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Thursday, September 16, 2010

Unit Trust vs Stock Market



Taken from : RHBInvest's forum

Written by : "I smell money"

Don't know if you guys notice this, but everyone with investment in unit trust need to take note of this. I've recently flipped through the newspaper to have a check on performance of unit trust (according to Lipper Ranking) and these are some of the findings:

1.For the 6 months period [26-02-10 - 27-08-10], the common benchmarks FBM KLCI index rose +12.8% and FBM100 rose +12.4%. However Malaysian equity funds (non-islamic) had only return +8% on an 80-member average. {WHOA!!! not too impressive return by an average fund manager}.

2. Ok, then lets look at how many of the funds beat the benchmark of 12%. Oppss .. only 10 out of 80 fund or 12.5% of fund managers beat their benchmark.

3. Ok, then we shall look at the creme de la creme of the group, and see how they have done. For the top performing fund for the 6 month category, the top fund only had a return of 15%, huhhhh!!! only 3% above the benchmark.

Ok. then its time to compare this with some of the markets 2010 favourite.

Comparison same period
1. Supermax 12% (even after it had fallen off the cliff towards the end of July)
2. TimeCom 29%
3. Axiata 19%
4. Jadi 65% (ok this one a bit too unrealistic, but if you went in around XXsen when the stock was heavily traded)
5. AirAsia 14%
6. JCY -29% (of course not everything is hunky dory, and how can anybody forget about this name)
7. Unisem 19%
8. Notion -45% (woooo, dont we hate this name)
9. UEMLand 40%
10. MRCB 21%
11. Adventa -27%
12. Talam -20%
13. BJ Corp -23%
On average +37.5% (if you spread your money across all the 13 stocks evenly).


So if anyone who wants to invest in the stock market through unit trust then they should reconsider this strategy.

1st reply by : Cheng

Thanks for the comparison. However, there are 2 points I like to highlight here.

1. We can not compare directly the equity invested with Unit Trust. When market turns to negative, you may see equity losses are much more than Unit Trust. As equity is always higher risk than Unit Trust, higher returns or losses are expected. Unit Trust tends to provide consistency in longer term and not big gain(or loss) in short term, and you do not need to monitor stock performance daily.

2. Lipper only selected certain Unit Trust fund to track, not all. During the same period, I can find Unit Trust fund with more than 15% return from 1 Unit Trust company. Sorry I do not have time to check all the funds performance from all companies.

Regards,
Cheng

2nd reply by Audrey

Ismell..my 2 sen worth ABT investing in unit trust and directly in shares.
1) investing in unit trust is investing in a pool of funds=many companies that that a fund mgr invests in according to the prospectus & fund objective.Investing into shares directly=u/ur remisier decides which company to invest in..according to technical and/or fundamental analysis.

The risk of investing into shares is much higher as u r only investing in 1 particular company compared to unit trust where with a small capital you can have access to a pool of companies.

2) do not under-estimate the skill, expertise n experience of fund mgrs. Sometimes they get it right, sometimes they r wrong..(just like a share trader who just trades 'part-time..remember, the fund mgr's career n livelihood is at stake).

The important thing ABT investing into UT is the fund mgr must deliver consistent n above-average returns over time. Do U get it right ALL THE TIME..?? Do you have losses which u deny/do not talk ABT?? Ahem..;)

3) at the end of the day, Lipper/RAM etc only compares past 3/6/12mths etc. It is just a GUIDE..does it mean that when ones invests in a particular award-winning fund, the unit trust investor's portfolio will also be award-winning also..??

Most times I think NOT becoz the Lipper only measure from 1st Jan-31st DEC in a calendar year.The investor could be investing throughout the year..so how to compare apple with apple then??

4) my final point..so how to make lotsa moolah via investing in unit trust and shares then??

My humble opinion is: investing in unit trust: u need to know ur risk profile (how much risk u want to take),Risk tolerance (how much LOSS u can tahan before switching out), objective (for what purpose?)Time frame (how long before u need to cash out~3-5yrs, 5-10yrs etc), preference for particular companies/market etcShares: entry/stop/profit target. Time invested could be day/days/week/weeks.

My dear I Smell Money..both are different vehicles although they invest into Bursa (I assume u r comparing equity funds.?). Do not under-estimate one or the other..both can enhance your portfolio and increase ur Net Worth or make a big lubang in ur pocket n reverse ur fortune if not properly managed..!!

Wanna know how to make money via a properly managed unit trust portfolio..??

Call me..a happy, successful unit trust & share investor with a winning portfolio

Audrey

TEH : I hv replied too an hour ago, pending for approvals. I will like to elaborate ot these as it is an important information for unit-trust investors. What the "I smell money" written are kinda naive and should not be taken seriously. Yes, DO NOT take out your money from your unit-trust(put it safely partial of your funds there if it is doing well, and above 10% is simply GREAT!!).

Sometimes I wonder ... why some in forums could be so proud, some very egoistic, some 'sound' that they hv DONE IT in stock markets and giving us novices some hints etc etc ... I still wonder on those THINK they are very good in knowledge sense - I could only envy as they certainly a millionaire by now after years in market- but even if you are the minority 10% who gained from market, WHY being boastful? WHY the nose-in-the-air?

TEH

1 comment:

lsb said...

manage ur own money, dont let others do it for u. active self managing is better than passive and let others do it.