By FINTAN TAN
WHEN external demand dries up, most governments of export-reliant countries aim to increase domestic demand by encouraging private consumption while ramping up public spending.
Besides fiscal measures, they have lowered key policy rates, which in turn triggered cuts in the commercial lending rates as well as the rates for savings. These cuts in interest rates worldwide have put the returns on savings in danger of turning negative, if it has not already.
In the euro-zone, the interest rate is now 1.5% after the European Central Bank cut its benchmark rate by 50 basis points on March 5.
On the same day, the Bank of England cut interest rates to 0.5%, the lowest since the bank’s founding in 1694. In the US, the federal funds rate is now zero, after the Federal Reserve cut the rates from 1% in mid-December last year.
Since November, Bank Negara has cut its key policy rate, the overnight policy rate, by 150 basis points to 2.0%. Following the cuts, the base lending rate, which is the benchmark commercial lending rate, also fell. It now averages 5.55%, according to bankinginfo.com.my.
The average rate on a conventional one-year fixed deposit (FD) account for most banks have fallen to 2.50% payable at maturity from 3.70% to 3.75% a year ago.
While the threat of crippling inflation has fallen by the wayside, there is still residual inflation. The consumer price index (CPI) increased in January by 3.9% to 111.7, compared to a year ago, due to increases in the prices of food and fuel.
The real interest rate is the rate after deducting tax and the rate of inflation. That means savers are getting a negative rate of return if one takes into account the inflation rate as measured by the CPI and compares it with the current one-year FD rate. In fact, for last year, it was minus 1.7%.
Some experts say that we just have to bite the bullet.
Fair enough, if one is young and have 25 to 35 years of employment and hopefully, saving and investment opportunities, in the future.
For savers, whether working or retired, the drop in the FD rates is not a good thing even though it is unavoidable. For those who have retired and are relying on their interest income, this will be especially hard.
If they have investments – which to the average Malaysian, are in the form of equities and property – they would have suffered losses. Inflation would have also eroded the value of government bonds, even if held to maturity. But government savings bonds, at least for the risk-averse, are still the safest.
That is why in January, the Government announced it would be issuing up to RM2bil in bonds aimed at people aged 56 and above as well as those who have retired on medical grounds.
Bon Simpanan Malaysia has a three-year tenure and offers a return of 5% per annum with flexibility for early redemption before maturity.
But as a reader pointed out in a letter to The Star in January, applicants are only allowed to subscribe up to RM50,000. He said that the Government should consider doubling the bond issuance to RM4bil and allow senior citizens to subscribe up to RM100,000. Even then, he worked out that the return will only be RM416 a month based on the RM100,000 principal sum.
The Government also announced that as part of the RM60bil stimulus package, it will issue up to RM5bil in saving bonds this year for people aged 21 and above with a maturity period of three years and an annual return of 5% to be paid quarterly.
In such a fluid environment, where recent economic indicators, whether domestic or external, have been bleak, any sort of opportunity to save for the future is welcomed, especially if it’s considered “safe”.
The situation for those who are working and contributing to the Employees Provident Fund (EPF) is just as dire. The EPF said last month that investment income for the third quarter of 2008 plunged 60.4% compared to the same period a year ago.
EPF contributors cannot expect a dividend payout similar to that for 2007, when the pension fund announced a 5.8% dividend, but it should not go below 2.5%, the minimum rate set by law.
For those who are relying merely on their EPF savings for their retirement, reports and studies have already shown that it is thoroughly inadequate.
When and if this blip in EPF dividend payouts is factored in, coupled with residual inflation, contributors may not be seeing much in terms of returns over the next few years, since economists have said that this will be a long drawn-out recession. Savers, prepare to batten down for the storm.
Source: The Star , 14 March 2009
Friday, March 13, 2009
Did Ka-shing diversify enough?
COMMENT By TAY HAN CHONG
Time to review our portfolios and consider the alternatives available.
ARE you richer than Li Ka-shing? I suspect not, but if you have not lost half of your wealth in 2008, then you are actually better off than he is!
All right, I am stretching the comparison to the point of breaking, but the truth is, Li did lose 50% of his wealth last year, leaving him with only US$16.2bil.
Naturally we all think that he has already got more than enough for a few lifetimes, even if he had lost more than 50%.
However, that is not the point here. No matter how much or little, it is always painful to lose money.
In comparison, many seemed to have done better than Li in this period.
While comparing with someone who has lost more money may give us a lot of comfort, there’ll always be someone else who has done better – such as those who kept their money in cash over the last two years.
But are such comparisons relevant and fair? While I can name many people who have made it big investing, I cannot name one person who has grown wealthy through savings in cash alone.
Few can claim to have done better than Li during the good times.
So how did many investors out there lose less money than Li (in percentage terms, of course)?
He lost a lot through his equity in Cheung Kong (Holdings) Ltd and Husky Energy Inc, his two largest holdings.
In a way, he has a concentrated portfolio. When your bets are right, a concentrated portfolio can yield great results. But it is a double-edged sword that cuts both ways.
Here are some examples.
· If one held 100% of one’s investments in US bank stocks only, 2008 would have seen a loss of at least 60%.
· If the investment portfolio was 50% invested in US banks and the other 50% in US Treasury, straight off, the 2008 performance would have been -25% (or more than twice as good, though still painfully negative).
· If the portfolio is equally invested in US banks, US Treasury and gold, then the 2008 performance would have been -16%, an even better performance (though still negative)!
What I have illustrated above is a simple application of diversification of investments.
When you have more asset classes that are not correlated strongly to one another, you will reap the benefits of diversification.
With diversification, it is almost always possible to achieve a superior portfolio compared to holding only one asset class.
A superior portfolio is one where for the same risks, you can get a higher expected return; or for the same expected returns, you could experience a lower risk.
The idea of diversification itself is not a new concept. Old wisdom has left us with the advice of not putting all your eggs in one basket.
Academia has presented numerous studies which show that asset allocation is one of the most important aspects in investments.
In the past, the process of diversification would have been only accessible to a select few through exclusive banking or investment services.
Today, many alternative investments are now accessible to the man on the street through indexes, tracker funds, unit trust funds and/or alternative depository products.
However, most Malaysian portfolios continue to be dominated by equities and depository products only.
Perhaps it is time to review our portfolios and consider alternatives available to us to make our portfolios less risky and more diversified.
As the famous investment guru John Bogle once said, “The best time to invest is today”.
So start reviewing your portfolio and introduce some diversification.
Perhaps in a couple of years we can beat Li in good times, even if it’s in percentage rather than absolute terms!
Source : The Star, 14 March 2009
Time to review our portfolios and consider the alternatives available.
ARE you richer than Li Ka-shing? I suspect not, but if you have not lost half of your wealth in 2008, then you are actually better off than he is!
All right, I am stretching the comparison to the point of breaking, but the truth is, Li did lose 50% of his wealth last year, leaving him with only US$16.2bil.
Naturally we all think that he has already got more than enough for a few lifetimes, even if he had lost more than 50%.
However, that is not the point here. No matter how much or little, it is always painful to lose money.
In comparison, many seemed to have done better than Li in this period.
While comparing with someone who has lost more money may give us a lot of comfort, there’ll always be someone else who has done better – such as those who kept their money in cash over the last two years.
But are such comparisons relevant and fair? While I can name many people who have made it big investing, I cannot name one person who has grown wealthy through savings in cash alone.
Few can claim to have done better than Li during the good times.
So how did many investors out there lose less money than Li (in percentage terms, of course)?
He lost a lot through his equity in Cheung Kong (Holdings) Ltd and Husky Energy Inc, his two largest holdings.
In a way, he has a concentrated portfolio. When your bets are right, a concentrated portfolio can yield great results. But it is a double-edged sword that cuts both ways.
Here are some examples.
· If one held 100% of one’s investments in US bank stocks only, 2008 would have seen a loss of at least 60%.
· If the investment portfolio was 50% invested in US banks and the other 50% in US Treasury, straight off, the 2008 performance would have been -25% (or more than twice as good, though still painfully negative).
· If the portfolio is equally invested in US banks, US Treasury and gold, then the 2008 performance would have been -16%, an even better performance (though still negative)!
What I have illustrated above is a simple application of diversification of investments.
When you have more asset classes that are not correlated strongly to one another, you will reap the benefits of diversification.
With diversification, it is almost always possible to achieve a superior portfolio compared to holding only one asset class.
A superior portfolio is one where for the same risks, you can get a higher expected return; or for the same expected returns, you could experience a lower risk.
The idea of diversification itself is not a new concept. Old wisdom has left us with the advice of not putting all your eggs in one basket.
