Friday 26 July 2019

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Using EPF to invest into Unit Trust - Part 2 (EPF versus EPF approved Unit Trust)

For Part 2 of the "Using EPF to invest into Unit Trust" series, I will be sharing the performance statistics of EPF approved Unit Trust Funds versus that of EPF returns over a period of 7 years (2012-2018). 

EPF Approved Unit Trust Statistics
There are in total 278 funds (not inclusive of 9 funds from Amanah Saham Nasional Berhad) approved by EPF (this is based on the the fund list provided by EPF website). All 278 funds are broken down into the following:
 Breakdown of EPF Approved Unit Trust Funds

EPF Dividend Statistic (2012-2018)
Since the Islamic portion of EPF has only two years worth of dividend history, I will be using the EPF Conventional Dividends as the yardstick to compare the performance for both Conventional and Islamic Unit Trust (UT) funds.
EPF Historical Dividend (2012-2018)

Comparison 1: Average (%) Return of all UT Categories versus EPF Dividend
Annual returns for all UT Categories (equity, mixed assets, bond and money market) are summed up and compared against EPf's annual dividend. The result as shown below:
Sum of all EPF Approved UT versus EPF Dividend (Year on Year comparison)
Summary: EPF approved UT funds as a whole performed better than EPF in 4 out of the 7 years. However, EPF has shown consistency over the 7 years by generating positive dividend as compared to UT where in 2018, the average return was negative. It is important to highlight that a negative return can drastically impact many years of compounded return and this will be highlighted in Comparison 4.

Comparison 2: Average (%) Return of Equity based UT versus EPF Dividend
Average (%) Return of UT(Equity Conventional) versus EPF Dividend
Average (%) Return of UT(Equity Islamic) versus EPF Dividend
Summary: Similar trend is observed here for conventional equity UT except that the annual gain or loss are amplified. Islamic Equity UTs on the other hand are struggling with negative return seen in 2018, 2016 and 2014. 

Comparison 3: Average (%) Return of Mixed Assets based UT versus EPF Dividend
Average (%) Return of UT(Mixed Assets Conventional) versus EPF Dividend
Average (%) Return of UT(Mixed Assets Islamic) versus EPF Dividend

Comparison 4: What happens to RM1000 when invested into EPF Approved UT versus investing into EPF?
The outcome of investing RM1000 over 7 years into the Equity based UT category produced the following results:
Cumulative return of RM1000 over 7 years for EPF approved Equity UTs versus EPF
As you can see, the cumulative returns for the first 6 years (2012-2017) indicate that Equity UTs are outperforming EPF return. However a single poor performing year in 2018, resulted in the accumulated return for EPF approved Equity UTs to drop below EPF accumulated return. This is also a similar scenario for the Mixed Asset UTs as shown below:
Cumulative return of RM1000 over 7 years for EPF approved Mixed Assets UTs versus EPF
I have also taken the effort to summarized the cumulative return for all the EPF approved categories in a single table below:
Cumulative Return for all EPF Approved UT Categories
Summary: The overall statistics indicate that only the Unit Trust Funds under the Equity Category are able to "match" the cumulative return generated via EPF dividend. I would also like to highlight an important point where this comparison does not take into consideration the loss of opportunity from the compounding returns you get for having a head start from the larger savings you already have with EPF. 

Conclusion
I hope this article on "EPF approved Unit Trust Funds versus EPF" has in some way helped you in terms of awareness before deciding to withdraw your savings from EPF to invest. I have also simulated several scenarios using the data that I have accumulated. If you wish to obtain those data, feel free to email me at shanesee03@gmail.com.

Tuesday 23 July 2019

Test Case: Leveraging on Market News to Invest into Gold Unit Trust Fund

Update (5 June 2022)

Fund: RHB Gold and General Fund
Period of Investment: 26 July 2019 - 3 June 2022 (1043 days)
Return of Investment: +42.90%


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Positive Gold Miner's Earning Ahead
I came across an article from MarketRealist which talked about Gold Miners's earning season for Q2 is scheduled to start this Thursday (25 July 2019).

According to the report, Gold Mining companies including Newmont Goldcorp (NEM), Agnico Eagle Mines (AEM), and Yamana Gold (AUY) are expected to release their earnings this coming Thursday. The report also include analyst's recommendation on which mining stocks should investors buy based on the expected earnings. 


Standout Gold Mining companies that are expected to see their stock prices benefit from the earnings are AEM and NEM (please remember both names as they will surface again later)

Gold Price has been Bullish
For investors who track gold closely, you would have notice that gold price’s reversal this year has created opportunities in gold stocks. The SPDR Gold Shares ETF (GLD) had gained 11% year-to-date as of Friday. About 11.3% of those gains have come in the last one-and-a-half months. Since the end of May, the S&P 500 and the Dow Jones Industrial Average have returned 6.1% and 7.1%, respectively.

