This is the transcript of the webinar I conducted live with Jean Soong from Fundsupermart.

Webinar Fundsupermart

Jean:

Thank you, and Good Afternoon. First let me thank everyone who is tuning in for today’s topic on What is unit trust and How Important is it as a Saving and Investment Tool? On the next slide, I will be bringing you to six key pointers, starting with how everyone is an investor whether you realize it or not, the types of unit trusts available, how the right unit trust can be chosen, the methods of investments, and investing in both good and bad times.

Walkthrough the webinar content

Basic Forms of Investment

On the table we can see the basic forms of investments which most people have, starting with the savings account which is barely an investment and is more for liquidity – cash on hand whenever you need it. Naturally, it then progresses to FD, which is the fixed deposit where there is a 3.15% per annum. Credit investors are ready to lock in your money. EPF is provided to working employees as a form of retirement planning. From EPF you can earn 4-6% per annum in recent years. Unit trusts, meanwhile, could actually yield you with potentially higher returns, and they have no lock-in periods. Unit trusts range from low to high risk. Other investment options include a wide variety of money markets, bonds, stocks, property, and REITs, to name a few. Let’s go through them one by one.

Basic Forms of Liquid Investment

A money market is actually a short-term debt by the government or financial institutions and corporations. Money markets mature in less than a year. This is how it works: RM1,000, for example, can mature in ninety days. In the future you can buy this for RM900, for example, and then you redeem the RM1,000 and pocket the RM100 when it matures after ninety days. Most of this money market instrument is not available to the public or to the individual.

Money Market

Next we go on to bonds. Bonds are actually loans to governments or companies and they will pay you back the amount with additional interest. You are actually lending them money to fulfill the company interest or for the governments to carry out any projects. These interests pay back on a regular basis, for example, yearly, and it can also be quarterly. For this the interest rates decrease but if you can hold this bond until maturity you will be getting the fixed coupon rate.

Bonds

Stocks. I am sure that some of you are already stock investors. Stocks are “shares” of a company, ownership of every piece of desk, filing cabinets, or sales of this company which you own a share for. Companies sell their shares to obtain additional financing for their business. Investors buy shares when they project good future earnings. Shares are affected by ‘macro’ and ‘micro’ factors and are very volatile as you may already know.

Stocks Market

After that we have property and REITs. Properties that are commonly owned used to be residential or business, but now we have another group of people buying properties for the sake of investment. Property can be a good or bad investment depending on a lot of factors. The profit usually comes through rental or capital appreciation of properties. To buy a property, as we all know, you need high capital, and it is also low liquidity. For example, when you need money you may need to wait until there is a suitable buyer. There are a lot of different factors affecting the selling of a property. Lastly, you have REITs, which are real estate investment trusts. Equity REITS invest in own corporate properties, and revenues come from rentals or capital appreciation of their real estate assets. These are all examples of investments.

Property and REITs

What are unit trusts?

What are unit trusts? Where do they stand among all these instruments? A unit trust is a portfolio that invests into all the investment instruments I mentioned. Basically, it is a basket of stocks or equity funds, bond funds that invest in corporate bonds, money market funds which invest into the money instruments, REIT funds, and property funds. It is well diversified locally and globally. You may a piece of U.S., Europe, or China by investing into unit trusts. It is managed by professional fund managers from top fund houses in Malaysia or foreign fund managers. What I mean by foreign fund managers is that this manager is managing from abroad in foreign markets which are being sold in Malaysia and carried by the local fund house.

What's unit trust

Types of Unit Trust

Going on to the types of unit trusts on the market, there are five categories, and you can also find this information in your fund selecter tool at fundsupermart.com. There is the equity market, the balanced market, the fixed income market, the money market, and alternative investments. What do we mean by all these different types of categories? You can see that this money market fund has a risk rating from 0-1. So it is not very risky to put your money into the money market funds. The reason being, it is very low on volatility, the money will just be put in there to grow. You have the domestic fixed income funds, meaning this money is being invested domestically. The risk rating is from 1-4.

Types of Unit Trust

Global and regional fixed income funds have a currency exposure, and there is a slightly higher risk rating of about 4-5. After that, you have the global equity funds and the regional or sector equity funds. This risk rating is the highest, from 7-10. You have your investments in countries which are outside of Malaysia, and they are invested into either blue chip stocks or a fund that invests into small cap companies. The balanced fund has a risk rating from 4-9. From 4-6 I think would be pretty balanced and not too risky, and from seven onwards it is a high-risk market.

All the funds can invest into different geographical locations. Just because you are in Malaysia doesn’t mean that you should be constrained to invest in the home market. You can, of course, but you can also open up your options to investing into Asean, Asia (including/excluding Japan), and Australia, to name a few.

