The Bursa Malaysia is running high for a few years already. Most dividend funds are making money, distributing good dividend. Before the dividend reaches the unit holders' hand, the taxable dividend already have its 20% taken off.
For those unit holders whose income has touched 20% tax bracket, it is really a loss, and rather have funds that don't distribute the dividend.
However, if you have large investment on dividend funds, it may be worth keeping track of the financial year for those funds. You can consider switching the funds to the money market fund that don't charge you initial charges to skip the day when the distribution is declared, and switch back the following day. This may save you from paying the 20% tax from the taxable dividend.
One thing is watch out is the terms and conditions for switching charges from equity fund to money market fund, and vice versa.
Showing posts with label Unit Trust. Show all posts
Showing posts with label Unit Trust. Show all posts
Tuesday, 8 July 2014
Wednesday, 6 March 2013
Selling Insurance and Unit Trust
For almost one year, I have been drifted away further and further from my work activities. I get to dislike approaching people for investing in unit trust and insurance protection. As I stay longer in this line of business, I am more and more convinced that unit trust and insurance marketing departments are only interested getting sales, instead of making money and providing proper insurance for clients.
I took the effort to complete my study on Financial Planning, and obtained the certification as Registered Financial Planner. I joined the Financial Planning Company because I felt that being a tied agent to insurance company, no other insurance policy is good other than what you are selling. I don't agree with asking people to surrender their policies to buy from me. However, this is what agents are doing, especially those who are "successful" in their insurance career. This goes against my principle. Sadly to find out that Financial Planning Company are also more concerned with sales than giving proper advise to clients. Guess this line of business is not for me.
I took the effort to complete my study on Financial Planning, and obtained the certification as Registered Financial Planner. I joined the Financial Planning Company because I felt that being a tied agent to insurance company, no other insurance policy is good other than what you are selling. I don't agree with asking people to surrender their policies to buy from me. However, this is what agents are doing, especially those who are "successful" in their insurance career. This goes against my principle. Sadly to find out that Financial Planning Company are also more concerned with sales than giving proper advise to clients. Guess this line of business is not for me.
Wednesday, 10 October 2012
Choose a unit trust fund
What are the criteria to choose a unit trust fund? When your consultant recommends you, ask the below questions. By the way, don't buy new fund because there is no track records.
1. Past performance - even though past performance is not an indication of future performance, we still believe that it is more likely for a fund with good past performance to perform better in the future. You can also study the sharpe ratio, r-squared, beta, standard deviation if you are savvy investors.
2. Annual Expense Ratio - compare that with other funds of the same group. e.g local equity fund compares with local equity fund
3. Front end sales charge - different fund houses may have different sales charges for the same type of funds. Choose lower sales charge funds so that you have more capital to invest in.
4. Certain funds may have high Sales charge but low annual expense ratio. Others may have low sales charge but high annual expense ratio.
5. Fund size - if the fund size is too small, the fund managers may have difficulties to do diversification and allocation.
6. Top 5 holdings - if you like, you can check what are the top stocks holdings of this fund. Just check. In Malaysia, we may have some listed companies that need attention.
7. Switching fee - When we do asset allocation, switching will occur. Take note that switching can be expensive if you have many funds to switch at asset allocation. Public Mutual gives a number of free switches to their Mutual Gold members but if you have too many switching to do, it will still incur unnecessary expenses.
8. In insurance policies, we can appoint nominees in case dxxxh should occur and the nominees can receive the compensation. How about unit trust? Ask your consultants. Or write a will to cover for that.
1. Past performance - even though past performance is not an indication of future performance, we still believe that it is more likely for a fund with good past performance to perform better in the future. You can also study the sharpe ratio, r-squared, beta, standard deviation if you are savvy investors.
2. Annual Expense Ratio - compare that with other funds of the same group. e.g local equity fund compares with local equity fund
3. Front end sales charge - different fund houses may have different sales charges for the same type of funds. Choose lower sales charge funds so that you have more capital to invest in.
4. Certain funds may have high Sales charge but low annual expense ratio. Others may have low sales charge but high annual expense ratio.
5. Fund size - if the fund size is too small, the fund managers may have difficulties to do diversification and allocation.