Bullish Gold Price + Positive Earnings = Opportunity!
Now this comes back to this blog post, where we are going test the theory of trying to time the entry of investment based on potential uptick of miner's stock price as well as leveraging on the current bullish trend of gold price.

How to go about this?
Step 1: Identify the right Gold fund to invest into
There are only two Gold based unit trust funds available for Malaysian to invest into (both are available on eUnittrust platform). The two funds are:

  • RHB Gold and General Fund (Conventional)
  • Precious Metals Securities Fund (Islamic)

Step 2: Check portfolio composition of these two funds
Top 5 Holdings of RHB Gold and General Fund consist of Agnico Eagle Mines Ltd (AEM) and Newmont Goldcorp (NEM) which make up 16.48% of the total portfolio. Both which are identified to be attractive BUY by gold analysts.
31st May 2019: RHB Gold and General Fund Fund Factsheet
Similarly the Top 5 Holdings of Precious Metals Securities Fund also consist of Agnico Eagle Mines Ltd (AEM) and Newmont Goldcorp (NEM) which make up 17.52% of the total portfolio.
31st May 2019: Precious Metals Securities Fund Factsheet
Considering that both unit trust funds have exposure to other mining companies apart from AEM and NEM, investors may also enjoy overall increase in these fund returns if gold prices continues to rise over the next couple of months.

Step 3: Invest now
Since this is a test case, I have invested RM1000 into RHB Gold and General Fund via eUnittrust. Coincidentally, there is an ongoing 0% sales charge promotion over at eUnittrust, thereby allowing me to save on the sales charge and allowing me to profit immediately on any uptick of the fund price.

RM1000 investment to validate if this Test Case works!
Details of Investment:
  • Fund Name: RHB Gold and General Fund
  • Amount Invested : RM1000
  • Indicative Price of Fund: RM 0.3547/unit
  • Sales Charge : 0%

Step 4: Now we wait!
Now the fun part starts as I will track the price of the Stock Mining companies that are listed in both funds. Let's see if we are able to make a small profit from this test case!

Cheers and I will be posting a follow up blog post on this somewhere next week. In the meantime, do follow me at Invest Made Easy Facebook for updates and news.

Sunday 21 July 2019

HISTORICAL EPF ANNUAL DIVIDEND RATE

EPF Dividend 2008-2018

YEAR
Conventional
% DIVIDEND
Syariah
% DIVIDEND
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

1983–1987
8.50

1988–1994
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

2008
4.50

2009
5.65

2010
5.80

2011
6.00

2012
6.15

2013
6.35

2014
6.75

2015
6.40

2016
5.70

2017
6.90
6.40
2018
6.15
5.90

%
%

Highest
8.50%
6.40%
Lowest
4.25%
5.90%
Average Last 5 Years
6.38
NA

Using EPF to Invest into Unit Trust Funds - Part 1 (The Pros of Investing into EPF Approved Unit Trust)

News that EPF will be releasing e-MIS to allow Malaysians to conveniently invest into unit trust using their EPF (KWSP) savings online has been a subject of heavy discussion within the unit trust consultants community. Majority of unit trust consultants whom have been serving clients via investment advisory as well as manual submissions of EPF investment form in exchange of a 3% sales charge fee stand to lose out most in this latest shift in convenience of investing unit trust through EPF's e-MIS. 

It has been been stated in a local publication that Malaysians whom utilized the online platform to withdraw their EPF savings to invest into unit trust will only be charged a fees of 0.5%. The risk of doing so is that Malaysians will not have the privilege or receiving investment advisory from a dedicated unit trust consultant. 

We may all get excited about saving on sales charge of EPF investment but I truly believe we should be educated on the very basic pros and cons of withdrawing your EPF savings to invest into Unit Trust funds. First, let's go through the fundamental benefits that you will always hear from your unit trust consultant when it comes to withdrawing your EPF savings to invest unit trust!

Pro Reason 1: Unit Trust returns tend to outperform EPF annual dividend rate!
If you look at the historical dividend rates of EPF, it has always been a steady SINGLE DIGIT (%) dividend as shown here. There is nothing sexy about the dividend payout of EPF which has been consistently hovering between 5% - 7% over the past 10 years. Unit Trust Consultants over the years have always compared the returns of Unit Trust fund on a yearly basis versus that of EPF dividend, and in most cases when unit trust funds are generating double digit returns for a particular year, the potential of clients withdrawing EPF to invest into unit trust funds are higher. 