Academia has presented numerous studies which show that asset allocation is one of the most important aspects in investments.
In the past, the process of diversification would have been only accessible to a select few through exclusive banking or investment services.
Today, many alternative investments are now accessible to the man on the street through indexes, tracker funds, unit trust funds and/or alternative depository products.
However, most Malaysian portfolios continue to be dominated by equities and depository products only.
Perhaps it is time to review our portfolios and consider alternatives available to us to make our portfolios less risky and more diversified.
As the famous investment guru John Bogle once said, “The best time to invest is today”.
So start reviewing your portfolio and introduce some diversification.
Perhaps in a couple of years we can beat Li in good times, even if it’s in percentage rather than absolute terms!
Source : The Star, 14 March 2009
Thursday, March 12, 2009
Unit trust industry stable with record sales of RM18bil
By LAALITHA HUNT
KUALA LUMPUR: There has not been any panic selling in the local unit trust industry as redemption rates are at an average of 2% of total fund size per month, said Federation of Malaysian Unit Trust Managers (FMUTM) president Tunku Yaacob Tunku Abdullah.
The local unit trust industry had continued to record net sales of nearly RM18bil in the first 10 months of 2008, he noted.
However, the total NAV (net asset value) of the unit trust industry as at end 2008 slid RM34bil or 20% from RM169bil in 2007.
“However, this decline was relatively less severe compared to the drop in commodity and stock-market indices,” Tunku Yaacob said after the Morningstar 2008 Fund Awards presentation here yesterday.
“Going forward, we expect redemption rates to be maintained and sales to improve this year.”
From 2001 to 2007, the Malaysian unit trust industry had enjoyed double digit growth in NAV, from RM43bil in 2001 to RM169bil in 2007.
Tunku Yaacob also said he did not see the Kuala Lumpur Composite Index dropping below 850 points.
US-based Morningstar Inc chief financial officer Scott Cooley said the long term prospects for unit trust funds were still bright despite the current downturn in comparison with other asset classes.
“US equities have lost more than 50% of their value since October 2007.
“Besides that, out of 10,691 US equities, 2,886 lost over 75% of their value last year. In comparison, out of 15,272 mutual funds, only one lost more than 75% of its value,” Cooley noted.
For the Morningstar 2008 Fund Awards, winning funds were determined based on their delivery of risk-adjusted returns over the past year and their consistency over the longer term.
Seven awards covering three categories, namely equity, fixed income and balanced fund, were given out, with Islamic funds dominating the awards.
ASM Investment Services Bhd was named the winner for its Islamic syariah equity fund, while MAAKL Mutual Bhd took the award for its ringgit bond fund under the fixed income category.
RHB Investment Management Sdn Bhd won the award for the balanced fund category for its RHB Mudharabah Fund.
Tunku Yaacob noted that Islamic funds had turned out to be more resilient and were shielded from some of the huge portfolio losses that conventional funds had encountered.
“This could be due to the fact that Islamic funds were not permitted to have any exposure to conventional banking and financial equities, which had taken a beating as a result of the current crisis,” he said.
Source : The Star 12 March 09
KUALA LUMPUR: There has not been any panic selling in the local unit trust industry as redemption rates are at an average of 2% of total fund size per month, said Federation of Malaysian Unit Trust Managers (FMUTM) president Tunku Yaacob Tunku Abdullah.
The local unit trust industry had continued to record net sales of nearly RM18bil in the first 10 months of 2008, he noted.
However, the total NAV (net asset value) of the unit trust industry as at end 2008 slid RM34bil or 20% from RM169bil in 2007.
“However, this decline was relatively less severe compared to the drop in commodity and stock-market indices,” Tunku Yaacob said after the Morningstar 2008 Fund Awards presentation here yesterday.
“Going forward, we expect redemption rates to be maintained and sales to improve this year.”
From 2001 to 2007, the Malaysian unit trust industry had enjoyed double digit growth in NAV, from RM43bil in 2001 to RM169bil in 2007.
Tunku Yaacob also said he did not see the Kuala Lumpur Composite Index dropping below 850 points.
US-based Morningstar Inc chief financial officer Scott Cooley said the long term prospects for unit trust funds were still bright despite the current downturn in comparison with other asset classes.
“US equities have lost more than 50% of their value since October 2007.
“Besides that, out of 10,691 US equities, 2,886 lost over 75% of their value last year. In comparison, out of 15,272 mutual funds, only one lost more than 75% of its value,” Cooley noted.
For the Morningstar 2008 Fund Awards, winning funds were determined based on their delivery of risk-adjusted returns over the past year and their consistency over the longer term.
Seven awards covering three categories, namely equity, fixed income and balanced fund, were given out, with Islamic funds dominating the awards.
ASM Investment Services Bhd was named the winner for its Islamic syariah equity fund, while MAAKL Mutual Bhd took the award for its ringgit bond fund under the fixed income category.
RHB Investment Management Sdn Bhd won the award for the balanced fund category for its RHB Mudharabah Fund.
Tunku Yaacob noted that Islamic funds had turned out to be more resilient and were shielded from some of the huge portfolio losses that conventional funds had encountered.
“This could be due to the fact that Islamic funds were not permitted to have any exposure to conventional banking and financial equities, which had taken a beating as a result of the current crisis,” he said.
Source : The Star 12 March 09
Thursday, February 26, 2009
Banks slash interest rates
More reasons to invest in Unit trust???
PETALING JAYA: Several banks have slashed interest rates imposed on loans and more are expected to join in the fray.
Four banks - RHB Banking Group, Public Bank Group, United Overseas Bank Bhd (UOB) and Malayan Banking Bhd (Maybank) - have cut their respective base lending rates (BLR) from 5.95% to 5.55%.
RHB Bank and Public Bank will also be reducing each of its Islamic bank’s base financing rate (BFR) by the same quantum.
This follows the move by Bank Negara Malaysia to bring down the Overnight Policy Rate (OPR) from 2.5% to 2% on Tuesday.
RHB Banking Group managing director Michael J. Barrett said customers will be able to pay less to service their existing loans with floating rates while individuals and businesses will enjoy lower borrowing costs.
“We want to be able to help borrowers during these challenging times and provide our customers with more financial support,” he said in a statement on Thursday.
Public Bank Group chairman Tan Sri Dr Teh Hong Piow said the bank’s new rates will take effect on Tuesday.
“The reduction of BLR and BFR is part of the group’s on-going commitment towards the creation of a more supportive monetary environment which will help to sustain economic growth in the country,” he said.
A UOB Bank spokesperson said the bank would reduce its BLR on March 6.
Maybank said on Wednesday that it would begin implementing its new rates on Monday.
It is learnt that other banks are currently taking initiatives to restructure their rates and will be announcing lower BLR soon.
The Association of Banks said in a statement that the downward revision of monthly loan repayment instalments was expected to be completed around the end of the first quarter of this year.
“Banks will be officially notifying their customers on the quantum of reduction of the loan repayment instalments and the effective date directly,” it said.
Source from The Star, Malaysia dated Thursday February 26, 2009
PETALING JAYA: Several banks have slashed interest rates imposed on loans and more are expected to join in the fray.
Four banks - RHB Banking Group, Public Bank Group, United Overseas Bank Bhd (UOB) and Malayan Banking Bhd (Maybank) - have cut their respective base lending rates (BLR) from 5.95% to 5.55%.
RHB Bank and Public Bank will also be reducing each of its Islamic bank’s base financing rate (BFR) by the same quantum.
This follows the move by Bank Negara Malaysia to bring down the Overnight Policy Rate (OPR) from 2.5% to 2% on Tuesday.
RHB Banking Group managing director Michael J. Barrett said customers will be able to pay less to service their existing loans with floating rates while individuals and businesses will enjoy lower borrowing costs.
“We want to be able to help borrowers during these challenging times and provide our customers with more financial support,” he said in a statement on Thursday.
Public Bank Group chairman Tan Sri Dr Teh Hong Piow said the bank’s new rates will take effect on Tuesday.
“The reduction of BLR and BFR is part of the group’s on-going commitment towards the creation of a more supportive monetary environment which will help to sustain economic growth in the country,” he said.
A UOB Bank spokesperson said the bank would reduce its BLR on March 6.
Maybank said on Wednesday that it would begin implementing its new rates on Monday.
It is learnt that other banks are currently taking initiatives to restructure their rates and will be announcing lower BLR soon.
The Association of Banks said in a statement that the downward revision of monthly loan repayment instalments was expected to be completed around the end of the first quarter of this year.
“Banks will be officially notifying their customers on the quantum of reduction of the loan repayment instalments and the effective date directly,” it said.
