135) Investment Knowledge is Crucial

135) Investment knowledge is Crucial

You must have heard the old saying....

Give a fish to a man and he eats for a day.
Teach him to fish and he eats for a lifetime.

 

In the same way, money and investment is similar. 

Give money to a man and he will have money for a day.
Teach him how to invest and he will have money for a lifetime.

Warren Buffet is one of the Greatest person alive with investment.knowledge. He realized the importance of investment from very young and is spending his life doing investment. His knowledge is being shared and had created many good investors.

Please note that Investment is VERY DIFFERENT from Trading.
Investment is for the long term, while trading is for short term.

Investment knowledge is just like any other knowledge. You can learn it. With the proper knowledge, you will be able to seek the right opportunity and take advantage of situations.

When there is stock market crisis, companies stocks will be at a much cheaper price. The companies shares dropped a lot. Companies that are good and have a strong businesses, will survive the downturn. The product and services will still be needed and required by many. The business of good and stable companies will still continue.

Do you think the banks, utilities,  telecommunications, basic food and milk companies will close?  Their products are required everyday. Just imagine how your life will be without your hand phone, food, water and electricity..... 

Total disaster right? 

So, do take time to learn as much as you can about investment. Knowledge about investment is the main knowledge of the richest people alive today. All of them have shares of their public listed companies.

 

There are many smart people, but may not be the rich. They may know a lot about science or art, but without the investment and financial knowledge, they may not have much money. Many rich people got into financial problem because they do not have the right financial and investment knowledge.

As per quotation from Benjamin Franklin above, An investment in knowledge always pays the best interest. Just imagine what benefits you will get when you 
Invest in Investment Knowledge.

If you want to know about investment knowledge, you can google or join investment classes.
Alternatively, look for a Financial Consultant and request him or her to share the investment knowledge.

It will be better if you join them and learn directly from their team. 

134) Easy Way To Invest Into Businesses

134) Easy Way To Invest Into Businesses 

Most people know that to be rich, you need to own a business. It is tough to be rich if you are working for others.

Many will complain and wish that they have enough money to start a business. Without the large amount, they cannot afford to start a business. While it is easy to start a small business with small amount, it still needs a lot of time and effort. If the business is easy to start, there also a lot of people will start the same business as you. Then you will have a lot of competitors very soon.

Many have misunderstanding about money and business. 

To own a business, you can start your own business from scratch or buy somebody's existing business. The easier way is to buy the existing business. However, buying over somebody's successful business will cost you a lot of money.

The great news is that there is an easier way and with much less money. You can buy the shares of existing companies. Many good companies had already listed their shares in the stock market. You can buy the shares and own a part of the company. The more money you have, the more shares you can buy.

However,  many people will come out  with another complaint. They say that they don't know anything about companies and businesses. So don't know how to invest and which company to invest into. 

More will also complain that they don't have much money.  How to buy the expensive shares?  

Basically the issues are they have not enough:
a) Money
b) Skill & knowledge
c) Time

To be a successful share investor, you need the above. Most people have only 1 or 2 of the above requirement. For example, some people have money and time, but no skill. Some have time, but no money and no skill.

 

One of the easiest way to buy into companies is to invest into Unit Trust equity funds. You can start with a reasonably small amount. You can always add more money to the investment when you have more money. With Unit Trust, your money will be invested into many different companies and industries. Most Unit Trust equity funds also invest into companies located at many countries.

All the management of the funds, choosing good companies, when to buy and sell, collecting dividend, reinvest profits, etc. is done by the Unit Trust Management Company.  They have a group of professionals working and doing all the work.

Investing in a Unit Trust Equity fund is an easy way to invest into the many public listed companies. 

You only need the money that you have without requiring much time, skill and knowledge.

Do contact your Unit Trust Consultants to discuss on your investment requirements.

133) Benefits of Distribution in Unit Trusts

133) Benefits of Distribution in Unit Trusts

Below are some benefits you get from Distribution of a Unit Trust Scheme.

1) Reduce Fund Price

The fund price is managed to be within a certain price range. As the fund assets continuously grow form the shares, bonds and money market instruments. The fund manager will do their best to increase the values of their portfolio.  If no distribution was declared, the fund price will keep on increasing in the long term

For example, a fund with the unit price of $1.00 gives a distribution of $0.10 after the market closes. The fund price will be $0.90 on the next day’s market open.  Thus, the fund price had been reduced to below $1.00.

Let's assume the fund had a total return of 50% after 5 years. The initial $1.00 fund will now be valued at $1.50 ($1.00 Capital + $0.50 Growth). Do you think it will be able to attract more investments when priced at $1.50? 

Most investors will perceive the fund as expensive after the 50% increase.  It will encourage selling of the funds. It will also be difficult to get new investments money.

By declaring distributions regularly, the unit price can be maintained to be below $1.00. 