6. Top 5 holdings - if you like, you can check what are the top stocks holdings of this fund. Just check. In Malaysia, we may have some listed companies that need attention.
7. Switching fee - When we do asset allocation, switching will occur. Take note that switching can be expensive if you have many funds to switch at asset allocation. Public Mutual gives a number of free switches to their Mutual Gold members but if you have too many switching to do, it will still incur unnecessary expenses.
8. In insurance policies, we can appoint nominees in case dxxxh should occur and the nominees can receive the compensation. How about unit trust? Ask your consultants. Or write a will to cover for that.
Working As Unit Trust Agent
I am an insurance agent and also registered as a unit trust consultant. However I am never very active in promoting insurance and unit trust. For the past 10 years, I only managed to hit my target to maintain my licenses. :)
Nevertheless, I can tell you that I am more knowledgeable than many of the top sales insurance agency managers and unit trust consultant managers out there in the market. LOL.
Ha2. I just like to attend classes, seminars, motivation talks. Both these 2 fields allow me to gain a lot of insight by attending the many free (or minimal) educations they provide. I even obtained Register Financial Planners license and now registered as Financial Adviser.
I gain a lot because my knowledge has enabled me to better my financial situation. I am now well planned with my own financial matters.
How do unit trust companies teach their consultants how to choose funds for their customers? Most common used method would be to pick the high return funds at certain periods to show to the customers. Then, at the launch of new funds, will do a good projection of the funds with some deduction of sales charges. One Agency Manager even said it doesn't matter what fund to choose, they are all the same.
Anyway, it really depends on consultants' experience, knowledge and code of ethics when comes to selling of funds. If you meet a consultant who sees only commission and oversea trip incentive, then the customers would be the loser. I would suggest that if you were to invest a lot of money plus EPF in unit trust, do ask a lot of questions. And educate yourself. There are many useful website to guide investors. Happy investing!
Nevertheless, I can tell you that I am more knowledgeable than many of the top sales insurance agency managers and unit trust consultant managers out there in the market. LOL.
Ha2. I just like to attend classes, seminars, motivation talks. Both these 2 fields allow me to gain a lot of insight by attending the many free (or minimal) educations they provide. I even obtained Register Financial Planners license and now registered as Financial Adviser.
I gain a lot because my knowledge has enabled me to better my financial situation. I am now well planned with my own financial matters.
How do unit trust companies teach their consultants how to choose funds for their customers? Most common used method would be to pick the high return funds at certain periods to show to the customers. Then, at the launch of new funds, will do a good projection of the funds with some deduction of sales charges. One Agency Manager even said it doesn't matter what fund to choose, they are all the same.
Anyway, it really depends on consultants' experience, knowledge and code of ethics when comes to selling of funds. If you meet a consultant who sees only commission and oversea trip incentive, then the customers would be the loser. I would suggest that if you were to invest a lot of money plus EPF in unit trust, do ask a lot of questions. And educate yourself. There are many useful website to guide investors. Happy investing!
Beta
There are 5 principal risk measures of unit trust performance. They are alpha, beta, r-squared, Standard Deviation and sharpe ratio.
Beta measures a fund's sensitivity to movements in the benchmark index.
Before you read Beta, make sure R-squared should be at least 0.85. Otherwise, beta doesn't reflect the fund's sensitivity to the benchmark index.
a fund with a beta of 1.5 tend to gain 1.5% for every 1% rise the market and lose 1.5% for every 1% decline in the market.
Thus, if beta is 1, then it imitates the benchmark index completely.
Beta measures a fund's sensitivity to movements in the benchmark index.
Before you read Beta, make sure R-squared should be at least 0.85. Otherwise, beta doesn't reflect the fund's sensitivity to the benchmark index.
a fund with a beta of 1.5 tend to gain 1.5% for every 1% rise the market and lose 1.5% for every 1% decline in the market.
Thus, if beta is 1, then it imitates the benchmark index completely.
R Squared
R-squared is a historical measure which indicates how closely a fund's past fluctuations have correlated with the fluctuations of its benchmark index. R-squared vales range from 0 to 1.0, or 0% to 100%. In Public Mutual, we are using 0 to 1.0.