Source from The Star, Malaysia dated Thursday February 26, 2009
Tuesday, February 17, 2009
Public Mutual declares distributions
Public Bank’s wholly-owned subsidiary, Public Mutual declares distributions for four of its funds. The total gross distributions declared are for financial year ended 31 January 2009:
Fund
Gross Distribution / Unit
Public Index Fund 5.00 sen
Public Islamic Optimal Growth Fund 0.30 sen
Public Enhanced Bond Fund 2.00 sen
Public Money Market Fund 3.00 sen
Public Mutual’s Chairman Tan Sri Dato’ Sri Dr. Teh Hong Piow commented that despite challenging market conditions, Public Mutual is pleased to be able to declare distributions on these four funds.
Public Mutual is Malaysia’s largest private unit trust company with 67 funds under management. It has over 2,000,000 accountholders serviced by over 40,000 unit trust consultants. As at 31 December 2008, the total net asset value of the funds managed by the company was RM23.3 billion.
Fund
Gross Distribution / Unit
Public Index Fund 5.00 sen
Public Islamic Optimal Growth Fund 0.30 sen
Public Enhanced Bond Fund 2.00 sen
Public Money Market Fund 3.00 sen
Public Mutual’s Chairman Tan Sri Dato’ Sri Dr. Teh Hong Piow commented that despite challenging market conditions, Public Mutual is pleased to be able to declare distributions on these four funds.
Public Mutual is Malaysia’s largest private unit trust company with 67 funds under management. It has over 2,000,000 accountholders serviced by over 40,000 unit trust consultants. As at 31 December 2008, the total net asset value of the funds managed by the company was RM23.3 billion.
Unit Trust Price as at 15 February 2009
Public Savings Fund** 0.5038
Public Growth Fund** 0.3637
Public Index Fund 0.4896
Public Industry Fund** 0.4080
Public Aggressive Growth Fund** 0.5184
Public Regular Savings Fund 0.4309
Public Balanced Fund** 0.6207
Public Bond Fund 0.9513
Public Ittikal Fund** 0.6882
Public Smallcap Fund** 0.5795
Public Islamic Bond Fund 1.0049*
Public Equity Fund** 0.2123
Public Institutional Bond Fund 1.0070
Public Islamic Equity Fund 0.2509
Public Money Market Fund 0.9919
Public Focus Select Fund** 0.1599
Public Enhanced Bond Fund** 0.9435
Public Dividend Select Fund 0.2189
Public Islamic Opportunities Fund** 0.2228
Public Islamic Balanced Fund 0.2152
Public Far-east Select Fund** 0.1883
Public Select Bond Fund 1.0039
Public Islamic Dividend Fund 0.2443
Public Regional Sector Fund** 0.1666
Public Asia Ittikal Fund** 0.1888
Public Global Select Fund** 0.1573
Public Far-east Dividend Fund** 0.1725
Public Islamic Enhanced Bond Fund** 0.9666
Public Far-east Balanced Fund** 0.1715
Public Global Balanced Fund** 0.1790
Public Islamic Asia Dividend Fund** 0.1580
Public China Select Fund** 0.1314
Public Islamic Money Market Fund 1.0268
Public Far East Property & Resorts Fund** 0.1147
Public Islamic Select Bond Fund 1.0304
Public Islamic Asia Balanced Fund** 0.1783
Public South-east Asia Select Fund** 0.1441
Public Sector Select Fund 0.1721
Public Islamic Sector Select Fund 0.1745
Public China Ittikal Fund** 0.1438
Public Far-east Consumer Themes Fund** 0.1901
Public Islamic Select Treasures Fund 0.2062
Public China Titans Fund** 0.1807
Public Islamic Optimal Growth Fund 0.1908
Public Far-east Telco & Infrastructure Fund ** 0.2425
Public Capital Protected Select Portfolio Fund ** 1.0255
Public Islamic Select Enterprises Fund 0.2434
Public Islamic Income Fund 1.0138
Pb Balanced Fund** 0.7253
Pb Growth Fund** 0.6262
Pb Fixed Income Fund 1.0172
Pb Islamic Equity Fund 0.1797
Pb Islamic Bond Fund 1.0317
Pb Asia Equity Fund** 0.1869
Pb Islamic Asia Equity Fund** 0.1590
Pb Cash Management Fund 1.0223
Pb Cash Plus Fund 1.0014
Pb Asean Dividend Fund** 0.1512
Pb Islamic Cash Management Fund 1.0176
Pb Euro Pacific Equity Fund** 0.1339
Pb Islamic Asia Strategic Sector Fund** 0.1327
Pb China Pacific Equity Fund** 0.1212
Pb Asia Real Estate Income Fund** 0.1592
Pb Islamic Cash Plus Fund 1.0023
Pb China Asean Equity Fund** 0.2084
Pb Capital Protected Dragon Fund** 0.9786
Pb Capital Protected Resources Fund** 1.0066
Public Growth Fund** 0.3637
Public Index Fund 0.4896
Public Industry Fund** 0.4080
Public Aggressive Growth Fund** 0.5184
Public Regular Savings Fund 0.4309
Public Balanced Fund** 0.6207
Public Bond Fund 0.9513
Public Ittikal Fund** 0.6882
Public Smallcap Fund** 0.5795
Public Islamic Bond Fund 1.0049*
Public Equity Fund** 0.2123
Public Institutional Bond Fund 1.0070
Public Islamic Equity Fund 0.2509
Public Money Market Fund 0.9919
Public Focus Select Fund** 0.1599
Public Enhanced Bond Fund** 0.9435
Public Dividend Select Fund 0.2189
Public Islamic Opportunities Fund** 0.2228
Public Islamic Balanced Fund 0.2152
Public Far-east Select Fund** 0.1883
Public Select Bond Fund 1.0039
Public Islamic Dividend Fund 0.2443
Public Regional Sector Fund** 0.1666
Public Asia Ittikal Fund** 0.1888
Public Global Select Fund** 0.1573
Public Far-east Dividend Fund** 0.1725
Public Islamic Enhanced Bond Fund** 0.9666
Public Far-east Balanced Fund** 0.1715
Public Global Balanced Fund** 0.1790
Public Islamic Asia Dividend Fund** 0.1580
Public China Select Fund** 0.1314
Public Islamic Money Market Fund 1.0268
Public Far East Property & Resorts Fund** 0.1147
Public Islamic Select Bond Fund 1.0304
Public Islamic Asia Balanced Fund** 0.1783
Public South-east Asia Select Fund** 0.1441
Public Sector Select Fund 0.1721
Public Islamic Sector Select Fund 0.1745
Public China Ittikal Fund** 0.1438
Public Far-east Consumer Themes Fund** 0.1901
Public Islamic Select Treasures Fund 0.2062
Public China Titans Fund** 0.1807
Public Islamic Optimal Growth Fund 0.1908
Public Far-east Telco & Infrastructure Fund ** 0.2425
Public Capital Protected Select Portfolio Fund ** 1.0255
Public Islamic Select Enterprises Fund 0.2434
Public Islamic Income Fund 1.0138
Pb Balanced Fund** 0.7253
Pb Growth Fund** 0.6262
Pb Fixed Income Fund 1.0172
Pb Islamic Equity Fund 0.1797
Pb Islamic Bond Fund 1.0317
Pb Asia Equity Fund** 0.1869
Pb Islamic Asia Equity Fund** 0.1590
Pb Cash Management Fund 1.0223
Pb Cash Plus Fund 1.0014
Pb Asean Dividend Fund** 0.1512
Pb Islamic Cash Management Fund 1.0176
Pb Euro Pacific Equity Fund** 0.1339
Pb Islamic Asia Strategic Sector Fund** 0.1327
Pb China Pacific Equity Fund** 0.1212
Pb Asia Real Estate Income Fund** 0.1592
Pb Islamic Cash Plus Fund 1.0023
Pb China Asean Equity Fund** 0.2084
Pb Capital Protected Dragon Fund** 0.9786
Pb Capital Protected Resources Fund** 1.0066
Sunday, February 8, 2009
We all need to become millionaires
One must have cash reserves of about RM1mil to be able to maintain one’s current lifestyle 20 years after retirement
Ooi Kok Hwa: The key principle here is we need to have cash reserves of more than RM1mil to be able to maintain our current lifestyle 20 years after retirement.
WE need to become millionaires when we retire! A lot of people have misconceptions about being millionaires. To them, being a millionaire means they should own total assets – by adding up their total cash, house, Employees’ Provident Fund (EPF) contribution and car – that are worth RM1mil and above.
