There are 3 common strategies used in unit trust investment:
1. Ringgit Cost Averaging
Regularly invest a fix amount in a unit trust fund regardless of market trend is called the Ringgit Cost Averaging strategy. The actual market performance is fluctuating. When the equity market is high, you buy less unit with the same amount. When the market is low, you buy more unit. For long term, you will get much more unit in the lower price range.
2. Portfolio Re-balancing (Asset Allocation)
Portfolio re-balancing is the process of bringing the different asset classes back into proper relationship following a significant change in one or more. More simply stated, it is returning your portfolio to the proper mix of stocks, bonds and cash when they no longer conform to your plan.
Example:
You start investing 50% in equity and 50% in fixed income fund. 1 year later, the equity rises and now your portfolio consist of 80% equity and 20% fixed income fund.To re-balance your portfolio, you should sell 30% of your total fund in equity and invest it in fixed income fund so that the portfolio is maintained.
This is the simple principle of buying low, and selling high.
3. Switching
Switching will lock in the gain you made in your unit trust investment. Switching fees are low and definitely lower than the upfront service charge. When you are making profit from an equity fund, you can switch it to some lower risk fund to lock the gain instead of selling it for cash. When the market turn low, you can switch it back to equity fund.
Source: http://kclau.com/
Showing posts with label Investment Strategy. Show all posts
Showing posts with label Investment Strategy. Show all posts
Saturday, March 6, 2010
Saturday, August 15, 2009
Asset Allocation
For investors who want to invest large sum of cash or EPF money, they are advised to do Asset Allocation, allocate money into a few baskets instead of 1 basket so that the increase and decrease of funds profit can be balanced out.
For instance, investment of $100,000 for moderate investor type:
40% $40,000 - Balanced Fund - Conservative - PIBF
30% $30,000 - Equity Fund - Moderate - PIDF, PIADF
30% $30,000 - Equity Fund - Aggressive - PCIF, PAIF
----------------------
100% $100,000
----------------------
For instance, investment of $100,000 for moderate investor type:
40% $40,000 - Balanced Fund - Conservative - PIBF
30% $30,000 - Equity Fund - Moderate - PIDF, PIADF
30% $30,000 - Equity Fund - Aggressive - PCIF, PAIF
----------------------
100% $100,000
----------------------
Friday, August 14, 2009
MutualGold Investment Tool Is On Sale Now - BUY NOW FOR ONLY RM50!
Assalamualaikum dan Salam Sejahtera semua.
I spent some time to create a tool, called MutualGold_InvestmentTool, to help us plan out our investment properly and wisely. This tool is created using Excel Macro VBA. All calculations are done with a click of a button! A very useful user guide is provided to help users to use this tool.
I myself use this tool for my personal and family financial planning and also for my clients (upon request).
BUY NOW at only $50. It is cheap and very useful. You won't regret of having it!
How can this file help us? It provides tools / formula to:
1. Calculate total amount of money we are eligible to withdraw from EPF Account 1 for investment
2. Plan out our financial for retirement age
3. Plan out our financial for children's education
4. Calculate future value of our savings
4. Plan out our financial to become a millionaire
5. Calculate average cost per unit after RCA/top up
BUY NOW at only $50. It is cheap and very useful. You won't regret of having it!
Detail Info:
1. EPF Sheet:
This worksheet is used to get eligible amount to withdraw from EPF account 1 to invest in unit trusts.
2. Retirement Sheet:
This worksheet is used to plan out our retirement age such as how much money we need to have to support our retirement age,how much money we need to save/invest monthly in order to reach the target saving.
3. Education Sheet:
This worksheet is used to plan out our children's education such as how much money we need to have to support their studies,and how much money we need to save/invest monthly in order to reach the target saving.
4. Saving Sheet:
This worksheet is used to calculate future value of our saving.
5. Millionaire Sheet:
This worksheet is used to plan out reach the target saving and how much money we need to save/invest monthly in order to reach the target saving.Make sure to key in data in all of the red boxes
6. RCA Sheet:
This worksheet is used to calculate average cost per unit after top up and the profit gained when price increases to average cost per unit before top upThis worksheet also contains notes/information related to Ringgit Cost Averaging and Compounding.
7. RCA_Note Sheet:
This worksheet contains notes/information related to Ringgit Cost Averaging and Compounding.
8. FundPerfm_Allocation Sheet:
This worksheet contains Shariah funds performance information as at 13/08/2009.For NAV column, it reads the NAV from Note worksheet using Vlookup function.
9. FactorTable Sheet:
This worksheet contains the referral Factor table used in this file.
The copy comes with free Investment Summary template and Dollar Cost Averaging calculation as shown below:
BUY NOW at only $50. It is cheap and very useful. You won't regret of having it!
Saturday, August 1, 2009
Thursday, September 25, 2008
Dollar Cost Averaging - A Technique that Drastically Reduces Market Risk - By Joshua Kennon, About.com
Dollar cost averaging is a technique designed to reduce market risk through the systematic purchase of securities at predetermined intervals and set amounts. Many successful investors already practice without realizing it. Many others could save themselves a lot of time, effort and money by beginning a plan. In this article, you will learn the three steps to beginning a dollar cost averaging plan, look at concrete examples of how it can lower an investor’s cost basis, and discover how it reduces risk.
Dollar Cost Averaging: What is It?
Instead of investing assets in a lump sum, the investor works his way into a position by slowly buying smaller amounts over a longer period of time. This spreads the cost basis out over several years, providing insulation against changes in market price.
