trusts managed in Malaysia. The fund sizes managed by various Malaysia Unit Trust Management Companies are as followed;

28 millions Public Mutual

8 millions AmInvestment and CIMB

3 millions OSK-UOB, Prudential

2 millions HLG, Hwang-DBS

1 millions ING, Pacific, MAAKL

So the truth of using mutual fund as the highest return passive personal finance tool is as simple as buying Public Mutual every month automatcially using a Standing Instruction ie. apply the DCA - Dollar Cost Averaging technique. This recommendation has been true for the past 10-20 years and most likely to be continue correct for the next 5 years.

To further show the confidence on this recommendation, anyone who has had a Public Mutual fund with DCA applied. If you are still NOT happy after 3-5 years, contact me for a potential total buy out of all your investment units.

It will take a while for 8 millions to catch up with 28 millions. However, not impossible. If you have been watching all the mutual fund companies growth for the past 10 years like I have, the growth of OSK and Prudential are really significant.

If for whatever reason Public Mutual is NOT an option for you, the other choices following this same argument would be CIMB from the banking industry and Prudential from the insurance industry. While CIMB's size stands side to side with AmInvestment but Prudential is way ahead of other insurance oriented mutual fund companies.

How about which funds to buy ? Well, following this same argument, we should buy the largest fund size funds. And that usually means NOT the NEW funds. Most of the older funds have bigger fund sizes. Believe it or not, some of the recommendations based on performance here are actually some of the oldest funds too.

KLSE New Tick Size Impact

this is a follow up post ...

This is the current tick size in KLSE. It means if you buy a stock at RM 0.900 the next up price is 0.905 and the next down price is 0.895. Like wise, if you buy a stock at RM 1.01, the next prices are RM 1.00 and RM 1.02

If we plot a graph across a range of prices, we can observe that the tick size may imply a different percentage to each price, also known as having different weightage.

For example, if we buy at RM 1.00, the tick size is RM 0.01, so the weightage is 1%. If we buy at RM 2.00, the tick size is the same but the weightage is 0.5% <== ( 0.01 / 2 * 100 )

Y axis : tick size weightage

X asix : stock price

From above chart, we can see that the tick size effect is broadly cap at 1% except when the prices are lower than RM 0.50. So buying stocks at RM1, RM5, RM10 and RM 25 have similar effect, percentage wise.

Below is the latest tick size starting from 3 Aug 2009.

And this is the associated graph.

When you put both graph together, the current / old tick size vs the future / new ones, you get below graphs ...

There are no changes for stock prices below RM 3.00

However, all stock prices at and above RM 3.00 have significantly changes ! In short, starting on RM 3 onward, the tick size weightage is moving toward Zero as the stock price increases. With an exception at RM10+.

This brings to 2 recommendations when the new tick size is implemented;

1. Long term investors can now accumulate expensive stocks with much cheaper cost, especially those between RM 3 and RM 10.

2. The only speculatable ground is now reduced to below RM 0.50 arena only.

In short, this is great for both long term investors and speculators. Generally more expensive stocks ( above RM 3 ) are running business at larger scale. Reducing speculation on these businesses and attracting more long term investors generally allow them to grow steadily and improve health on the play ground.

However Malaysia shares buyers don't really know much about Minimum Optimized Trading Size and Tick Size Weightage anyway. Most do NOT trade strategically. Hence we will most probably NOT see any BIG change in trading habits especially for retail investors.

On the other hands, fund managers are not that ignorant on this aspect. If the mutual fund you are holding also invest mostly into RM3 to RM10 stocks, like those capital growth fund. The average fund's transactional cost could save as much as 75% simply by doing nothing after 3 Aug.

Take RM10 stock for example, one tick size changes from RM0.10 to RM 0.02, that is a 80% discount!

Although this saving is actually a strategical cost saving, not a real and direct cost saving. But nevertheless this will still leave a positive impact on a fund's portfolio. So theoritically, your mutual fund should start giving you better return after 3 Aug. Fund managers who choose not to report about this cost saving in their next annual report, are fund managers you should consider challenging on their transparency, honesty and their true interest with your money.