They believe that once they achieve one million cash, they should enjoy themselves by driving big luxury cars and staying in bungalows.
In reality, all of us need to become millionaires when we retire at age 55. Based on our computation, we need to own total cash, including all money in savings, fixed deposits and EPF, which have total value of more than RM1mil.
The key principle here is we need to have cash reserves of more than RM1mil to be able to maintain our current lifestyle 20 years after retirement from age 55 to age 75. This is on the assumption that we can live up to 75 (the average lifespan of Malaysians).
Based on our computation (see table), if you are now 35 years old and your current monthly expenses are RM3,000 per month, assuming you are only able to generate a return of 3% (the return from fixed deposits) on all of your savings and the RM3,000 will grow by the average historical inflation rate of 3.5% per annum, you would need RM1.6mil when you retire at age 55.
This amount will be enough to maintain your current lifestyle for the next 20 years after your retirement at 55.
However, if you need to spend RM5,000, RM7,000 or RM10,000 per month, then you need RM2.6mil, RM3.7mil and RM5.3mil respectively at your retirement age of 55.
In short, you need to become a millionaire when you retire even if you only maintain a simple lifestyle after your retirement. You will not be able to use this money to buy a big luxury car or a bungalow, as you really need the money for the next 20 years.
Thomas J. Stanley and William D. Danko have conducted research on the reasons why some Americans become wealthy. They discovered that a lot of them live well below their means.
Unfortunately, we notice that some Malaysians do not have enough money when they retire. Some of them may not be aware that they really need to accumulate that amount of money when they retire. Some may be aware, but they may have used up all their savings to support their children’s education. As a result, they need to find a job after retirement.
Some may have difficulties finding a job. A lot of companies may prefer to employ a young graduate rather than a retiree unless the latter is willing to accept a lower pay.
We also believe that a lot of investors are quite worried about having enough money for retirement. They are also concerned that their money may not be enough to protect them against inflation. Hence, besides controlling our expenses, we also need to know how to grow our money.
Looking at the table, different minimum achievable annual target returns can provide different required amounts for retirement.
For the current monthly expenses of RM3,000, if you are only able to generate a 3% return per annum, then you need to have RM1.6mil for retirement whereas you only need about RM900,000 if you are able to generate a return of 10%.
However, higher returns come with higher risks. We need to understand our risk tolerance level. We need to equip ourselves with adequate investing knowledge if we intend to generate higher returns.
source by By OOI KOK HWA
The Star, Wednesday January 28, 2009
Ooi Kok Hwa: The key principle here is we need to have cash reserves of more than RM1mil to be able to maintain our current lifestyle 20 years after retirement.
WE need to become millionaires when we retire! A lot of people have misconceptions about being millionaires. To them, being a millionaire means they should own total assets – by adding up their total cash, house, Employees’ Provident Fund (EPF) contribution and car – that are worth RM1mil and above.
They believe that once they achieve one million cash, they should enjoy themselves by driving big luxury cars and staying in bungalows.
In reality, all of us need to become millionaires when we retire at age 55. Based on our computation, we need to own total cash, including all money in savings, fixed deposits and EPF, which have total value of more than RM1mil.
The key principle here is we need to have cash reserves of more than RM1mil to be able to maintain our current lifestyle 20 years after retirement from age 55 to age 75. This is on the assumption that we can live up to 75 (the average lifespan of Malaysians).
Based on our computation (see table), if you are now 35 years old and your current monthly expenses are RM3,000 per month, assuming you are only able to generate a return of 3% (the return from fixed deposits) on all of your savings and the RM3,000 will grow by the average historical inflation rate of 3.5% per annum, you would need RM1.6mil when you retire at age 55.
This amount will be enough to maintain your current lifestyle for the next 20 years after your retirement at 55.
However, if you need to spend RM5,000, RM7,000 or RM10,000 per month, then you need RM2.6mil, RM3.7mil and RM5.3mil respectively at your retirement age of 55.
In short, you need to become a millionaire when you retire even if you only maintain a simple lifestyle after your retirement. You will not be able to use this money to buy a big luxury car or a bungalow, as you really need the money for the next 20 years.
Thomas J. Stanley and William D. Danko have conducted research on the reasons why some Americans become wealthy. They discovered that a lot of them live well below their means.
Unfortunately, we notice that some Malaysians do not have enough money when they retire. Some of them may not be aware that they really need to accumulate that amount of money when they retire. Some may be aware, but they may have used up all their savings to support their children’s education. As a result, they need to find a job after retirement.
Some may have difficulties finding a job. A lot of companies may prefer to employ a young graduate rather than a retiree unless the latter is willing to accept a lower pay.
We also believe that a lot of investors are quite worried about having enough money for retirement. They are also concerned that their money may not be enough to protect them against inflation. Hence, besides controlling our expenses, we also need to know how to grow our money.
Looking at the table, different minimum achievable annual target returns can provide different required amounts for retirement.
For the current monthly expenses of RM3,000, if you are only able to generate a 3% return per annum, then you need to have RM1.6mil for retirement whereas you only need about RM900,000 if you are able to generate a return of 10%.
However, higher returns come with higher risks. We need to understand our risk tolerance level. We need to equip ourselves with adequate investing knowledge if we intend to generate higher returns.
source by By OOI KOK HWA
The Star, Wednesday January 28, 2009
Sunday, January 18, 2009
Setting up a trust is one way of preventing loss of wealth
THE global economic downturn and financial turbulence has given rise to an overall climate of uncertainty. It is likely that many are having sleepless nights worrying about their hard-earned wealth vanishing into thin air or eroding or worst still, falling into the wrong hands.
One way to prevent that from happening, and it is getting more popular, is by setting up private trusts. Trusts are commonly used for family wealth preservation and estate planning.
OSK Trustees Bhd, one of the leading players in the trust business, has seen a 61% jump in revenue for private trusts last year from 2007.
A trust exists whenever a person known as the trustee, holds the legal ownership of a property, not for his own benefit, but for another person known as the beneficiary.
The trustee holds the legal title to the trust property, but the beneficiary enjoys most of the rights of an owner.
For example, where the trust property is shares of a company, it is the beneficiary who will ultimately receive and spend the dividends.
OSK Trustees chief operating officer and executive director Ong Eu Jin says many people are still not aware of the importance of having a trust.
“Some people tend to transfer one’s personal assets to family members or to “trusted persons” for safe keeping. This can be a problem if these “guardians of wealth” intend to misuse it or dispose of the assets as they wish since they are considered the legal owners, he adds.
A trust, on the other hand, does not give the beneficiaries of the trust full control as absolute control only comes with legal ownership, Ong says.
As they are not the legal owners, the beneficiaries cannot sell the assets, he adds. The trustee will manage the trust assets and distribute the income derived from the trust assets in accordance with the trust deed, which is the legal document creating the trust and containing the wishes of the creator of the trust.
As such, he notes that the beneficiaries will enjoy income from the trust assets but yet be unable to dispose of the assets.
A trust is also an important estate planning tool. Its two primary objectives in terms of estate planning are to unlock the frozen assets of one’s estate in the shortest possible time and without incurring unnecessary costs; and to ensure that the assets will be passed on to the persons of his choice, says Ong.
Ong, however, cautions that a trust is not a vehicle created with the outright purpose of putting a person’s assets out of the reach of his creditors.
After all, a trust is void if its objective is illegal, immoral or against public policy including to facilitate or encourage a breach of law or to cheat one’s creditors, he says.
According to him, an increasing number of people are now using life insurance to fund their trusts, hence providing a wider audience to enjoy the benefits of trusts.
The gloomy economic picture is also putting brakes on consumer spending as many of them are jittery and tend to keep their purses “tight”.
Great Vision Advisory Group head of tax and financial planning Chua Tia Guan says even during difficult times, people can still spend provided they have an emergency fund and a proper budget.
“Generally, from a prudent personal financial management perspective, a person should have at least three to six months’ emergency funds in case of any eventuality.
“This practice is particularly important during these uncertain times where pay cuts and retrenchments are highly possible. Those who do not have any emergency funds and proper budgets are advised to plan their spending cautiously,” he says.
He adds that it will be useful to draw up a personal budget, taking into account the expected cash inflow with possible reduction in income.
“Prioritising one’s expenses is equally important in personal budgeting so that unnecessary expenditure can be deferred or avoided totally.
“If a proper budget has been drawn up, then there is no reason for consumers not to spend even during difficult times,” Chua says.
He also advocates the dollar cost averaging method for people looking to invest in the current volatile market.
This method involves slowly picking up certain selected stocks over a period of time where the average cost of purchase is “low”.