How to Choose the Right Unit Trust Fund

Now comes the most important question. With so many concentrations, how can I invest and choose the right fund? Firstly, understand how much risk you can stomach. Secondly, you should create and maintain an investment portfolio. What we mean by investment portfolio is you can have more than one fund from the same geographical location or fund category. This means if you have a unit trust where you invest in China, for example, you can buy 5000 units in China and you can also be allocating another 5000 to maybe Indonesia, and another 5000 into a fixed income fund which is not very risky. This is what we mean by a portfolio. Thirdly, you should set the comfortable investment horizon for yourself. Unit trusts usually invest in wall street for five years. I would be lying to you if I told you that you should by unit trusts and then sell them off without keeping it for very long or that you could get a very big profit within a short period of time. Unit trusts are a long term inv estment and is for investors who believe in keeping their money inside and letting it grow, let it ride through the normal economic cycle. There are good times and bad times, of course, and when you have hit your target return you can sell you funds. This brings us to my last point, that you have to set your expectations to match the portfolio performance. I’ll be giving you a few examples of a portfolio.

Choosing the right unit trust fund

Conservative Unit Trust Portfolio

There is a portfolio for everyone. We start with a conservative portfolio. What is a conservative portfolio? You have 90% of your money in fixed income and only 10% in equity. If you invest RM10000, for example, you should have RM9000 in fixed income and only RM1000 in equity. It gives a very slow but steady return. What we mean by a steady return is that it’s stable, it’s low risk, and you do not need to manage it actively. You will be keeping this portfolio for at least three years or more.

Conservative Unit Trust Portfolio

Moderately Conservative Unit Trust Portfolio

Next we have the moderately conservative portfolio. For the moderately conservative portfolio we invest 70% in fixed income and 30% into equity. For the 70% into fixed income, again with the example of RM10,000 is RM7,000 and another RM3000 into the equity fund. This shouldn’t be a problem because for most of the unit trusts in Malaysia the investment amount starts with RM1000. This portfolio can give you reasonably good returns and is for investors who are able to bear a little bit of risk. This is a medium to long-term portfolio and you should be able to stay here for three years or more.

Moderately Conservative Unit Trust Fund Portfolio

Balanced Unit Trust Portfolio

Next we have a balanced portfolio, which is actually rather popular because it’s neither too risky, nor is it too safe. It’s 50% into fixed income funds and another 50% into equity funds. This will help you achieve moderate returns with medium risk. The investment horizon you are looking at is at least five years or more.

Balanced Unit Trust Portfolio

Moderately Aggressive Unit Trust Portfolio

After that we have the moderately aggressive portfolio. It’s 70% into equity and 30% into fixed income. This gives you higher returns in a moderately higher risk, and the investment horizon should be between 5-10 years.

Moderately Aggressive Unit Trust Portfolio

Aggressive Unit Trust Portfolio

Lastly we have the aggressive portfolio. It is not for the faint hearted, but if you are able to stomach the volatility that goes on in the market with all the ups and downs, you should be able to have an aggressive portfolio. You invest into global, regional, or single country equity. It has high risk and with high risk you are able to generate higher return. The investment horizon you are looking at is maybe 10 years or more. Most of the listeners out there are thinking, “10 years!? I mean, I’m putting my money in there for 10 years? How much return do I expect to have? First and foremost, of course, you will be wanting to beat inflation. Secondly, the purpose of the portfolio is to plan for your retirement, or you could be planning for your children’s education, planning for your new house, or anything like that. 5 years should be a very good time for you to keep your portfolio.

Aggressive Unit Trust Portfolio

How can you Invest in Unit Trusts?

How can one invest into unit trusts? Say you are interested in having this portfolio, you can invest in a lump sum investment by cash or check. You can also invest using your EPF or you can invest periodically using the regular saving plan. Most investors are reluctant to reconsider their EPF for investment purposes and are content with the dividend yield. The dividend yield which is given for this past year’s annualized return was a 6% dividend, but if you had taken that money and invested it in unit trusts you could have made 18.33%. This unit trust we are using as an example was taken from a Malaysian unit trust. The EPF does not allow its members to take out their money; the unit trust is invested in to foreign markets, so you have to be investing into malaysian unit trusts. Even Malaysian unit trusts can give you 18.33% for the year of 2011. Meanwhile, for a three year annualized return, from 2008 to 2011, the unit trust can give 28.48% return. This is annualized, so every year you are getting 28.48%. That is compared to the EPF’s interest of 4.75% on this graph.

Methods of Investment in Unit trust

Should you Withdraw your EPF money to Invest in Unit Trust funds?