I can finally buy more BAT ... :)

How to passively choose a mutual fund

Soon after this site claims that mutual fund is one of the PASSIVE personal finance tools, it turns around and shows a past performance analysis where some of the best performed funds are choosen base on their prvious good returns. Looking at those numbers and charts, it doesn't seem PASSIVE at all !

What is going on ? What is the Right way to decide which fund to buy the passive way ?

The FIRST mutual fund article on this site had already mentioned the answer actually,

Choose Fund Manager,

Not the Fund !

Despite many justification of the high fee on mutual fund (general, vs stock fee), one must admit that Its FREE to save money in Fix Deposit and buying shares in stock market is cheaper. Mutual fund could be the MOST expensive personal finance vehicle.

So what are you paying for ? Why do you want to pay 5-6% UP FRONT in order to earn more money ?

Are you sure you want to pay the extra fee just because they did good in the past ?

Do you pay more just because you agree with the investment objective of the fund ?

How about just because a certain fund has some of the stocks you want to buy anyway ?

The agent is your friend, she did a great sale talk ?

Lets see what happen when you pay extra in other scenarios;

Sometimes I like to shop in a particular grocery store more than another even if some items are slightly more expensive. That is because the store owner is really friendly and knowledgable. He can answer most of my questions and I really don't mind letting him earn the extra cents.

If your ultimate goal in mutual fund is to earn more money passively without understanding the whole mechanism, then what you are really buying is your belief that the fund manager can do well with your money.

Choose Fund Manager,

Not the Fund !

The fund itself is pretty much a fix element, the objective is hard cast on stone. Past performance tells a lot but is really irrelevant to the future but future income is what you really care about. The environment could repeat itself or it may change. Either way, there is only one element that we can hope for to address all future unknown issues - the Fund Manager.

If the objective of a fund is met, its because the Fund Manager did a good job. If the good past performance continue, its because the fund manager is keeping it. If the bad past performance turns good in future, it is because the fund manager improves.

Without the trust on the Fund Manager, all other aspects carry less or almost no weight at all.

So that is it! Find out who the Fund Manager is, ask for a lunch date or read their reports to determine if this is the type of guys or companies you would trust your money with.

After you have found a fund manager you can rely on, just look through all the fund objectives and pick one that you understand most or have the highest hope for.

Why so many hates & loves with mutual fund ?

When the series of mutual fund articles were initiated, a lot of contradictions are raised. Some are intended and some are not. Here are a list of them in respond to Mutual Fund is the Highest return Passive finance tool, Don't Buy Low Sell High in mutual fund ?

1. Fund managers are incompetent
2. The only people who gest Rich are those agents, not the investors!
3. mutual fund fee 5-6% are terribly HIGH!
4. mutual fund returns are LOW!
5. mutual fund is NOT a PASSIVE investment, you may as well buy stocks!
6. Buy Low Sell High is applicable in mutual fund, why should I keep the fund knowing the price will drop?
7. Mutual fund cannot be compared with FD, their risks are different!

It is no surprise why many will hate mutual fund as well as some loving it. Lets revise the wealth pyramid again.

Fix Deposit / Bond are generally acceptable as a worry free saving while stock investment is generally understood as risk is involved. Guess what, Mutual Fund sits in between them and actually is the only personal finance vehicle that transition from one to another. So by its nature, there will always be some confusion and conflicts in mutual fund. What FD people likes about mutual fund is usually what derivative investor hates about, what a stock investor likes about mutual fund is usually something a FD guy would not agree.

At one end, mutual fund is like a FD, on another end its like a stock investment but actually it is Neither of them. So you cann't compare mutual fund with FD and yet you could, like wise with stock investment.

There will be some articles addressing some of the concerns raised above, but below are the short answers.

1. If you look at the world's best investors of all time, in average they out perform the market by 6.46%. This includes Warren Buffet, Benjamin etc. Most of the fund managers may not be as good as the Gurus, but their past historical performance is not that far apart.
   
   Most people who curse at fund manager's competency are due to their unrealistic expectation. Some ofcourse is due to their own unhappy experience. Either ways, generally fund managers' performance is at par but definitely has room to improve.
   
