Sunday, December 14, 2008

EPF Dividend Rate Compared Against Inflation

Kumpulan Wang Persaraan Malaysia (Employees Provident Fund)

EPF statute promises to pay their clients minimum 2.5%

EPF Dividend History

1952 - 1959 = 2.50%
1960 - 1962 = 4.00%
1963 =5.00%
1964 =5.25%
1965 - 1967 =5.50%
1968 - 1970 =5.75%
1971 = 5.80%
1972 - 1973 = 5.85%
1974 - 1975 = 6.60%
1976 - 1978 = 7.00%
1979 = 7.25%
1980 - 1982 = 8.00%
1983 - 1986 = 8.50%
1987 - 1994 = 8.00%
1995 = 7.50%
1996 = 7.70%
1997 - 1998 = 6.70%
1999 = 6.84%
2000 = 6.00%
2001 = 5.00%
2002 = 4.25%
2003 = 4.50%
2004 = 4.75%
2005 = 5.00% 
2006 = 5.15%
2007 = 5.80%

From a tabulation table, basic minimum is shown below.

Call me old school, but I would still advise that everyone to keep the invesment intact, since it is for your future. While EPF protecting the principal and minimum distributions of 2.5% you would never miss a thing. If you need to invest or purchase anything, set up another fund.

(This is simple article just to share records of EPF distributions for reference)

ASNB Fixed-Priced Unit Trust Funds a Hit With Investors

My comment can be read below after the article.

The Star Online > Business
Monday December 15, 2008

ASNB Fixed-Priced Unit Trust Funds a Hit With Investors


AMANAH Saham Nasional Bhd’s (ASNB) fixed-priced unit trust funds launched in the past few years have proven to be big winners due to their commendable returns.

These equity-based funds, namely Amanah Saham Wawasan 2020 (ASW 2020) and Amanah Saham Malaysia (ASM), have achieved compounded annual growth rates of 10.78% and 6.3% respectively since the time of its launch.

ASW 2020 and ASM have been providing an annual average distribution income of 7.74 sen and 7.12 sen respectively.

To paint a clearer picture, say if an investor had placed RM100,000 in ASW 2020 10 years ago, his investment value would amount to RM251,360 today.

Similarly, by placing the same amount in the ASM fund 10 years ago, the investor would have RM173,340 today in his investment account.

ASM was launched on April 20, 2000, with an initial fund size of two billion units which were fully subscribed in 21 days.

ASM undertook its first increase in fund size two months later in June 2000 with one billion units fully subscribed in four months.

In April 2006, one billion units of the ASM open for subscription were fully subscribed in 45 minutes.

The most recent offer of ASM’s additional units was in July 2007 which saw all the 500 million units, capped at 50,000 units per investor, fully taken up in 30 minutes.

Earlier in March 2007, a total of 800 million units, also capped at 50,000 units per investor, were fully sold out in one day.

ASW 2020 also drew strong response for its subscription quota for non-bumiputra investors since its launch in August 1996.

Besides the notable payouts, both these funds have fixed prices at RM1 per unit unlike other unit trust funds, which is an attractive feature for risk-averse investors.

According to an analyst, ASNB’s strength lies in the fact that it manages a big fund and has the luxury of time.

“These two factors are crucial to beat the market at any time,” the analyst added.

To date, the fund size for ASW 2020 and ASM stands at 10.42 billion units and 7.2 billion units respectively.

This includes the additional one billion units each offered to the public last month for both these funds. In comparison to these fixed-priced unit trust funds, ASNB’s variable priced balanced fund, Amanah Saham Nasional 3 (ASN 3), did not perform as well.

ASN 3, which has a fund size of 112.91 million units, only registered a compounded annual growth rate of 3.7%.

My Comment:

I prefer ASB which gave good and consistent distributions almost every year. It's compounded interest for 15 years based average 7% is 11.92% and at the same time also invest into Amanah Saham Nasional (ASN) and 15 years based on average 5.88% is 9.5% - I worked this on estimation and history and tracked record for the past 3 years and extrapolated to 15%. (I shall later, updated with correct average and compounded interest after I extract its data from ASB and ASN historical records.)

Friends advocate me to join other houses as well, I know - to reduce risks, I am therefore better to have a few good funds and diverse my money.

But, I am the believer of consistency and focussing on certain fund to avoid over-lapping investment into same category of fund as well as to avoid over-diversified and losing my focus on its horizon.

Those common mistakes I've seen is that, investors do not project  vivid horizon and target of a particular fund. They always missed this:

1. Horizon : How long they want to invest and preserving its capital.

2. Cum distribution : At the end of their projected horizon, how much do they expect distribution that they can take out (using capital preserving model).