This scenario of double digit returns of unit trust funds were true especially during the bullish years of the Malaysia stock market between 2009 to 2015. Shown below is a historical data of the Top 5 Malaysia Equity Fund as of Feb 2015 where notice that the 5 Year Annualised (%) Returns of these funds range between 15% to 22% per year!!!

Malaysia Equity Funds Annualised % Returns as of Feb 2015
It was certainly a great time for Malaysians to regularly withdraw their EPF savings to invest into these funds! Forget bout the single digit dividends of EPF which will take forever to grow your retirement savings, so they say.

Pro Reason 2: Negative Returns of Unit Trust Funds is a good opportunity to Dollar Cost Average using your EPF savings
This has always been the reason unit trust consultants give when a fund performs poorly. A negative return is an opportunity for the investor to invest more and acquire more units at lower prices as how many long term successful passive unit trust investing has been shown to work. The concept of Dollar Cost Averaging (DCA) strategy has always been proven to work if you are into long term passive investing albeit with one caveat to this. In order for the DCA strategy to work, the unit trust fund that an investor chooses to invest into is also pivotal to the success.

Having a good investment strategy such as DCA yet choosing a poor performing unit trust fund will most likely also reap poor results as the unit trust fund could potentially incur major losses (during a bear market) as well as unable to take advantage of reaping big returns in a bull market. 

This is why over the years, I have written articles that encourage investors to invest passively yet aggressively pursue your rights to good advisory as well as proper investment recommendations from your financial advisor/consultant to ensure he or she is always taking care of your investment interest. This is your investor right as an investor to be given such advisory in return of the sales charges that you are already paying your advisor or consultant.

Pro Reason 3: Invest into other specific country/sector markets that are not covered by EPF investment
This is least used reason given by Unit Trust consultants yet is the most logical reason why an investor would decide to withdraw part of their EPF savings to invest into. I'll give you very strong reason example on why this strategy can be beneficial given the right selection of sector of country to invest in.

Let's take the sector based shariah compliant Precious Metal Securities fund as an example. This fund which is under AmFunds Management Bhd is an EPF approved unit trust fund that invest specifically into Gold Mining stocks. Say for example an investor whom sees an opportunity in gold decides to invest into this fund using his or her EPF savings in Sept 2018, he or she would have made +34.92% in less than a year as shown below:


On a longer horizon example, if the investor has been diligently investing into Precious Metal Securities via the same amount on a quarterly withdrawal from of his/her EPF savings, the total investment return between Jan 2017 to July 2019 for the investor would be +17.3%!

Summary of Part 1 of "Using EPF to Invest into Unit Trust Funds"
In Part 1 of the "Using EPF to Invest into Unit Trust Funds" series of blog post, I have explained the basic benefits of why investors are attracted to withdrawing their EPF savings to invest into unit trust funds.

In the coming future parts of the series of "Using EPF to Invest into Unit Trust Funds", I hope to cover the cons as well as the current state of approved unit trust funds versus that of EPF dividend returns. I also intend to release an in-depth analysis of how the funds in each category are performing versus that of EPF dividend returns.

So stay tune and do follow Invest Made Easy Facebook page for future updates!!

Related Links
Using EPF to invest into Unit Trust - Part 2 (EPF versus EPF approved Unit Trust)

Monday 15 July 2019

0% Sales Charge Promotion by eUnittrust (1st - 31st July 2019)


In conjunction with the recently ended Phillip Capital 10th Annual Investment Conference, the good folks at eUnittrust have decided to reward members with a promotional campaign of "0% Sales Charge for 183 Unit Trust Funds!"

eUnittrust is the only online unit trust platform that is able to offer a value proposition of 0% sales charge to its members (especially for equity based funds). This has always been the unique differentiation factor for eUnittrust as compared to other unit trust platforms.
0% Sales Charge Promotion Campaign
Participating Fund Houses for this campaign are:

  1. Affin Hwang Asset Management Berhad (28 Funds)
  2. AmFunds Management Berhad (26 Funds)
  3. CIMB-Principal Asset Management Berhad (13 Funds)
  4. Eastspring Investments Berhad (17 Funds)
  5. Kenanga Investors Berhad (10 Funds)
  6. Manulife Asset Management Services Berhad (18 Funds)
  7. Maybank Asset Management Sdn Bhd (20 Funds)
  8. Nikko Asset Management Asia Limited (1 Fund)
  9. Pheim Unit Trusts Berhad (4 Funds)
  10. Phillip Mutual Berhad (1 Fund)
  11. RHB Islamic International Asset (1 Fund)
  12. RHB Asset Management Sdn Bhd (38 Funds)
  13. UOB Asset Management (Malaysia) Berhad (6 Funds)

Terms and Conditions

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