A lot of investors are reluctant to give up their EPF for investment purposes. They are content with the dividend yield, but if you take away the erosion of inflation you may be left with little of the dividend. The EPF body has allowed its investors to withdraw some savings from account one for unit trust investments. Is it worth it? If you judge from this slide, I think you can see that since the money is in there for the long run, perhaps you can pick it up and make your money work harder for you.

EPF vs Unit Trusts

How much of your EPF account 1 money can you take out for your investment? This goes by age. You are not allowed to take out 100% of your EPF account one. I will give an example for a thirty year old. We just need to fill in your account one amount, your age, and then subtract the basic savings. For a thirty year old with 50,000, if you refer to the table, is 50,000 – 18,000, and then 20% of that money is 6,400. You can use this for investment. So, actually, its not the entire 50,000 that you can pick up and invest. It is the 6,400 which you can invest and it will generate 28% return for you over a year. Why not take a little bit out? Ask for it and take out your money to invest. When you settle this investment it eventually goes back to your EPF as well.

EPF Account 1 withdrawal for unit trust investment schedule table

Why you should invest regularly, both in good and bad time with unit trust?

Investing in both good and bad times: To invest in regular timing means to avoid market timing. You should be disciplined to invest consistantly regardless of market conditions. As we look at this chart, how many of you have experienced this before or have already seen this chart? The point of euphoria is at the top of market. Usually investors feel great and it is usually the time that they buy more. When it goes down to a point of maximum financial opportunity at the bottom you have depression. Investors will usually think, “Maybe the market is not for me. You can see this is a cycle that repeats itself. When it is going up you want to ride on the optimism and you want to invest more. But during that time it is not a very good time to invest.

Timing the market

Jean – I just wanted to ask how many of the listeners actually have seen this chart before.

KC – I don’t think any of the viewers have seen this.

Jean – Oh, Ok. So it is a good reminder to watch these. Each time we show this in one of our seminars, most of our investors feel very connected to this because they are bad. As much as we try to be like Warren Buffet or any of the great investors we just don’t know when the market is going to be at its top or if it is already at the top. So your journey is during the best market times anyone can give you the best advice or you can throw it down and then you lose your investment.

Avoid Timing the Market

If you want to be an investor in both good and bad times, you have to avoid timing the market, talking about unit trusts. For stocks you have to try to time the market but to know if your time is correct or not, it depends. You need discipline to invest consistently and to not be overcome by your emotions. You need to choose the undervalued market. I’ll quickly explained what an undervalued market is, and you can also refer to our reccomended funds for fund ideas.avoid timing the market

When I talk about being consistent and not timing the market, I just want to say that the unit trust is designed to ease the investment slide. The regular savings plan will help investors to achieve their first few coins. This is a monthly subscription plan which instills discipline to the investor and it is a based on automatic deduction. There are no additional fees for this. With this the investor can also avoid the market timing and not be overcome by the emotion of investing. Every month there is a dedicated amount to be put into the specific fund that you like; it can be any fund. It gets rid of the hastle for you because you don’t need to manually put in an order and make the payment. This is about investing discipline.

Make profit by investing in the under-valued market

I mentioned to choose the undervalued markets. Over here we have the greater China market, and also the emerging markets. Why is it so? If you look at this chart, it is actually for greater China. Greater China consists of China, Hong Kong, and Tiawan. For year 2012 we have PE, which is the price ending ratio of any investment or primary you look at. Estimated PE is what is being calculated now, what is happening now, and the fair PE is what it should be at. There is a lot of potential for these countries that they are not reaching yet. You can see for the year 2012, China. for example, had an estimated PE of 9x, but in fact we think a fair PE should be at least 14x. Any difference between the 9x PE and the 14x PE is a discount. What we mean by discount is that you are investing into this cheap market, which has more potential than where it has come. Upset potential ranges from 43.6% for Tiawan and 32.3% for Hong Kong to 45.2 for China by the end of 2013. China’s economy is e xpected to grow by an estimated 8.25% to 8.5% in 2012 and 2013. So their growth is expected to be faster than any developed market. There are probably already a lto of people out there saying that China is good for investment, but some of our listeners who may have China funds may feel not so because maybe their China fund is now showing negetive returns. Given the current market condition, I would like to ask, there are a lot of other countries giving a negative return but when we revisit the chart that I showed just now, does this mean that there is no room for investment? We don’t know if it has hit the bottom yet, but at least according to our PE calculations these are actually cheap markets with good value that you can consider investing into.

under-valued market

The next slide is for global emerging markets. The U.S. and the Euro are currently looking gloomy or glum, so a lot of the tension has been switched over to the asian side, and especially for the global and emerging mar kets it has a lot of potential. So notice all the estimated PEs are also very low, and the fair PE is estimated at 14x. We are seeing a lot of discount in the global emerging market. It is currently trading at 9.7% and 8.6% PE ratio based on 2012 and 2013. There is an upside potential of about 35% per annum by the end of 2013. This is our research analysts’ estimations.