3. Total unit holdings : Which reflected in (1) and (2). So, they know how much they need to invest, regardless any method they want to use during invesment period.

4. Over-diversified : Where investors hold to too many funds that they lost focus for (1) and (3).

Wednesday, December 3, 2008

Unit Trust - Question on Return of Investment

Have anyone ever question this situation:

One decided that he wanted to invest into Unit Trust. So, he walks to a Unit Trust house, we named it Super Trust Bhd. An agent then proposed him to buy Super Trust Fund.

In his explanation, the revealed that Super Trust Fund, charging 5% for entry fee. For example, if he decided to spend RM1000 - Super Trust Bhd will take 5% that is RM50 out of that amount. So, he is only left RM950 to buy the Super Trust Fund.

The agent explain further, Super Trust Fund has been in the market for 5 years and during the period has given dividend in average of 7% which sounds a lot to him.

The nice agent who offered him free drink then adds, every financial year Super Trust Bhd will charge 1.5% for management fee. That sounds little to him.

When he gets back home, he does few calculations.

1. He decided to spend RM1000 to initially purchase Super Trust Fund.
2. He already knows that entry fee is RM50.00 (5%)
3. End of each financial year, there will be 1.5% charge translated as RM15.00
4. Ok, average returns is 7%. He made a little assumption that price fluctuation deviation is very small and can be ignored.
5. From (1) to (4), he tries to determine net profit (return) from his investment.

His results:

1. For the first year: Profit 7% minus entry fee 5% minus management fee 1.5% leaves him only 0.5% of net profit.
2. If he decided not to buy or sell his holding for another year, the net profit will be 7% minus management fee 1.5%, leaves him at 5.5%

That sounds good, because it is good!

But, since Super Trust Fund's price is not fixed and it is fluctuated, he wants to consider Dollar-Cost-Averaging and he invest in fixed and orderly time manner. Again, he made assumption that price deviation is very small and can be ignored.

Year 1
Initial investment: RM1,000.00
Deduction: 6.5%
Balance: RM935
Balance brought forward after dividend: RM4.68 (RM939.68)
So, losses for the first year is RM60.32 (6%)

Year 2
Balance brought forward: RM939.68
DCA addition: RM1,000.00
Deduction - Entry Fee: RM50.00
Accumulation after Deduction: RM1,889.68
Deduction - Management Fee: RM28.35
Balance: RM1861.33
Dividend at 7%:
Balance brought forward after dividend: RM130.29 (RM1,991.62)

Year 3
Balance brought forward: RM1,991.62
DCA addition: RM1,000.00
Deduction - Entry Fee: RM50.00
Accumulation after Deduction: RM2,941.62
Deduction - Management Fee: RM44.12
Balance: RM2,897.50
Dividend at 7%:
Balance brought forward after dividend: RM202.83 (RM3100.33)

Only after 3 years, then he gets back his capital and dividend RM100.33 translated as 3.34% or average 1.11% a year.

Well, it sure seems that 1.11% per annum is below annual inflation rate...

So, I really like to ask - is Unit Trust really a good vehicle to ride on considering that fund houses in Malaysia (we have many: Public Mutual, ASNB, CIMB Principal, MAAKL, and lot more) charging high entry and exit fees which at some point above the particular funds annual returns?

This is something that no one really asking and want to look into - but still we need to consider the cost of our investment and do we really get a good returns as promised. When our returns below inflation rate - I really have nothing to say.

Anyone has to comment?

Ok, I shall add more discussion to this. At the mean time, do think about the calculation above and do you really "investing" in Unit Trust?

I shall write comparison Pros and Cons between investing in Unit Trust and Stock Market. But that would be later, when I have enough time to put things together.

Disclaimer: Figures and name here just for example and rough calculations only. I may be wrong in the idea of presenting it and I would be much appreciated if someone who has better "lights" and knowledge to share it with me. One more thing, I am not associated with any fund house nor selling or promoting any fund.

Tuesday, December 2, 2008

Fuel Price Reduction - Another 10 Sen

OK. Malaysian can now enjoy another 5% reduction which translate 10 sen from previous price of RM2.00 which perhaps may be a relief since it is another 2 sen lower than the price at the beginning of the year at RM1.92

But as the world's price going down, government may perhaps want to give true "price".

Seeing the price of fuel chopped and slashed many times, from RM2.70 to RM1.90 - about 30% - but we have yet to see consumer prices to go down as well.

The electricity tariff which was increased during the time may now returned to the previous price. The consumer dry and food products supposed now to follow suits.

But, we can only wait - since it is hard and rather difficult to see these prices to go down. Their tendencies to hike never know how to return downward.

So guys, I am cutting another 5% from my monthly budget for fuel and putting the saved to pay other killing debts - how about you?