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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.

Cheers and if you like this post, please SHARE and also LIKE our Invest Made Easy Facebook Page!

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

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.