Always refer to Fundsupermart.com’s recommended funds for fund ideas. We have almost 200 funds on our platform to help investors choose. We have a list of 23 funds which we picked out and it is for investors who already know or have anidea where to invest what they like or they can read the investment ideas on our platform. After that you can choose from our 23 funds whether you want to buy or not. How is this methodology picked? It is picked by our researcher analysts. We have the analysts from Malaysia, Hong Kong, India and Singapore. It is based on 60% performance, 20% expence ratio and 20% risk.

Recommended Funds

That is my introduction to unit trusts. I hope it has been able to help you and if I’m too fast you can let KC know.

Jean – KC?

KC – I think you are doing a good job.

Jean – Aw, thanks.

KC – The most important issue is what to do during the market cycle. The most common question I have gotten from my subscribers is they ask, “I bought this certain fund and then it is giving negative return nearly 30%, what should I do?” What do you reccomend normally if an investor is making a loss of this kind?

Jean – We get a lot of this. Trust me, you are not alone when you ask this sort of question. In fact, being an investor myself, I have my doubts when I see negative returns as well. You must always think about what the investment underlying your fund is. If it is China markets right now, we would tell the investor to look at the evaluations. Do not look at the price because the price does not indicate whether the market is expanding or changing. If we look back at the evaluations for China and Hong Kong we can see that the price is way below the fair PE now. There is a formula which can be used by the analysts and stock pickers. They use PE as the guidepost to investment. When we say that the market is changing and there is a lot of upside in potential, you just have to be patient and if you can use the regular savings plan to put in a little bit of money on a monthly basis, which will help you to average out your price. When you average out your price you will encounter situations when the market moves up here you will be telling yourself, “Oh, I wish I knew this would happen, and I should have bought when the market was down.” This helps you to skip a little emotion, and when the market is down, great, you’ll be giving more units and they will help you to average your price. But when the market goes up at least you know you won’t be buying everything at the most expensive price. We will usually suggest using the regular savings plan. When a client comes to us and says that this fund is not performing well, we will see which market this fund is investing into or which sector, and we can propose something better. We will normally tell the customer you can consider, maybe, this one, and switch into this one now, but if you realize it, meaning if you sell it, then your loss is not only a paper loss, but is really come out. You lost your investment here.

KC – Ok, good, thanks for the great answer. Fundsupermart is the only way I invest in any unit trust, I dont invest in any other fundhouse, true agent or anything. Why don’t you tell us about fundsupermart?

Jean – Thanks for the support KC.

Who is Fundsupermart?

Who is Fundsupermart.com? Fundsupermart.com is a platform for you to buy, sell, and switch unit trusts. This is the simplest way that we can explain it. We have 20 fund houses on our platform, which are: ASM investment, Alliance, CIMB, Eastspring (formerly known as prudential), Hwang, OSK, to name a few. 20 of these fundhouses are on our platform for you to find. We don’t have Fundsupermart.com unit trusts. We are generally a distributer which distributes close to 200 funds.

What's Fundsupermart

Fundsupermart is the online unit trust platform for iFast Capital, which is a subsidiary of iFast-OSK, which is a joint venture between Malaysia’s OSK Investment Bank Bhd and iFast Corporation. We have the necessary license. We have a lot of investors who worry what will happen if we cease as a business and whether we have the necessary license. We are licensed by the securities comission to deal in unit trusts and also to provide investment advise. We are with the federation of Investment Managers Malaysia (FiMM) and are registered as an Institutional unit trust Adviser (IUTA). We are the online distribution for iFAST Capital and were launched in malaysia in August 2008. We are entering our fourth year in Malaysia now.