   
2. Let's face some factual figures. The most a mutual fund business can squeeze out of the investors are the 5-6% no matter how they distribute among their agency force. Insurance can be up to 40% while MLM structure usually allocate more than 55% in similar distribution.
   
   So if one is worry his agent gets richer just because he invest, mutual fund is probably NOT the first and major concern relatively.
   
   
3. The 5-6% High Fee is VALID but may not be as bad as it was described. For example, a comparable stock investment with 0.7% fee could have an effective rate of 2.31% vs the mutual fund's 5.5%. So buying one mutual fund is as if buying 2 stock counters.
   
   
4. See 1). Get the expectation right. No one becomes rich because they buy mutual fund. But when done right, many retire wealtheir than they initially thought of.
   
   
5. Yes, mutual fund CAN BE an active invesment like in 6). But MalPF preaches not to use it that way, one should use mutual fund the PASSIVE ways.
   
   
6. If you know the timing of a market trend, mutual fund and dollar cost averaging concepts is NOT something for you. Buying a stock can give you exercise your timing concept with lower fee. This is an example of how to.
   
   Are you sure you are not an agent earning commission when you encourage people to speculate using mutual fund ? Are you sure there is no conflict of interest with your clients portfolio ?
   
   
7. As mentioned above, the top part of mutual fund ie. equity fund cannot be compared with FD but the lower part of mutual fund ie. capital guarantee fund, money market fund etc. CAN.

Do you hate or do you love mutual fund ?

Choose a mutual fund using numbers ?

Making investment decision based on historical records is NOT the best way. However, it is one of the FEW methods that is measurable. This method cann't say much about the future but it absolutely show evidence to what they have promised before ie. the goal of the fund itself.

There are 38 mutual fund companies in Malaysia, more than 530 funds have been launched in the market. There is about 160 billion ringgits Net Asset Value all together. Making it the largest component (20%) in the whole Malaysia stock market.

Below shows all the funds performance information for 4 companies;

Public - 67 funds,

OSK - 34 funds,

AMB - 15 funds and

TA - 16 funds.

That is a LONG list to look at. However, if we focus on a few criterias ;

1. Funds that are more than 5 years old

2. Funds that have received good ratings from 3rd party

3. Equity or moderate to high risk fund, ie. exclude bond and income

More than 75% of the funds can be filtered out immediately!

Then just plot some graphs to look at each of the remaining funds, try to see if one is MORE "Apparently Better" than another.

This is the short list result from this exercise;

PB Growth

Public Growth

Public Ittikal

Public Regular Savings

Public Savings

AMB Ethical Trust

AMB Value Trust

OSK-UOB Equity Trust

OSK-UOB Kidsave Trust

TA Growth

TA Islamic

Still a long list to work with ? One may further compare the funds and pick the highest return fund, but that is Highly NOT advisable. Playing with numbers any further than this stage would be considered as obsessity and may result totally irrelevant investment decision.

This list tells the following;

1. These funds have been managed well. The reasons could due to talent, regulation, the goal of the funds ... no matter what the reasons are, they have been managed well for the past 5-10 years.

2. They have performed BETTER than other funds in comparison.

It may also carries these implications:

1. It is unlikely these funds just get lucky continously for 5-10 years

2. Despite all the potentially bad things that may happen,

However, the list DOES NOT mean these ;

1. These are the best funds,

2. These are the funds to buy now,

...

Mutual Fund, Buy-Sell or Buy-Keep ?

There are mainly 2 different schools in mutual fund believers.

1. Apply Dollar Cost Averaging, (DCA) put in money consistently for a long long time. Never take it out until you die, retire or you initially planned to. Lets call this Buy-Keep technique.

2. Buy Low Sell High, when market is bad, buy more, when market is good, sell them to take profit then buy again when market is low again. This way you maximize your return, the more you roll the bigger you get. Lets call this Buy-Sell technique.

There may be some simple answers : (a) Its really a personal preference; (b) If you know DCA you use DCA, if you know the market, you use Buy-Sell techniques. But at the end of this article, there may be a distinctive answer NO MATTER if you have a preference or understand anything on DCA and the market.