“Having said that, do your homework first before investing. An investor should have the financial ability to hold the investment for at least two to three years before it yields result, provided you have the right pick,” he says.
Source : The Star Business, BY DALJIT DHESI, Saturday January 17, 2009
One way to prevent that from happening, and it is getting more popular, is by setting up private trusts. Trusts are commonly used for family wealth preservation and estate planning.
OSK Trustees Bhd, one of the leading players in the trust business, has seen a 61% jump in revenue for private trusts last year from 2007.
A trust exists whenever a person known as the trustee, holds the legal ownership of a property, not for his own benefit, but for another person known as the beneficiary.
The trustee holds the legal title to the trust property, but the beneficiary enjoys most of the rights of an owner.
For example, where the trust property is shares of a company, it is the beneficiary who will ultimately receive and spend the dividends.
OSK Trustees chief operating officer and executive director Ong Eu Jin says many people are still not aware of the importance of having a trust.
“Some people tend to transfer one’s personal assets to family members or to “trusted persons” for safe keeping. This can be a problem if these “guardians of wealth” intend to misuse it or dispose of the assets as they wish since they are considered the legal owners, he adds.
A trust, on the other hand, does not give the beneficiaries of the trust full control as absolute control only comes with legal ownership, Ong says.
As they are not the legal owners, the beneficiaries cannot sell the assets, he adds. The trustee will manage the trust assets and distribute the income derived from the trust assets in accordance with the trust deed, which is the legal document creating the trust and containing the wishes of the creator of the trust.
As such, he notes that the beneficiaries will enjoy income from the trust assets but yet be unable to dispose of the assets.
A trust is also an important estate planning tool. Its two primary objectives in terms of estate planning are to unlock the frozen assets of one’s estate in the shortest possible time and without incurring unnecessary costs; and to ensure that the assets will be passed on to the persons of his choice, says Ong.
Ong, however, cautions that a trust is not a vehicle created with the outright purpose of putting a person’s assets out of the reach of his creditors.
After all, a trust is void if its objective is illegal, immoral or against public policy including to facilitate or encourage a breach of law or to cheat one’s creditors, he says.
According to him, an increasing number of people are now using life insurance to fund their trusts, hence providing a wider audience to enjoy the benefits of trusts.
The gloomy economic picture is also putting brakes on consumer spending as many of them are jittery and tend to keep their purses “tight”.
Great Vision Advisory Group head of tax and financial planning Chua Tia Guan says even during difficult times, people can still spend provided they have an emergency fund and a proper budget.
“Generally, from a prudent personal financial management perspective, a person should have at least three to six months’ emergency funds in case of any eventuality.
“This practice is particularly important during these uncertain times where pay cuts and retrenchments are highly possible. Those who do not have any emergency funds and proper budgets are advised to plan their spending cautiously,” he says.
He adds that it will be useful to draw up a personal budget, taking into account the expected cash inflow with possible reduction in income.
“Prioritising one’s expenses is equally important in personal budgeting so that unnecessary expenditure can be deferred or avoided totally.
“If a proper budget has been drawn up, then there is no reason for consumers not to spend even during difficult times,” Chua says.
He also advocates the dollar cost averaging method for people looking to invest in the current volatile market.
This method involves slowly picking up certain selected stocks over a period of time where the average cost of purchase is “low”.
“Having said that, do your homework first before investing. An investor should have the financial ability to hold the investment for at least two to three years before it yields result, provided you have the right pick,” he says.
Source : The Star Business, BY DALJIT DHESI, Saturday January 17, 2009
Friday, January 9, 2009
Unit Trust Price as at 9 January 2009
Public Savings Fund**0.5117
Public Growth Fund**0.3789
Public Index Fund 0.5350
Public Industry Fund** 0.4207
Public Aggressive Growth Fund**0.5492
Public Regular Savings Fund 0.4344
Public Balanced Fund**0.6381
Public Bond Fund 0.9412
Public Ittikal Fund**0.7134
Public Smallcap Fund** 0.5880
Public Islamic Bond Fund0.9968
Public Equity Fund** 0.2217
Public Institutional Bond Fund 0.9995
Public Islamic Equity Fund 0.2502
Public Money Market Fund 1.0189
Public Focus Select Fund**0.1640
Public Enhanced Bond Fund**0.9517
Public Dividend Select Fund 0.2188
Public Islamic Opportunities Fund**0.2255
Public Islamic Balanced Fund 0.2140
Public Far-east Select Fund**0.1995
Public Select Bond Fund 1.0015
Public Islamic Dividend Fund 0.2427
Public Regional Sector Fund**0.1759
Public Asia Ittikal Fund** 0.1969
Public Global Select Fund**0.1642
Public Far-east Dividend Fund**0.1793
Public Islamic Enhanced Bond Fund**0.9568
Public Far-east Balanced Fund**0.1754
Public Global Balanced Fund**0.1820
Public Islamic Asia Dividend Fund**0.1641
Public China Select Fund**0.1326
Public Islamic Money Market Fund 1.0240
Public Far East Property & Resorts Fund**0.1259
Public Islamic Select Bond Fund 1.0221
Public Islamic Asia Balanced Fund**0.1836
Public South-east Asia Select Fund**0.1567
Public Sector Select Fund 0.1736
Public Islamic Sector Select Fund 0.1754
Public China Ittikal Fund**0.1429
Public Far-east Consumer Themes Fund**0.1962
Public Islamic Select Treasures Fund 0.2059
Public China Titans Fund**0.1838
Public Islamic Optimal Growth Fund 0.1929
Public Far-east Telco & Infrastructure Fund ** 0.2489
Public Capital Protected Select Portfolio Fund **1.0155
Public Islamic Select Enterprises Fund 0.2441
Public Islamic Income Fund 1.0089
PB Balanced Fund**0.7372PB Growth Fund**0.6404
PB Fixed Income Fund 1.0068
PB Islamic Equity Fund 0.1803
PB Islamic Bond Fund 1.0236
PB Asia Equity Fund**0.1955
PB Islamic Asia Equity Fund**0.1654
PB Cash Management Fund 1.0196
PB Cash Plus Fund 1.0008
PB Asean Dividend Fund**0.1646
PB Islamic Cash Management Fund 1.0151
PB Euro Pacific Equity Fund**0.1415
PB Islamic Asia Strategic Sector Fund**0.1389
PB China Pacific Equity Fund**0.1230
PB Asia Real Estate Income Fund**0.1691
PB Islamic Cash Plus Fund 1.0013
PB China Asean Equity Fund**0.2032
PB Capital Protected Dragon Fund**0.9766
PB Capital Protected Resources Fund**1.0022
Public Growth Fund**0.3789
Public Index Fund 0.5350
Public Industry Fund** 0.4207
Public Aggressive Growth Fund**0.5492
Public Regular Savings Fund 0.4344
Public Balanced Fund**0.6381
Public Bond Fund 0.9412
Public Ittikal Fund**0.7134
Public Smallcap Fund** 0.5880
Public Islamic Bond Fund0.9968
Public Equity Fund** 0.2217
Public Institutional Bond Fund 0.9995
Public Islamic Equity Fund 0.2502
Public Money Market Fund 1.0189
Public Focus Select Fund**0.1640
Public Enhanced Bond Fund**0.9517
Public Dividend Select Fund 0.2188
Public Islamic Opportunities Fund**0.2255
Public Islamic Balanced Fund 0.2140
Public Far-east Select Fund**0.1995
Public Select Bond Fund 1.0015
Public Islamic Dividend Fund 0.2427
Public Regional Sector Fund**0.1759
Public Asia Ittikal Fund** 0.1969
Public Global Select Fund**0.1642
Public Far-east Dividend Fund**0.1793
Public Islamic Enhanced Bond Fund**0.9568
Public Far-east Balanced Fund**0.1754
Public Global Balanced Fund**0.1820
Public Islamic Asia Dividend Fund**0.1641
Public China Select Fund**0.1326
Public Islamic Money Market Fund 1.0240
Public Far East Property & Resorts Fund**0.1259
Public Islamic Select Bond Fund 1.0221
Public Islamic Asia Balanced Fund**0.1836
Public South-east Asia Select Fund**0.1567
Public Sector Select Fund 0.1736
Public Islamic Sector Select Fund 0.1754
Public China Ittikal Fund**0.1429
Public Far-east Consumer Themes Fund**0.1962
Public Islamic Select Treasures Fund 0.2059
Public China Titans Fund**0.1838
Public Islamic Optimal Growth Fund 0.1929
Public Far-east Telco & Infrastructure Fund ** 0.2489
Public Capital Protected Select Portfolio Fund **1.0155
Public Islamic Select Enterprises Fund 0.2441
Public Islamic Income Fund 1.0089
PB Balanced Fund**0.7372PB Growth Fund**0.6404
PB Fixed Income Fund 1.0068
PB Islamic Equity Fund 0.1803
PB Islamic Bond Fund 1.0236
PB Asia Equity Fund**0.1955
PB Islamic Asia Equity Fund**0.1654
PB Cash Management Fund 1.0196
PB Cash Plus Fund 1.0008
PB Asean Dividend Fund**0.1646
PB Islamic Cash Management Fund 1.0151
PB Euro Pacific Equity Fund**0.1415
PB Islamic Asia Strategic Sector Fund**0.1389
PB China Pacific Equity Fund**0.1230
PB Asia Real Estate Income Fund**0.1691
PB Islamic Cash Plus Fund 1.0013
PB China Asean Equity Fund**0.2032
PB Capital Protected Dragon Fund**0.9766
PB Capital Protected Resources Fund**1.0022
Tuesday, January 6, 2009
Public Mutual declares distributions for 3 funds
KUALA LUMPUR: Public Mutual Bhd yesterday announced distributions for three of its funds, amounting to 7.5 sen for Public Savings Fund, 1.25 sen for Public Focus Select Fund and 1.75 sen for Public Islamic Enhanced Bond Fund for the financial year ended Dec 31, 2008. Public Savings is its maiden fund.
