122) New Fund vs Old Fund. Which is Better?

122) New Fund vs Old Fund. Which is Better?

I have been asked this question for a long time and very often. Especially when there is a new fund launch. Should we invest in the new fund or stick to the old fund.

There are some who believed that the old fund is better. Reason being there is already records of the past performance. You have some guidance of how it performed. So, you can have a "feel" of its future performance.

There are also others who believed that new fund is better. Reason being the fund manager has a fresh start. The money is going to be invested into the best stocks now. There are no past history and stock loses to worry about.

Explained below is my understanding and you should do your own research for comparison.

It does not matter when the funds started. Either just new or very long time fund. Reason being, when you start to invest in any of the fund, you are paying at the current market value. All the assets profits and losses are already calculated into the current fund price. If you did not invest before, you are not affected by the profits and losses. You did not gain or loss anything.

Let's look at a sample comparison between 2 similar funds. Fund A (Blue line) was launched in 1997 and Fund B(Orange Line) was launched in year 2011. There is a difference of 14 years. Both funds are classified as Equity Malaysia in the Lipper Classification. Both have similar fund objectives and Benchmark.

 

You will notice that both funds performance are almost the same for the last 5 years. 

From the Quarterly Fund Report ended on 29 Sep 2017, below is extracted from the performance table. 

The Total Return for different period varies slightly only. For the 1-year and 5-year, fund B performed better than Fund A. However, for the 3-year, Fund B performed less than fund A.

Let's compare the performance of Fund A with other funds over the same 5 year period. Below is a Fund Performance graph between Fund A, a Foreign Fund and a Bond Fund.

You can see the big differences in performance volatility and returns over the last 5 years. Bond funds are less volatile compared to equity funds. Foreign funds are also more volatile than a Malaysia fund.

There are many other comparisons between old and new funds that I have seen. 

In conclusion, there are no clear winner between old or new funds. The fund performance varies greatly between different fund objectives, countries and asset classes.

So, Diversify your Funds to have a more Balanced Investment Portfolio.

Malay Version: https://peraturantahaptinggi.blogspot.my/2018/01/dana-baru-vs-dana-lama-yang-mana-lebih.html