Comments on: Does Compound Interest Really Apply to Unit Trust Investment?

By: Lynn

Lynn — Mon, 01 Nov 2010 06:18:16 +0000

hi KC,

my investment is more to equity, and after 1 year plus…I am now seeing my ‘profit’ to >20%….some is >10% only…should I do switching? I am not really sure how this thing works…:( If I invested with EPF $, I can still do switching at RM25 per switch (as long as I maintain 1000 units in the first fund right?)…then later when the equity price is low again, I switch back? Or should I just leave it there, no need to worry, and adfter 3 or more years, only sell? will my return be as good or better?

By: KCLau

KCLau — Thu, 10 Jun 2010 15:57:37 +0000

1. that’s right.

2. normally unit trust fund will have distribution, where unit NAV is driven down a bit but the number of unit you hold will increase. Compound interest is just a concept that you don’t cash out the gains and let it roll in your investment account for even more profits.

By: Vince

Vince — Sat, 05 Jun 2010 09:39:12 +0000

Hi KC Lau,
I’ve found your blog recently and found out that your tips is really simple and practical.
Regarding to the compound interest of mutual fund, I have some question:
1. Isn’t it the profit of mutual fund is depend on the NAV value of purchase time and selling time? i.e. profit = (NAV x unit sold)-(NAV x unit purchase) – agent fees

2.Does it make a different that if I purchase RM1000 in fund A with NAV=1.0,
sell it after one year with NAV=1.3 or sell it after 10 years with NAV=1.3? Is the final amount of cash I would get will be different? How is the compound interest work in that case?

By: KCLau

KCLau — Tue, 03 Nov 2009 02:36:31 +0000

Hi Adrian,

First, the fund report shows the return in a fixed period of time. Normally return showed in 2000 refer to the value difference between 01/01/2000 and 31/12/2000.
But the price fluctuate every single working day in the whole year. So it depends on when you buy and sell.

By: Adrian

Adrian — Mon, 02 Nov 2009 13:33:47 +0000

Hi ,

When i look at the Quartely fund review , if show the return of the fund yearly say
2000 0% 2001 19.09% 2002 13.15%
if i invest 1k during year 2000 meaning that i will get 19.09% return ?
how does the compound interest apply into this ?
can you show an illustration ?

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By: Jimy Wong

Jimy Wong — Mon, 14 Jan 2008 05:47:12 +0000

thanks for the advices

By: KCLau

KCLau — Mon, 07 Jan 2008 22:00:22 +0000

Hi Jimy,

I can’t say that it is wise to buy new fund every time. However, it might be wise to buy new funds every time because of the lower service charge promotional offer. It all depends on your investment strategy and philosophy.

By: Jimy Wong

Jimy Wong — Sun, 06 Jan 2008 09:32:58 +0000

Hi KC Lau,
Pardon me is i ask too much questions and sometimes you may not in position to answer it.

By: Jimy Wong

Jimy Wong — Sat, 05 Jan 2008 06:47:33 +0000

yeah…keep it up all the way u be

By: KCLau

KCLau — Thu, 03 Jan 2008 08:57:06 +0000

Thanks for the compliment. I will continue to provide more useful info.

By: bigtime

bigtime — Wed, 02 Jan 2008 13:29:02 +0000

thanks kc for the info,without a doubt one of the best site i have ever visited in 2008.
keep it up kc.

By: Jimy Wong

Jimy Wong — Tue, 11 Dec 2007 17:21:29 +0000

would it be wise to buy new fund everytime it launched?

By: KCLau

KCLau — Tue, 11 Dec 2007 09:46:22 +0000

When new fund is launched, normally fund house gives bonus unit ( last time), now is lower service charges.
Just invest as soon as possible according to your portfolio of choice.

By: Jimy Wong

Jimy Wong — Mon, 10 Dec 2007 06:09:43 +0000

Hi KC

Would be the best to invest lump at offer period and regularly invest to get compound interest?

Get more units and compound interest?

By: KCLau

KCLau — Mon, 10 Dec 2007 02:06:18 +0000

Hi Jimy,
There is no absolute answer for this. Compound interest just apply to anything, anywhere that has a value. Invest lump sum will give the best return if you buy at bottom.
But if the market is at the peak, invest regularly (I mean separate your lump sum into a few times investment at certain period interval) will give you more return than lump sum.
Again, it is back to the issue of timing. But we will never get the right timing all the time.

My opinion is, get all your money invested now, in the portfolio of your choice (combination of funds, shares, properties, cash). And invest regularly when you have extra saving in the future.

Conclusion: just invest all your money larr.. ( even thought putting it in FD is also an investment)

By: Jimy Wong

Jimy Wong — Sun, 09 Dec 2007 12:24:28 +0000

Which is better to get better returns?
1. Invest in lump sum to buy new fund for lower sales charges and get more units at offer period?
2. Invest regularly into 1 or 2 funds to get compound interest?
Thanks.

By: KCLau

KCLau — Tue, 20 Nov 2007 08:37:39 +0000

Rey,
I am glad that you understand how compounding interest work.
It is just a concept that when we don’t withdraw the interest earned, it will add up into the capital and make your next interest earning bigger. When this goes on for a long period of time, the interest earned at later years is very remarkable, even bigger than your initial capital.
So no matter where you put your money, as long as you don’t withdraw the interest earning, compounding interest effect will work!