DCA is boring. All it says is you save a FIX amount of money PERIODICALLY. It doesn't tell you when you can take profit, when to withdraw. It doesn't care what the market is doing now. It just say save, save save ...

The good thing about DCA is it is simple. You just need to know (1) the amount and (2) the period. And both of these parameters are 100% under your control. You decide the amount and you decide the period. Another good thing about DCA is it is usually 'cheaper' - as low as $50 or $100 for each transaction.

The good side of DCA's simplicity can also be viewed as its disadvantage. Simple may also be viewed as lack of abundance, or in this case, ignorant. Admit it, its kind of stupid to think that if I want to earn money, all I need to do is to decide the amount and period !? Having said that, DCA is not really easy to implement neither. Simple concept is NOT always Easy to execute persistently. Unfortunately This has been statistically proven.

The good stuff about Buy-Sell technique is its exciting. You may read news, find info, analyse finance data or even play with charts in order to know the up down of the market. You may even be very well verse in some particular industries that you have secretive insider knowledge. Either ways, it is exciting. You may be able to gain big profit when your decisions are right.

The unhappy moments of Buy-Sell technique is when your intrepretation of the market is wrong. Or may be you are still right, just that the market goes the other way. It could be big guys play you out, natural disaster or simply that you thought you knew but actually you didn't. On this method, you will need to spend some effort to analyse the 'timing'. You need to know when to buy and you need to know when to sell. If you spend too much time on the timing, it may be disqualified as a passive income generator afterall.

If you are reading sequentialy, there may not be any apparent answer yet. It still seems like a preference issue.

Lets look at the risk-reward of both techniques. In long run, DCA seems like to be able to cushion the risk, but it would also provide lower return. So relatively, it seems like a lower risk lower return. Buy-Sell on the other hand is very investor dependant and therefore high risk high return.

Athough a weird dude run some numbers and said that in DCA, when you lose, you lose less and when you win, you win more. But in this context, Buy-Sell technique would still provide higher return than DCA while carrying more risk. Buy-Sell technique can also claims that the longer one practise it, the more experience one will gain and therefore, the longer it is the higher chance one may win. ( hardly a truth neither )

Ok, by now can you see any distinctive answer yet ? If not, then we will have to run some numbers again ...

Says you use DCA method and put in $1,000 a month for 5 years. You would have put in $60,000 in total. If you are paying 5% charges, the total fee you have paid is $3,000 through out the 5 years period.

On the other technique, lets say you buy-sell twice a year, that would be 10 times in 5 years. Assuming the average of each transaction amount is the same as your initial capital, $60,000. The total fee you have paid would be $15,000. Equivalent to 25% of your initial capital. Comparing to 5% from DCA method, this method is disadvantage by 20%, not in practice, but in strategy.

So if out of the 10 times you buy and sell, your total lost-win ratio is 50-50, then you would most probably ended up with performing 20% lower than DCA method ( not really, read on ). In other words, in order to eliminate this potential strategy short fall, your lost-win ratio should be at least 40-60 in order to break even. ( Conceptually, not exact by numbers because other parameters are needed for full calculation ).

Another way to put it, if you earn the SAME return in both techniques and you have a net profit of $1 in DCA, Buy-Sell technique would have given you $0.80 only.

If we go back to the fundamental in mutual fund is that we pay HIGH fee for professional services. If after paying them such a HIGH fee, you turn around making your own calls. It would be equivalent to wasting all the HIGH fee you pay them at the first place, wouldn't it be ?

No doubt Buy-Sell technique is a good method but why would you ever want to pay 5-6% fee comparing to other tools that charges less than 1% and yet allow you to buy sell much easier ?

So no matter if you have a preference between Buy-Sell vs Buy-Keep, no matter if you really understand DCA, no matter if you know the market, you should NEVER apply Buy-Sell techniques in mutual fund.

If you still insist to Buy-Sell mutual fund, then please understand this formula ....

The only scenario where Buy-Sell mutual fund is NOT strategically disadvantage is when you found a particular fund that already has a large number of stocks that you planned to invest into anyway. In that case, there is a chance that the 5-6% high fee is average down by the number of stocks until it is even LOWER than the stock invetment fees.