We are in Singapore, India, Malaysia and Hong Kong. In Singapore we are already on our 12th year, we started in 2000, and we are the largest online unit trust ditributer in Singapore. In Singapore we are partnered with SPH Asia One and we have more than 300 funds in Singapore. We were in Hong Kong one year before Malaysia, so that’s 2007. And in india we started one year after Malaysia. How safe is iFast Capital or Fundsupermart? I already shared with you that we are liscenced with the security commision and FiMM. We have a nomineees account and also a trust account. This means that even though you are buying unit trusts from us, the asset is actually registered under your name. We give out the physical and PDF versions of your unit trust holdings, so if we cease as a business you just have to print out this statement or bring it to any other distributer, bring it straight to the OSK or Prudential which you have bought your unit trust from, and they will ask you if you wnat to transfer to another distributer or if you want to sell it out. No problems with that. Why Fundsupermart? You can traditionally buy unit trusts from the agents or from the bank, they wait for the bankers to tell them why it is better than the FD. Fundsupermart it the obvious choice because our sales charge is 2% or lower. We help the investors to minimize investing cost. Generally outside of that the assistance that you’re paying for is 5-6% so with 2% or lower you cut out more than half of your cost, which helps you to break even faster. For products and services, we have a wide array of products and you can manage everything under one account. These online transactions we try to make as hastle free and as user-friendly as possible to all our investors. We also have seminars. This is our first web seminar but we also have lots of live seminars being organized in our office, for example, altogether with the fundhouse, or even recently with the star alliance. As for fund information we have the latest information and data and we also have strong online tools. Being a distributer with 20 fund houses means that we can have a neutrality on all the funds. We stand on a neutral ground and we are not biased for any fund h ouses. This is very important for investors because when they ask us for any advice or they want to know which fund is better compared to the other we are able to give them an independent view and it’s not just for the sake of selling the fund. This is a comparison of all the investment channels in Malaysia. Sale charges, as I mentioned, by banks or agents is 5-6%. Fundsupermart is a maximum 2% for equity funds or lower. Some money market funds are selling at 0%, so there is no cost for investment at all. For the range of products, banks and agents may be restricted to be under the asset house or under the particular fund house only. In Fundsupermart we have 20 top fund houses with more than 106 funds. For transaction efficiency you have to submit forms or hard copies that you earn from banks or agents, but with Fundsupermart you can forget about that! You will be getting online transactions or statements. For fund information and tools, we have a comprehensive on our form, and we also have a chart center which will give you up to 10 years of historical performances. The fund selector which is what I showed in the beginning is compared to a fund search engine. So if you want to buy sharia funds for example, you can just click sharia and we will show you all the sharia funds on our platform. As for Research Reports, we know that for unit trusts it’s a bit difficult for investors in Malaysia to get their hands on the information because they cant get ahold of their fund manager or they can only ask the agent which in turn has to go to their manager or go to the necessary people to get the answer that you need. But with Fundsupermart we have our independent research reports which are written by our regional research team, and we also have regular meetings with the fund managers to ask them how they feel about the current market and how they will position their funds to make them more resilient for the future. You can get a lot of investment ideas from our platform. The main priority for us at fundsupermart is not to sell the funds, but to provide investors with lots of investment ideas. If their agent is able to provide you with so many ideas of places to go for your holidays and make it so easy for you to plan where to go and what to do, it’s the same goal for fundsupermart. We want people to have a lot of investment ideas on how to grow, and all this is achieved through our investment articles. We also have idea of the week which is written for our fundsupermart mobile which you can download to your iphone or to your android. So it is a free application you can check it out and we also have a lot of latest promotion. The promotion goes in line with our market call so if we like a certain market, like the emerging market, we will lower our sales charge and it is not generate more sales but rather is an incentive for investors to invest. We have seminars and events and of course we have the reccomended funds.

This table I am showing as example of investing in unit trusts over a period of time. For the past three month you can see some negative, and one year you can see some negative, and especially Asia and Japan. That’s a negative 15.8 and the emerging market is negative 18.78. These are the undervalued markets we are talking about. If you are buying it, you are buying it at a discount now. Also, earlier on I mentioned the healthy investment horizon. If you looked at three years, if you are able to go for three years investing in fund supermart unit trusts you can see the majority of positive return. I’m not saying this is definitely what you will be getting, but this is based on the historical return. So you have some information after five years and even after ten years, because some funds have more than ten years to relieve. There is a general misconception about buying new funds that are newly launched which will generate better returns for the investor because with the fund that has a historical fund of at least three years you can know how the fund manager managed the fund in bad times, its not only about the good times. When it’s good, it’s good. But during the bad times usually it is the fund house fund manager who can make the fund resilient and also respond timely to you. That’s Fundsupermart.

Unit trust fund performance chart history

What about Switching Funds? Is there a fee involved?

KC – Thank you Jean, you have provided very good information about fundsupermart and I will say that the first thing I like is the low cost of investing with you guys. You save more than 50% of the cost, which is the entry cost. How about switching funds? Like switching from fundhouse A to fundhouse B?