Setting Up Your Own Dollar Cost Averaging Plan
In order to begin a dollar cost averaging plan, you must do three things:
1. Decide exactly how much money you can invest each month. Make certain that you are financially capable of keeping the amount consistent; otherwise the plan will not be as effective.
2. Select an investment (index funds are particularly appropriate, but we will get to that in a moment) that you want to hold for the long term, preferably five to ten years or longer.
3. At regular intervals (weekly, monthly or quarterly works best), invest that money into the security you’ve chosen. If your broker offers it, set up an automatic withdrawal plan so the process becomes automated.
An Example of a Dollar Cost Averaging Plan
You have $15,000 you want to invest in Sprint FON common stock. The date is January 1, 2000. You have two options: you can invest the money as a lump sum now, walk away and forget about it, or you can set up a dollar cost averaging plan and ease your way into the stock. You opt for the latter and decide to invest $1,250 each quarter for three years. (See chart for math of dollar cost averaging plan.)
Had you invested your $15,000 in January 2000, you would have purchased 264.46 shares at $56.72 each. When the stock closed for the year in December of 2002 at $13.69, your holdings would only be worth $3,620!
Had you dollar cost averaged into the stock over the past three years, however, you would own 746.21 shares; at the closing price, this gives your holdings a market value of $10,216. Although still a loss, Sprint FON stock must only go up to $20.10 for you to break even, not $56.72, which would have been required without the dollar cost averaging.
To go a step further, without dollar cost averaging you would break even at $56.72. With dollar cost averaging, you would have turned a profit of $27,326 when the stock hit that price thanks to your lower cost basis ($56.72 sell price - $20.10 average cost basis = $36.62 profit x 746.21 shares = $27,326 total profit.)
Combining the Power of Dollar Cost Averaging with the Diversification of a Mutual Fund
Index funds are passively managed mutual funds that are designed to mimic the returns of benchmarks such as the S&P 500, the Dow Jones Industrial Average, etc. An investor that puts money into a fund designed to mimic the Wilshire 5000, for example, is literally going to own a fractional interest in every one of the five thousand stocks that make up that index. This instant diversification comes with the added bonus. Traditionally, management fees of passive funds are less than one-tenth those of their actively managed counterparts. Over the course of a decade, for example, this can add up to tens of thousands of dollars the investor would have paid in fees to the mutual fund company that, instead, are accruing to his or her benefit.
The dollar cost averaging component reduces market risk, while the index fund investment reduces company-specific risk. This combination can be among the best investment options for individuals looking to build up their long term wealth by having a portion of their portfolio in equities.
Table 1: Sprint FON with Dollar Cost Averaging Plan
Source: http://beginnersinvest.about.com/cs/newinvestors/a/041901a.htm
Dollar Cost Averaging: What is It?
Instead of investing assets in a lump sum, the investor works his way into a position by slowly buying smaller amounts over a longer period of time. This spreads the cost basis out over several years, providing insulation against changes in market price.
Setting Up Your Own Dollar Cost Averaging Plan
In order to begin a dollar cost averaging plan, you must do three things:
1. Decide exactly how much money you can invest each month. Make certain that you are financially capable of keeping the amount consistent; otherwise the plan will not be as effective.
2. Select an investment (index funds are particularly appropriate, but we will get to that in a moment) that you want to hold for the long term, preferably five to ten years or longer.
3. At regular intervals (weekly, monthly or quarterly works best), invest that money into the security you’ve chosen. If your broker offers it, set up an automatic withdrawal plan so the process becomes automated.
An Example of a Dollar Cost Averaging Plan
You have $15,000 you want to invest in Sprint FON common stock. The date is January 1, 2000. You have two options: you can invest the money as a lump sum now, walk away and forget about it, or you can set up a dollar cost averaging plan and ease your way into the stock. You opt for the latter and decide to invest $1,250 each quarter for three years. (See chart for math of dollar cost averaging plan.)
Had you invested your $15,000 in January 2000, you would have purchased 264.46 shares at $56.72 each. When the stock closed for the year in December of 2002 at $13.69, your holdings would only be worth $3,620!
Had you dollar cost averaged into the stock over the past three years, however, you would own 746.21 shares; at the closing price, this gives your holdings a market value of $10,216. Although still a loss, Sprint FON stock must only go up to $20.10 for you to break even, not $56.72, which would have been required without the dollar cost averaging.
To go a step further, without dollar cost averaging you would break even at $56.72. With dollar cost averaging, you would have turned a profit of $27,326 when the stock hit that price thanks to your lower cost basis ($56.72 sell price - $20.10 average cost basis = $36.62 profit x 746.21 shares = $27,326 total profit.)
Combining the Power of Dollar Cost Averaging with the Diversification of a Mutual Fund
Index funds are passively managed mutual funds that are designed to mimic the returns of benchmarks such as the S&P 500, the Dow Jones Industrial Average, etc. An investor that puts money into a fund designed to mimic the Wilshire 5000, for example, is literally going to own a fractional interest in every one of the five thousand stocks that make up that index. This instant diversification comes with the added bonus. Traditionally, management fees of passive funds are less than one-tenth those of their actively managed counterparts. Over the course of a decade, for example, this can add up to tens of thousands of dollars the investor would have paid in fees to the mutual fund company that, instead, are accruing to his or her benefit.
The dollar cost averaging component reduces market risk, while the index fund investment reduces company-specific risk. This combination can be among the best investment options for individuals looking to build up their long term wealth by having a portion of their portfolio in equities.
Table 1: Sprint FON with Dollar Cost Averaging Plan
Source: http://beginnersinvest.about.com/cs/newinvestors/a/041901a.htm
Subscribe to:
Posts (Atom)