Unit trust still a good bet for the long term
KUALA LUMPUR: The past 12 months has seen the erosion of wealth in virtually every type of non-fixed income investment, and unit trust funds have not been spared.
Despite offering a modicum of security compared to traditional equities owing to its large pool of investors and its diverse portfolio of investments, trust funds have nonetheless declined alongside market indices, albeit at a slower rate.
According to data from the Securities Commission, the total net asset value (NAV) in Malaysia dropped by more than 20% to RM135.87 billion in November from RM170.1 billion in January.
There is, however, an anomaly within the figure, namely the decline in the NAV of Islamic-based funds. Unlike conventional funds’ NAV, which plunged 22% to RM119.77 billion in November from RM153.7 billion in January, Islamic funds declined only 2% to RM16.11 billion from RM16.4 billion.
A fund manager noted that this could be due to the fact that Islamic funds were not traded intensively and tended to lag behind the movement of conventional funds.
Case in point is the fact that the total NAV of Islamic funds only peaked in June with an NAV of RM17.98 billion, up 10% from January before starting its downwards slide. By that time, conventional funds’ NAV had already started to shed value since its peak in January.
On the whole, September’s figure also marked the first time that the total NAV failed to show positive year-on-year growth in at least four years. Subsequently, total NAV for September shrank 4% compared to the same month in 2007.
According to Eric Wong, Hong Kong head of research for global fund analyst Thomson Reuters Lipper, the last 12 months has seen unprecedented movements in the fund industry for both Malaysia and the region.
“The year-to-date (January to November) average loss of all funds registered for sale in Malaysia is the largest (-23.10%) since its average loss for the entire year in 1997(-43.30%),” Wong said in an email reply to The Edge Financial Daily.
He added that a similar trend had been occurring in other major regional markets such as Thailand, Hong Kong, Taiwan, Singapore and China.
The silver lining for Malaysian investors, however, is that the Malaysian fund industry has incurred significantly smaller losses then that of most other Asian countries. This finding is not surprising as the Kuala Lumpur Stock Exchange has outperformed other countries in the region.
Wong believed there were other considerations as well.
“This may probably be attributed to the capital control imposed by the Malaysian government, rendering foreign investors less interested to invest in Malaysian equities and bonds,” Wong said. “Their relative low participation reduces the volatility of Malaysian equities and bonds.
“This, coupled with the majority of funds that are registered for sale in Malaysia, are invested in Malaysian equities and bonds, limits the average loss of Malaysian funds in comparison to those in other Asian countries.”
Responding to reports that a majority of equity funds in Malaysia had increased their portfolio allocation to cash or other liquid securities in Malaysia as a precaution against a continued slump in the market, Wong said some funds made the switch to cash in the third quarter.
However, there was no evidence that a majority of equity funds were doing so, he added.
Time to buy and what to buy? With equities trading at historic lows, common wisdom suggests that now would be a good time to cherry pick for good stocks at cheap prices. By extension, this would mean that equity funds also would trade cheaply.
Nonetheless, Wong believed it was premature to conclude that equities were undervalued, saying it was likely that equities would continue their slide in 2009.
“The values of equities are basically determined by two components: interest rate and earnings growth. Low interest rates and expectation that central banks around the globe will continue to lower interest rates will continue to support equities,” he said.
“However, with reports showing the global economic environment is projected to deteriorate further in 2009, the downwards trend of corporate earnings growth is less likely to reverse in the coming quarters.
“Such a scenario means equities will still face significant downside risk on their valuation in 2009 and, hence, investors should not at this stage park their capital in equity funds.”
Wong added that the same was likely true for commodity funds, which were traditionally even more volatile than equity funds.
For investors who are concerned about preserving the value of their investments, Wong advised continued investment in bond-linked and money market funds, although yields had fallen to very low levels recently.
Should investors stay away from unit trusts?
No, said Robert Foo, financial planner and managing director of MyFP Services Sdn Bhd.
So long as investing for the long-term is concerned, investors shouldn’t concern themselves too much with the current state of the market, as markets will grow in the long term.
Unit trust funds, he added, were not “opportunistic investments” that would yield massive returns in the short-term. As a managed basket of investments, funds offer the benefit of professional management in exchange for more normalised returns on investments.
“When we talk to clients, we tell them that they have to look at it from a period of time of five years and above,” Foo said. “Our objective is to help our clients achieve their investment targets and this means rebalancing their portfolios depending on the condition of the market.”
Meanwhile, markets will rise and fall in the long-term, he said. What investors have to do is to rebalance their portfolios during both the peaks and the troughs. In that respect, it is essential for investors to establish investment goals that correspond with their tolerance for risk.
Foo said a disciplined approach would allow for greater returns in the long-term. His clients, he said, averaged between 7%-8% in returns although they had differing investment targets.
“When the market was way up, we also rebalanced our clients’ portfolios. We said, ‘Look, 60% return is absurd for a fund, so we need to rebalance,’ and we rebalanced our clients down,” he said.
As for asset classes of funds, Foo said the type of fund was not as important as the revenue model of the underlying investment and consistency in performance, although he said MyFP’s policy was to stay away from “theme-based funds” such as those localised in a specific region or commodity.
Foo also advised that investors refrain from going on a purchasing spree based on the “cheapness” of a stock or fund, as pricing was not a good indicator of the value of the share.
“At the end of the day, it’s not the price that determines the value of the stock — that kind of analysis is too simplistic. You have to look at the intrinsic value of the underlying equity to determine that,” Foo said.
Source : The Edge Daily
Despite offering a modicum of security compared to traditional equities owing to its large pool of investors and its diverse portfolio of investments, trust funds have nonetheless declined alongside market indices, albeit at a slower rate.
According to data from the Securities Commission, the total net asset value (NAV) in Malaysia dropped by more than 20% to RM135.87 billion in November from RM170.1 billion in January.
There is, however, an anomaly within the figure, namely the decline in the NAV of Islamic-based funds. Unlike conventional funds’ NAV, which plunged 22% to RM119.77 billion in November from RM153.7 billion in January, Islamic funds declined only 2% to RM16.11 billion from RM16.4 billion.
A fund manager noted that this could be due to the fact that Islamic funds were not traded intensively and tended to lag behind the movement of conventional funds.
Case in point is the fact that the total NAV of Islamic funds only peaked in June with an NAV of RM17.98 billion, up 10% from January before starting its downwards slide. By that time, conventional funds’ NAV had already started to shed value since its peak in January.
On the whole, September’s figure also marked the first time that the total NAV failed to show positive year-on-year growth in at least four years. Subsequently, total NAV for September shrank 4% compared to the same month in 2007.
According to Eric Wong, Hong Kong head of research for global fund analyst Thomson Reuters Lipper, the last 12 months has seen unprecedented movements in the fund industry for both Malaysia and the region.
“The year-to-date (January to November) average loss of all funds registered for sale in Malaysia is the largest (-23.10%) since its average loss for the entire year in 1997(-43.30%),” Wong said in an email reply to The Edge Financial Daily.
He added that a similar trend had been occurring in other major regional markets such as Thailand, Hong Kong, Taiwan, Singapore and China.
The silver lining for Malaysian investors, however, is that the Malaysian fund industry has incurred significantly smaller losses then that of most other Asian countries. This finding is not surprising as the Kuala Lumpur Stock Exchange has outperformed other countries in the region.