Jean – If it is within the same fundhouse, for example, OSK. OSK to OSK there would be no switching fee, if it is within the same tier. What I mean from same tier, is from equity to equity, so if it is from 2% to 2%, there’s no charges there. But from 0% to 2%, there would be the sales charge. Because you are buying at no charges, and you want to switch it to a higher sales charge fund of course the 2% charge is there. The good news for fundsupermart is that we designed something called a credit system. If you switched RM10,000 from 0-2% before we will give you 10,000 credits so that the next time you switch again where there are any costs incurred you will minus off using the credit. So if you invest next time at 5% and you have some switching costs we will use your credit

to minus off 5,000, so you don’t have to pay the cost.

KC – Oh, I see. So this is no cost.

Jean – It can be considered no cost, yes. This is the first of its kind in Malaysia for a credit system.

KC – Yeah, It’s great!

Jean – For the different fundhouses, for example, I will have to highlight Alliance to Canana it is a normal sell and buy. We have to sell your Alliance to buy Canana. This is no cost for selling and for buying there is the normal 2% to buy. What is the difference with doing this elsewhere or doing it at fundsupermart. As I have already mentioned in Malaysia there is no such thing as switching from different fund houses. What this means is that you do not need to wait for your money to come back after you have sold your fund. Once you sell it today, we will buy you your other fund within two business days. In contrast of waiting for your money to come back in maybe four to five business days, while you get a check, you have to bank it in and then you get to write another check for a different fund house, we can help you get this done withing six days. In six days you will see it in your holdings online. So it is completed for you.

KC – Yeah, that’s really convenien t. Like you were talking about waiting for a physical check to come and then you go banking and then you go ahead and buy another fund, that’s a lot of trouble. We have many questions for Why FS, let’s see if we can answer them. The first question is: Are we able to purchase funds offered at fundsupermart Singapore and Hong Kong.

Jean – No, You need to open a fundsupermart singapore or fundsupermart Hong Kong account. For fundsupermart Singapore it’s very easy to open, you just need to go to our website at fundsupermart.com.sg fill in the account of the name form and post it together with a utilities bill or a phone bill or anything like that. The regulation in Malaysia states that our foreign investments inside a particular fund cannot exceed a certain percentage. That’s why in singapore you have a variety of funds that are single country investments, meaning if you buy a malaysia fund, it’s 100% in Malaysia. We are not allowed to have that in Malaysia unfortunately. If you are interested in buying Singapore funds, please open a fundsupermart Singapore account, it’s free as well. Now as I know, for Hong Kong it’s a bit more of a problem. You can still open an account but you will have to bank in a certain amount of money into the account first. So this is in compliance with the Hong Kong financial gu idelines.

KC – So you needs to have money inside the funds before the account is interactive.

Jean – That’s right.

KC – Not like in Malaysia where if you open funds in an account, you don’t have to pay anybody at first. After set up is done, you can transfer money inside.

Jean – Yes.

KC – Ok, Good, so we have another question. This person asks: “I want to know, when you talk about the conservative portfolio, what is the annualized average return we are looking at?”

Jean – Let me just look back at the conservative portfolio. This is 90% in fixed income and 10% in equity. Fixed income is usually able to yield you about 5-6% a year and equity can maybe give you 20 or more percent a year, if it’s a good year. When you take the 20% in turn with the 5%, you have to average it out so it will be about 10%. This conservative portfolio does not contain a lot of risk. Like I said earlier risk is usually equal to perrformance. If you are not taking a lot of risk chances are that the return will not be that great but it is a very steady return. At least you wont be seeing peaks or lack of dividends just compared to the very aggressive portfolio.

KC – I hope that answered their question. We have another question: “Why are common mutual funds not available?”

Jean – This is a question that we get all the time and I am very happy that I get the opportunity to make it clear here. For common mutual funds they are selective funds, meaning they are only selling it to their banks or to their agents. They are not open for any other distributer to carry their funds. In order to sell common mutual funds, you can buy from your bank or from your agent. For the moment they are not joining fundsupermart.com’s online platform, and I do believe they have their own online platform as well. So on the online platform, the surcharge is still fixed at 5-6%.

KC – Oh, I see. So if they buy using the online platform, do they still need to go through an agent service?

Jean – As I know you do go online and buy for yourself, you do not need an agent service.

KC – If the charge is the same, is it better to go through the agent at least to have someone check it?

Jean – Yes, I think so too. You are paying the same cost, so maybe you should have an agent to help you out with that.

KC – Here’s another question. He wants to know whether the investment app will allow for mobile transaction.

Jean – No, because that app is more for generating investment ideas. There is a lot of tracking for investors, and there is also a very helpful function for you to check funds’ price and performance. For some investors they do have a wishlist. They want to buy a fund but they haven’t bought it yet. They can track that fund on a daily basis and when it hits the price that they want they can go ahead and purchase it. So, for now, the app is not for any transactions, but we are looking to enhance it in the future.