In fact, there are some investors who “think” that the fund is cheap again after distribution. So, it is time to buy more after distribution.

2) Maintain Investment Capital

There are also investors who would not touch the capital invested. This is their way of ensuring the Capital Preservation. They will enjoy the distribution pay out and never affect the investment.

The concept is that you can do whatever you want with the distribution amount, but NEVER TOUCH the Capital. It is like you had planted a tree and now the tree is giving fruits. You can eat the fruits, but never touch, trim or cut the tree. 

It is also used for Trust or in a Will. The investor would not want the children to take away and reduce the investment capital. The children can only receive the distribution pay out as benefits to be utilised. This will ensure the capital remains invested for a long time.

There are also Trust made for Charitable Foundations. Only the distribution pay out amount can be used to benefit others. The Capital remains under the Foundation's assets.

3) Build Confidence

When a fund is declaring distribution, it is "telling" the investors that the fund is making money. By declaring distributions, it gives confidence to the investors that the fund is performing.

By regulations, distribution can only be used from:

a) realized capital gain from the asset trading

b) received dividends from stocks

c) received coupon payments from bonds

d) received interest from the money market instruments

Distributions are made after considerations below:

a) Total returns & Income for the year

b) Cash flow for distribution

c) Stability & sustainability of the distribution

4) Free Insurance

There are some funds that provide Free Life Insurance for the investor. The insurance coverage is at $1.00 per unit. When there is distribution and be reinvested, the distribution money will purchase more units. Thus, the investor will get more insurance coverage after each distribution.

However, the insurance coverage remains the same if the coverage is based on NAV of the fund. This is because Total NAV remains the same before and after the distribution.

5) Gold Investor Status

There also some funds that provide extra benefit to their investors. For each invested amount, the investor will get points. When the investor had accumulated a certain number of points, his/her status is upgraded to Gold Investor Status. 

The points will increase when there are new money invested. However, points will be deducted for redemption. Distribution pay out does not reduce the points.  

In this way, the investor can get some money back via distribution and yet still maintain the points. So, the investor can remain as a Gold Investor status while receiving money regularly.

6) Easier Transactions

There are some transactions that require minimum number of units. For example, minimum 1000 units for switching to another fund. By having more units at a lower price, it will be easier for small investors to do those transactions. A fund with $0.25 per unit only requires minimum value of $250 to do switching. Compare to a fund worth $1.00 each unit, you need at least $1000 to switch. Funds with more units at a lower price will be more flexible. 

In conclusion, every fund has its own benefits which is not listed here. Please consult your Unit Trust Consultant on the other benefits.

132) Dividend vs Distribution

132) Difference between Dividend vs Distribution

Many people got confused on the differences between Dividend and Distribution in the Unit Trust Industry. Where are the money source of Dividend and Distribution?

Let's start with Dividend.



Dividend
Dividend is paid out by a public listed company to the shareholders. After making profits, the company may decide to give part of the profits to reward their share holders. A company may even give dividends a few times per year.

The Stock Exchange
The Stock market is where the shareholders trade the stocks or shares. This means to buy and sell the shares. The price of the share is decided between the buyer and seller. The buyer thinks that a certain company is good and decides to own the company's share. The buyer is willing to pay a certain price to get the shares.

At the same time, a seller may think that the company share is already expensive. The seller decides to sell the share away and get back his money.

The Buyer enters the price he is willing to buy. The Seller enters the price he is willing to sell. Both enters the prices into the Stock Exchange platform. When the buying and selling price matched at the same price, the trade happens. Now, the Buyer gets the share and seller gave away the share.

The share price changes regularly during the trading hours.
The share price is completely different and separate from the company profits.

After the company announced the dividend amount to be paid out, the share price may go higher or drops. It depends on the perceived value of the company. If the dividend is higher than expected, the share price may go higher. However, if the dividend payout is lower than expected, the share price may drop.

After the ex-dividend date, the share price will drop as the registered share holder will get the dividend (profit) and thinks the share is worth less now.

The share price will start to fluctuate based on demand and supply again. 

Unit Trust Funds
An Equity Unit Trust fund is mostly invested into shares. However, the fund also invests in bonds and money market instruments. The Equity fund is actually a share holder of many companies. Being a share holder, the fund receives dividend from the various company shares.

The NAV per unit price depends on:
a) market price of the shares, bonds & money market
b) profit or loses from share & bond trading
c) dividend received from shares
d) coupon payments received from bonds
e) interest received from money market instruments

The total NAV of the fund are calculated at the end of the day after the market closes.When the Total NAV is divided by the number of units, you get the fund's Unit Price.

Distribution
The fund NAV changes daily, up and down according to the market conditions. Normally, at the end of the fund's Financial Year, the fund manager may declare a distribution. The distribution is to return part of the NAV back to the Unit Holder. The distribution money is taken from the NAV of the fund. The fund price is the NAV per unit.