Wong believed there were other considerations as well.
“This may probably be attributed to the capital control imposed by the Malaysian government, rendering foreign investors less interested to invest in Malaysian equities and bonds,” Wong said. “Their relative low participation reduces the volatility of Malaysian equities and bonds.
“This, coupled with the majority of funds that are registered for sale in Malaysia, are invested in Malaysian equities and bonds, limits the average loss of Malaysian funds in comparison to those in other Asian countries.”
Responding to reports that a majority of equity funds in Malaysia had increased their portfolio allocation to cash or other liquid securities in Malaysia as a precaution against a continued slump in the market, Wong said some funds made the switch to cash in the third quarter.
However, there was no evidence that a majority of equity funds were doing so, he added.
Time to buy and what to buy? With equities trading at historic lows, common wisdom suggests that now would be a good time to cherry pick for good stocks at cheap prices. By extension, this would mean that equity funds also would trade cheaply.
Nonetheless, Wong believed it was premature to conclude that equities were undervalued, saying it was likely that equities would continue their slide in 2009.
“The values of equities are basically determined by two components: interest rate and earnings growth. Low interest rates and expectation that central banks around the globe will continue to lower interest rates will continue to support equities,” he said.
“However, with reports showing the global economic environment is projected to deteriorate further in 2009, the downwards trend of corporate earnings growth is less likely to reverse in the coming quarters.
“Such a scenario means equities will still face significant downside risk on their valuation in 2009 and, hence, investors should not at this stage park their capital in equity funds.”
Wong added that the same was likely true for commodity funds, which were traditionally even more volatile than equity funds.
For investors who are concerned about preserving the value of their investments, Wong advised continued investment in bond-linked and money market funds, although yields had fallen to very low levels recently.
Should investors stay away from unit trusts?
No, said Robert Foo, financial planner and managing director of MyFP Services Sdn Bhd.
So long as investing for the long-term is concerned, investors shouldn’t concern themselves too much with the current state of the market, as markets will grow in the long term.
Unit trust funds, he added, were not “opportunistic investments” that would yield massive returns in the short-term. As a managed basket of investments, funds offer the benefit of professional management in exchange for more normalised returns on investments.
“When we talk to clients, we tell them that they have to look at it from a period of time of five years and above,” Foo said. “Our objective is to help our clients achieve their investment targets and this means rebalancing their portfolios depending on the condition of the market.”
Meanwhile, markets will rise and fall in the long-term, he said. What investors have to do is to rebalance their portfolios during both the peaks and the troughs. In that respect, it is essential for investors to establish investment goals that correspond with their tolerance for risk.
Foo said a disciplined approach would allow for greater returns in the long-term. His clients, he said, averaged between 7%-8% in returns although they had differing investment targets.
“When the market was way up, we also rebalanced our clients’ portfolios. We said, ‘Look, 60% return is absurd for a fund, so we need to rebalance,’ and we rebalanced our clients down,” he said.
As for asset classes of funds, Foo said the type of fund was not as important as the revenue model of the underlying investment and consistency in performance, although he said MyFP’s policy was to stay away from “theme-based funds” such as those localised in a specific region or commodity.
Foo also advised that investors refrain from going on a purchasing spree based on the “cheapness” of a stock or fund, as pricing was not a good indicator of the value of the share.
“At the end of the day, it’s not the price that determines the value of the stock — that kind of analysis is too simplistic. You have to look at the intrinsic value of the underlying equity to determine that,” Foo said.
Source : The Edge Daily
Sunday, January 4, 2009
Best way to invest RM50,000 now
Have some cash to invest? Three experts were asked what would be the best way to invest RM50,000 and below are their responses.
Andy Tang
Executive Director
Head of Performance Development
Great Vision Advisory Group
First of all, we need to know what is the purpose of the savings? Is it for short-term use? Medium or long-term usage?
Our money should be allocated into three portions: liquidity, profit and security. Usually, money in the liquidity portion is meant for short-term use. The money allocated for the profit portion is mainly for investment, hedging for higher return (either to re-invest in business, the share market, etc.), whereas money allocated for security purpose is meant for long-term use such as retirement, long-term care, education and lifestyle.
For liquidity purposes, which is mainly for the short term, it usually involves savings accounts, current accounts, fixed deposits or short-term income funds.
Director Andy Tang
The ideal ratio of funds to be utilised is 20% for liquidity, 35% for profitability and 45% for security. Of course, the ratio is different from time to time and from one individual to another.
While making the allocation, it is a must to re-visit or review other essential planning such as a healthcare plan, family income protection plan, future income protection plan, critical illness coverage plan, debt cancellation, mortgage protection plan and mortgage review, life insurance and estate planning.
Before making any decision on the RM50,000, we need to identify the end in mind to avoid any disappointment.
First, we have to review and identify what other financial resources we have and only then proceed with the plan.
In conclusion, after checking and reviewing your personal cashflow, this is not only the RM50,000 that we should plan for but it could involve the ongoing securing of wealth from your yearly surplus in order to ensure wealth preservation and accumulation for the future. For a better picture of the entire planning, it is always advisable to look for the capable financial adviser.
Reginald Yoganathan Hunt
Senior Group Sales Manager
Great Eastern Life Assurance (Malaysia) Berhad
Investing RM50,000 over a period of six to 10 years. There are a number of financial instruments that yield higher than the fixed deposit and give a reasonable return of 7%–9% a year.
·Investment-linked single premium with a reputable life insurance company. Equity funds have shown to generate 8% to 10% return over a period of seven to 10 years but there is also the danger of a market crash where you may end up poorer. Bond funds give a lower return and are safer.
Reginald Yoganathan Hunt
·Real estate investment trusts (REITs) have recently sprung up and with quality buildings and high rental rates, a fair income can be assumed and reasonable returns could be expected.
·Unit trusts have been in the scene for quite some time. Most of them are life insurance or bank-backed organisations and they have also shown consistent returns.
·Structured products have recently come into the scene. Insurance companies and banks have moved into cash on low fixed deposit rates. As the experience is still in its infancy stage, we will have to wait to see if they perform well.
My recommendation would be to invest in investment-linked single premium product. Half of the RM50,000 can be invested in bonds and the other half in equities.
Robert Foo
Managing Director and Principal Consultant
MyFP Services Sdn Bhd
We should aim to get real returns of about 5% to 6% after deducting the inflation rate if our objective is to protect of our savings value from being eroded in times of high inflation.
Robert Foo
In the long term, however, we expect interest rates to moderate to about 2% to 3%, hence we would target to obtain about 7% to 8% in gross returns.
The financial instrument to achieve this would be unit trusts of different asset classes.
We would usually invest with about four to five different fund managers as well as varying asset classes as a form of risk diversification.
Despite the volatile market situation, it is possible to achieve notable returns in these investments provided we invest for the long term, generally more than five years.
It is also important to review our investment portfolio every six months and restructure according to the market’s performance.
Depending on one’s life stage, it would be necessary to plan for expenses as well as insurance before investing.
It is also crucial to have a timeframe in mind when investing.
For example, if we are planning for our retirement in 20 years’ time, we would target higher returns at the beginning by investing in riskier asset classes.
We would then gradually move to less riskier forms of asset classes as we near our retirement.
Source : The Star, 3 January 2009
Andy Tang
Executive Director
Head of Performance Development
Great Vision Advisory Group
First of all, we need to know what is the purpose of the savings? Is it for short-term use? Medium or long-term usage?
Our money should be allocated into three portions: liquidity, profit and security. Usually, money in the liquidity portion is meant for short-term use. The money allocated for the profit portion is mainly for investment, hedging for higher return (either to re-invest in business, the share market, etc.), whereas money allocated for security purpose is meant for long-term use such as retirement, long-term care, education and lifestyle.
For liquidity purposes, which is mainly for the short term, it usually involves savings accounts, current accounts, fixed deposits or short-term income funds.
Director Andy Tang
The ideal ratio of funds to be utilised is 20% for liquidity, 35% for profitability and 45% for security. Of course, the ratio is different from time to time and from one individual to another.
While making the allocation, it is a must to re-visit or review other essential planning such as a healthcare plan, family income protection plan, future income protection plan, critical illness coverage plan, debt cancellation, mortgage protection plan and mortgage review, life insurance and estate planning.
Before making any decision on the RM50,000, we need to identify the end in mind to avoid any disappointment.
First, we have to review and identify what other financial resources we have and only then proceed with the plan.