KC – Ok, good. So that means that in the future we may be able to see our statement from the app?

Jean – Yes.

Question: Can you invest with Fundsupermart Hong Kong and Singapore?

KC – Ok, Jason wants to know how to open an account in Malaysia with fundsupermart. It is very to open an account with fundsupermart, you’ll get through it in about five minutes’ time. Let’s get to another question. Before that, if anyone listening out there wants to know anything, you want to ask Jean about unit trusts or about fundsupermart, you can simply type your question in the chat box. We only have about five minutes to answer your question, so let’s hear from you. Now we get to another question. He wants to know if he wants to invest in Singapore or Hong Kong, does he need to open a bank account over there?

Jean – I think it is most convenient if you do have an account over there. For Singapore, you should have either a EDS account or a OCDC standard charter and there is another one that I am not sure of. Those are the Singapore accounts that you can use online banking for to ease your transaction. If you do not have a singapore bank account, you may need to do a telegraphic transfer each time you make a payment, and the same goes when you liquidate your investment, they will also need to issue you a check which you can’t bank in Malaysia, so they will need to do it by telegraphic transfer and there will be some cost involved there. So I would strongly suggest that you have one of the four accounts to make payments and also for a bank for fundsupermart to send its proceeds to you. As for Hong Kong, I’m not sure, because I’ve served Singapore before and Malaysia currently, but I’m not sure about the Hong Kong site. As I know it’s only for the account opening that you would need t o have a certain amount before you can start. I would think that it makes sense for you to do telegraphic transfers as well if you do not have an account over there.

KC – Ok, thank you for your answer. I think we will get to two more questions, one is from Rosilla. She wants to know who will observe investor portfolio and sell while investor was gaining from investment when everything is through online. Do the agents still decide on the buy and sell?

Jean – For funsupermart with the lower sales charge we have investors who ask, “What’s the catch.” There is no catch, but we need the invester to be more alert and DIY. So this is a platform for investors who are keen to do their own investment, or they have had not very good experiences with agents who are not able to help them. So you have to be very hands on with your investment. For unit trusts it’s not very big changes on a daily basis in the prices. What you need to do is merely set an investment horizon and expected return. When it hits it’s expected return you can sell it off. There will be no individual to help you oversee your account individually, but what we do have is a client investment specialist. This is a new position which we just created recently. If you have any problem you can email our client invest ment specialist and they will come up with a suggestion for you on what fund to add on or whether it is a good time to sell off now, or what else is recommen ded for your account. So they will give you suggestions but at the end day you will be the one who wants to buy more or sell more. This is one thing as far as human interaction. Secondly we have a ceiling price and a floor price indicator. This means that, for example, if you buy a fund RM1, and you want 50% return. You can set a ceiling price so that when it hits RM1.50, an email notification will be sent to you and you will know that it hit your projection, so from there you can decide what you want to do. The floor price is also, let’s say, again, for RM1 you want to buy more of this fund, so you set RM.80, and when it hits the price that you set there there will be an email nbotification sent to you. You can also decide whether you want to buy more or not. We need investors to be more savvy to be able to be in fundsupermart. The processes are very easy, it’s just a three to four step for buy, sell, or switch, but more is on the investment ideas, where to get it from. So we are trying very hard to give out lots of ideas on our website and also through our investment specialists and client service.

KC – Just now, I think I missed something. Did you say we can get advice from an expert?

Jean – Yes.

KC – How do we do that?

Jean – We call this our client investment specialist. If you go to the website there is actually one chat page dedicated to them, so there is a column where you can chat your question, or you can also email them at investhelp.my@fundsupermart.com.

KC – Ok, thank you. We’ll take two more questions. Ok, a simple one, Rice wants to know if you can give him a copy of your presentation, is it possible?

Jean – Can’t say, we don’t usually give out those. I don’t think it is a problem but I will probably just have to remove some of the slides which I can’t give out. Mainly it is a very general slide, so it is fine for me to have it.

KC – Maybe he will email you, or something?

Jean – Yes, he can email me that, no problem.

KC – Ok, some other question. Among all the unit trust investments, which one provides constantly good returns, like 20%? This question was asked by Evelyn.

Jean – If you would like to have at least 20% return per annum, I would say you should go with the equity funds. So it would be a more aggressive fund, and the risk rating is from 7-10%. For the aggressive fund we see this table here. All these funds are equity funds, and you can see that over a period of three years or even two years, you have funds that can generate up to 20%, and even see one that goes up to 50% returns. So, if you are looking for 20%, I would say go for equity funds. It can be any fund that invests into stocks, let it be from Malaysia, China, or emerging market, or the RIC which is the Russia, India, China, Brazil.