0 means that a fund's returns have noc correlation with a benchmark's fluctuations while 1 indicates that a fund's return s are completely correlated with the benchmark's return.
Thus, if R-squared is less than 0.7 (my opinion), there is no point to look at Beta, as beta measure a fund's sensitivity to movements in the benchmark index.
More useful R-squared is more than 0.85. It indicates the fund's performance patterns have been in line with the benchmark.
0 means that a fund's returns have noc correlation with a benchmark's fluctuations while 1 indicates that a fund's return s are completely correlated with the benchmark's return.
Thus, if R-squared is less than 0.7 (my opinion), there is no point to look at Beta, as beta measure a fund's sensitivity to movements in the benchmark index.
More useful R-squared is more than 0.85. It indicates the fund's performance patterns have been in line with the benchmark.
Sharpe Ratio
I am learning the ratios to better myself in unit trust investment.
The Sharpe ratio is a risk-adjusted measure of return that is often used to evaluate the performance of a portfolio. The ratio helps to make the performance of one portfolio comparable to that of another portfolio by making an adjustment for risk.
E.g. Fund A 15% return
Fund B 12% return
Is Fund A better? Fund A is better if it doesn't take higher risk than fund B. Risk adjusted return will tell you which one is better.
Fund A standard deviation 8%
Fund B standard deviation 5%
risk free rate is 5%
Sharpe ratio for Fund A is (15%-5%)/8% = 1.4
Sharpe ratio for Fund B is (12%-5%)/5% = 1.25
This means to say Fund B is able to generate a higher return on a risk-adjusted basis.
Public Mutual does compute sharpe ratio in the consultant's software. I don't know where to look for this reading in any public domain.
The Sharpe ratio is a risk-adjusted measure of return that is often used to evaluate the performance of a portfolio. The ratio helps to make the performance of one portfolio comparable to that of another portfolio by making an adjustment for risk.
E.g. Fund A 15% return
Fund B 12% return
Is Fund A better? Fund A is better if it doesn't take higher risk than fund B. Risk adjusted return will tell you which one is better.
Fund A standard deviation 8%
Fund B standard deviation 5%
risk free rate is 5%
Sharpe ratio for Fund A is (15%-5%)/8% = 1.4
Sharpe ratio for Fund B is (12%-5%)/5% = 1.25
This means to say Fund B is able to generate a higher return on a risk-adjusted basis.
A ratio of 1 and more is good,
2 and more is very good, and 3 and more is considered excellent.
Public Mutual does compute sharpe ratio in the consultant's software. I don't know where to look for this reading in any public domain.
Unit Trust Consultants
I passed my unit trust exam with FIMM many years ago. I have attended many unit trust training sessions at Prudential Unit Trust (now call Eastspring), Public Mutual, AmInvestment, RHB etc. Of all the training sessions, the trainer and managers will ask you to sell, sell, sell. They will teach you how to answer objections. Tell you what are the common objections and how you should prepare yourself for such kind of objections. They will show you how good the performance of their investments are. When new funds are launched, they will tell you blah blah blah, so that you feel that the investments are good for your friends and customers, and they you go, following what they have psycho you.
My sales volume has never hit the targets for oversea trips. I feel that when I sell unit trust, I am asking my clients to trust me for the return of their investments. I don't feel comfortable because after attending so many trainings and listening to so many sharing from 'successful consultant', I haven't seen the trainers have emphasized on making good returns for our clients. 'Consultants' will extract good performance of the past years' record, or pick on successful investment of their clients to persuade their clients. Even the managers are selling this way. I feel that most of the unit trust and insurance agents in Malaysia are not up to the level of being responsible 'advisers'. I would say many are merely good 'sales person'.
My sales volume has never hit the targets for oversea trips. I feel that when I sell unit trust, I am asking my clients to trust me for the return of their investments. I don't feel comfortable because after attending so many trainings and listening to so many sharing from 'successful consultant', I haven't seen the trainers have emphasized on making good returns for our clients. 'Consultants' will extract good performance of the past years' record, or pick on successful investment of their clients to persuade their clients. Even the managers are selling this way. I feel that most of the unit trust and insurance agents in Malaysia are not up to the level of being responsible 'advisers'. I would say many are merely good 'sales person'.
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