In conclusion, after checking and reviewing your personal cashflow, this is not only the RM50,000 that we should plan for but it could involve the ongoing securing of wealth from your yearly surplus in order to ensure wealth preservation and accumulation for the future. For a better picture of the entire planning, it is always advisable to look for the capable financial adviser.
Reginald Yoganathan Hunt
Senior Group Sales Manager
Great Eastern Life Assurance (Malaysia) Berhad
Investing RM50,000 over a period of six to 10 years. There are a number of financial instruments that yield higher than the fixed deposit and give a reasonable return of 7%–9% a year.
·Investment-linked single premium with a reputable life insurance company. Equity funds have shown to generate 8% to 10% return over a period of seven to 10 years but there is also the danger of a market crash where you may end up poorer. Bond funds give a lower return and are safer.
Reginald Yoganathan Hunt
·Real estate investment trusts (REITs) have recently sprung up and with quality buildings and high rental rates, a fair income can be assumed and reasonable returns could be expected.
·Unit trusts have been in the scene for quite some time. Most of them are life insurance or bank-backed organisations and they have also shown consistent returns.
·Structured products have recently come into the scene. Insurance companies and banks have moved into cash on low fixed deposit rates. As the experience is still in its infancy stage, we will have to wait to see if they perform well.
My recommendation would be to invest in investment-linked single premium product. Half of the RM50,000 can be invested in bonds and the other half in equities.
Robert Foo
Managing Director and Principal Consultant
MyFP Services Sdn Bhd
We should aim to get real returns of about 5% to 6% after deducting the inflation rate if our objective is to protect of our savings value from being eroded in times of high inflation.
Robert Foo
In the long term, however, we expect interest rates to moderate to about 2% to 3%, hence we would target to obtain about 7% to 8% in gross returns.
The financial instrument to achieve this would be unit trusts of different asset classes.
We would usually invest with about four to five different fund managers as well as varying asset classes as a form of risk diversification.
Despite the volatile market situation, it is possible to achieve notable returns in these investments provided we invest for the long term, generally more than five years.
It is also important to review our investment portfolio every six months and restructure according to the market’s performance.
Depending on one’s life stage, it would be necessary to plan for expenses as well as insurance before investing.
It is also crucial to have a timeframe in mind when investing.
For example, if we are planning for our retirement in 20 years’ time, we would target higher returns at the beginning by investing in riskier asset classes.
We would then gradually move to less riskier forms of asset classes as we near our retirement.
Source : The Star, 3 January 2009
Unit Trust Price as at 2 January 2009
Source : Public Mutual Berhad
Public Savings Fund **0.5724
Public Growth Fund **0.3671
Public Index Fund 0.5289
Public Industry Fund ** 0.4113
Public Aggressive Growth Fund **0.5365
Public Regular Savings Fund 0.4303
Public Balanced Fund **0.6250
Public Bond Fund 0.9399
Public Ittikal Fund **0.6968
Public Smallcap Fund ** 0.5768
Public Islamic Bond Fund 0.9920
Public Equity Fund ** 0.2143
Public Institutional Bond Fund 0.9999
Public Islamic Equity Fund 0.2481
Public Money Market Fund 1.0184
Public Focus Select Fund **0.1702
Public Enhanced Bond Fund **0.9481
Public Dividend Select Fund 0.2195
Public Islamic Opportunities Fund **0.2180
Public Islamic Balanced Fund 0.2134
Public Far-east Select Fund **0.1940
Public Select Bond Fund 1.0022
Public Islamic Dividend Fund 0.2406
Public Regional Sector Fund **0.1697
Public Asia Ittikal Fund ** 0.1892
Public Global Select Fund **0.1591
Public Far-east Dividend Fund **0.1729
Public Islamic Enhanced Bond Fund **0.9721
Public Far-east Balanced Fund **0.1723
Public Global Balanced Fund **0.1784
Public Islamic Asia Dividend Fund **0.1590
Public China Select Fund **0.1349
Public Islamic Money Market Fund 1.0236
Public Far East Property & Resorts Fund **0.1182
Public Islamic Select Bond Fund 1.0221
Public Islamic Asia Balanced Fund **0.1785
Public South-east Asia Select Fund **0.1497
Public Sector Select Fund 0.1729
Public Islamic Sector Select Fund 0.1748
Public China Ittikal Fund **0.1454
Public Far-east Consumer Themes Fund **0.1932
Public Islamic Select Treasures Fund 0.2043
Public China Titans Fund **0.1859
Public Islamic Optimal Growth Fund 0.1924
Public Far-east Telco & Infrastructure Fund **0.2448
Public Capital Protected Select Portfolio Fund **1.0125
Public Islamic Select Enterprises Fund 0.2442
Public Islamic Income Fund 1.0086
Pb Balanced Fund **0.7246
Pb Growth Fund **0.6278
Pb Fixed Income Fund 1.0107
Pb Islamic Equity Fund 0.1799
Pb Islamic Bond Fund 1.0240
Pb Asia Equity Fund **0.1904
Pb Islamic Asia Equity Fund **0.1605
Pb Cash Management Fund 1.0191
Pb Cash Plus Fund 1.0003
Pb Asean Dividend Fund **0.1573
Pb Islamic Cash Management Fund 1.0147
Pb Euro Pacific Equity Fund **0.1359
Pb Islamic Asia Strategic Sector Fund **0.1345
Pb China Pacific Equity Fund **0.1248
Pb Asia Real Estate Income Fund **0.1621
Pb Islamic Cash Plus Fund 1.0007
Pb China Asean Equity Fund **0.2076
Pb Capital Protected Dragon Fund **0.9763
Pb Capital Protected Resources Fund **1.0005
Public Savings Fund **0.5724
Public Growth Fund **0.3671
Public Index Fund 0.5289
Public Industry Fund ** 0.4113
Public Aggressive Growth Fund **0.5365
Public Regular Savings Fund 0.4303
Public Balanced Fund **0.6250
Public Bond Fund 0.9399
Public Ittikal Fund **0.6968
Public Smallcap Fund ** 0.5768
Public Islamic Bond Fund 0.9920
Public Equity Fund ** 0.2143
Public Institutional Bond Fund 0.9999
Public Islamic Equity Fund 0.2481
Public Money Market Fund 1.0184
Public Focus Select Fund **0.1702
Public Enhanced Bond Fund **0.9481
Public Dividend Select Fund 0.2195
Public Islamic Opportunities Fund **0.2180
Public Islamic Balanced Fund 0.2134
Public Far-east Select Fund **0.1940
Public Select Bond Fund 1.0022
Public Islamic Dividend Fund 0.2406
Public Regional Sector Fund **0.1697
Public Asia Ittikal Fund ** 0.1892
Public Global Select Fund **0.1591
Public Far-east Dividend Fund **0.1729
Public Islamic Enhanced Bond Fund **0.9721
Public Far-east Balanced Fund **0.1723
Public Global Balanced Fund **0.1784
Public Islamic Asia Dividend Fund **0.1590
Public China Select Fund **0.1349
Public Islamic Money Market Fund 1.0236
Public Far East Property & Resorts Fund **0.1182
Public Islamic Select Bond Fund 1.0221
Public Islamic Asia Balanced Fund **0.1785
Public South-east Asia Select Fund **0.1497
Public Sector Select Fund 0.1729
Public Islamic Sector Select Fund 0.1748
Public China Ittikal Fund **0.1454
Public Far-east Consumer Themes Fund **0.1932
Public Islamic Select Treasures Fund 0.2043
Public China Titans Fund **0.1859
Public Islamic Optimal Growth Fund 0.1924
Public Far-east Telco & Infrastructure Fund **0.2448
Public Capital Protected Select Portfolio Fund **1.0125
Public Islamic Select Enterprises Fund 0.2442
Public Islamic Income Fund 1.0086
Pb Balanced Fund **0.7246
Pb Growth Fund **0.6278
Pb Fixed Income Fund 1.0107
Pb Islamic Equity Fund 0.1799
Pb Islamic Bond Fund 1.0240
Pb Asia Equity Fund **0.1904
Pb Islamic Asia Equity Fund **0.1605
Pb Cash Management Fund 1.0191
Pb Cash Plus Fund 1.0003
Pb Asean Dividend Fund **0.1573
Pb Islamic Cash Management Fund 1.0147
Pb Euro Pacific Equity Fund **0.1359
Pb Islamic Asia Strategic Sector Fund **0.1345
Pb China Pacific Equity Fund **0.1248
Pb Asia Real Estate Income Fund **0.1621
Pb Islamic Cash Plus Fund 1.0007
Pb China Asean Equity Fund **0.2076
Pb Capital Protected Dragon Fund **0.9763
Pb Capital Protected Resources Fund **1.0005
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