KC – Currently on the platform you have a list of 23 recommended funds and some of them are definitely in the good deal category.

Jean – Yes.

How fast is the effect of stock markets on equity funds?

KC – Okay, this is a question from Peter: “How fast is the effect of stock markets on equity funds? Is it one day or two days, or immediately?”

Jean – The prices of unit trusts are computed daily, so there is only one price a day for a unit price, different than stocks. When you buy stocks it’s real time, and you can only buy if you have a seller. But for unit trusts you can by any time, and you can also sell at any time, the fundhouse is obligated to buy them from you. What it means by computed daily is that the stock needs to close on that particular day, and then they are computer priced and come out at the end of the day. So you only know at the end of of the day or two days later. There is a lag effect there. Since they are stocks that invest into thestock market of the particular country, I will say that if the stocks are not performing very well that day, than the unit price will go down as well. It will not be as great as the impact of a particular single stock, for example, because it is a basket of ten or more funds that are being picked by the fund manager from the stock. So it can either be the small cap stocks, or the blue chip stocks, or it can even be just technology stocks, so it would definitely be reflected in the unit trust, but at a much slower pace.

KC – So it is affected daily, but it’s not affected every hour or so, because it is based on the closing price of the stocks, right?

Jean – Yes, that’s right.

KC – Ok, this is the last question by Dr. Edmund, he wants to know, Why can I not grow a fund past the lowest profit recently?

Jean – Is Dr. Edmund holder for Kenanga growth fund?

KC – Yes.

Jean – Ok, Dr.Edmund, you don’t have to worry because recently Kenanga growth fund had stocks split, so for each one unit you get an additional two units. Also, the price fell about RM.03 to about RM.70, so they did a stock split, it wasn’t that the fund performed badly.

KC – In unit trusts, is it called distribution?

Jean – It is also called stock split, but it is a form of dividing.

KC – Ok, we have come to the end of the webinar, so can you tell us how we can contact you? Or if you want to open an account you can go to the link. This is the link where you can fill out the form at KCLau.com/webinar/fsm. There you can use a simple form, you can fill out your name, mobile number, and email address, and a representative from fundsupermart will contact you, then they will help guide you through what kind of account you need to open, there are two types.

Jean – Account opening is free and there is also no cost at activating your account. Your only cost is when you buy a fund at 2%. Pretty much we are an independent platform for investors that feel free to invest. We also do not puch anybody or a product to our investors out there.

KC – Ok, good. Can you show me your email again?

Jean – Yes. If you have any enquiries, you can contact me or Alvin. Alvin is from our marketing team as well. My email is jeansoong@fundsupermart.com, and Alvin is alvinwong@fundsupermart.com.

KC – Just a question I suddenly thought of, I wanted to ask you this: Do you have any sort of special deal for my subscriber?

Jean – In fact, you’re right KC. We have a very good deal right now. Not only for KC Lau subscribers because the deal is so low we don’t know how to beat it any more. If you open an account at fundsupermart for the first month the sale charge is kept at only 1%. There is a further discount.

KC – So if you would be paying 2%, you’re paying 1% for the first month?

Jean – Yes. And if you are keen to start the regular savings program, which is monthly, from as low as RM100, you can get 1% for the first six months.

KC – Wow, that’s good!

Jean – Yes, because if we go any lower than this, I think it’s gonna have to be zero already.

KC – I wanted to ask, what about existing customers?

Jean – For existing customers, we do have our gold and silver program. This is for investors who have a certain amount of investment. And also I would like to let our listeners know that our latest recommended fund, for year 2012 and 2013 will be out next month. It is very exciting for us, because we have added an CIMB, Hwang, and another fund house is going to be up soon, so we will have 21 fund houses, and the list is going to come out. We will be having a lot of highlights, so probably you will see the reccomended funds in the financial magazines and newspapers. This is in july.






KCLau
KCLau

Personal finance author and trainer

    3 replies to "What’s Unit Trust and How is it Important as a Saving and Investment Tool?"

    • naba

      is it possible to make investment in units without any trust ?

    • Ang

      Hi KC Lau,

      As suggested, it is recommended to use the strategy to buy in the fund in regular basis which to average out the buying price.

      What do you think of these scenario, when market is down, investor should buy more, in contrast, when the price is up, should investor continue to buy the same amount or less or none. please advise, Thanks

      • KCLau

        Hi Ang, the idea is to buy less when the market is on the way up. Less in terms of unit, if you use Dollar Cost Averaging strategy, the amount of money you invest is the same, but getting less unit. As to whether to invest less in absolute amount, that is like timing the market already. What if you are wrong, and miss the boat?

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