The fund price will be reduced by the same amount as the distribution.

For example, a fund price of RM1.00 will be RM0.90 after a distribution of RM0.10.

In the next morning after the distribution date, the unit price is RM0.90. By the closing time (valuation point) on same day, the unit price will change due to the fluctuations of that day's asset value. The new closing unit price may be slightly higher or lower than RM0.90.

In conclusion, 
Dividend and share price are from separate money accounts.

Distribution and Unit Trust price are from the same money accounts.


For more information, please consult your Unit Trust Consultant.

250) Distribution Yield vs Total Return

https://highlevelrules.blogspot.com/2020/05/250-distribution-yield-vs-total-return.html

226) No Distribution? Did the Fund Make Money?

https://highlevelrules.blogspot.com/2019/06/226-no-distribution-did-fund-make-money.html

Click the link below to know the Benefits of Distribution.
http://highlevelrules.blogspot.com/2017/11/benefits-of-distribution-in-unit-trusts.html

131) Percentage in Unit Trust Using 3PF

131) How to Calculate Investment Percentage in Unit Trust Using the Retirement Fund.

There are many who had invested into Unit Trust using their Retirement Account.
Let's call the Retirement fund as the 3PF account.

There are also many who are not willing to invest in the Unit Trust using their 3PF fund. The main reason is that it is safer in the 3PF account. There is a guarantee return of at least 2.5% per annum.

I'm sure you had heard on the benefits of investing.You need to make your money to work harder for you.

Do you want to gain the benefits?

Do you know how much you are actually risking your retirement money?

 


Let's use some numbers to show the real implication of investing using money from 3PF account. Look at the actual risk that you are taking. The 3PF fund is divided into 2 accounts. Account I (70%) and Account II (30%). There is also a basic amount required for each age.

You need to minus the Basic Amount from Account I before the balance can be invested. Furthermore, only 30% of Account I can be invested every 3 months.

For example, let's use a 30 year old. He has $100,000 in his 3PF account.
Amount in Account I = $70,000 (70%)
Basic Saving @ 30 year old = $29,000
Balance = $70,000 - $29,000 = $41,000
Max 30% = $41,000 x 30% = $12,300

So, he can invest up to maximum $12,300 into Unit Trust.

That means he can only invest:
= $12,300/$100,000
= 12.3%

His investment is only 12.3% of his retirement fund.

Let's assume no additional amount contributed into 3PF for next 3 months.
He invested again after 3 months.

Amount in Account I = $70,000 - $12,300 = $57,700
Basic Saving @ 30 year old = $29,000
Balance = $57,700 - $29,000 = $28,700
Max 30% = $28,700 x 30% = $8,610.

So, total amount into Unit Trust = $12,300 + $8,610 = $20,910.

After invested 2 times, it is $20,910/$100,000 = 20.91%.

(We used $100,000 as the total Retirement amount is still $100,00 in both 3PF & Unit Trust funds.)


From this calculation, the invested percentage is still a low of 20.91%. 

Even if you lose all your money in the Unit Trust investment, you still have a high percentage in your 3PF. The remaining 79.09%

Let's assume no additional amount contributed into 3PF for next 3 months.
He invested again after 3 months for the third time.

Amount in Account I = $70,000 - $12,300 - $8,610 = $49,090
Basic Saving @ 30 year old = $29,000
Balance = $49,090 - $29,000 = $20,090
Max 30% = $20,090 x 30% = $6,027.

So, total amount into Unit Trust = $12,300 + $8,610 + $6,027 = $26,937.

After invested 3 times, it is $26,937/$100,000 = 26.94%.

Let's assume no additional amount contributed into 3PF for next 3 months.
He invested again after 3 months for the fourth time.
In the fourth time, he is already 1 year older.
He is 31 years now.

Amount in Account I = $70,000 - $12,300 - $8,610 - $6.027 = $43,063
Basic Saving @ 31 year old = $33,000
Balance = $43,063 - $33,000 = $10,063
Max 30% = $10,063 x 30% = $3,018.

So, total amount into Unit Trust = $12,300 + $8,610 + $6,027 + $3,018 = $29,955.

After invested 4 times, it is $29,955/$100,000 = 29.96%.

Let's assume no additional amount contributed into 3PF for next 3 months.
He invested again after 3 months for the fifth time.

He is 31 years now.

Amount in Account I = $70,000 - $12,300 - $8,610 - $6.027 - $3,018 = $40,045
Basic Saving @ 31 year old = $33,000
Balance = $40,0450 - $33,000 = $7,045
Max 30% = $7,045 x 30% = $2,113.

So, total amount into Unit Trust = $12,300 + $8,610 + $6,027 + $3,018 + $2,113 = $32,068.

After invested 5 times, it is $32,068/$100,000 = 32.07%.

Let's assume no additional amount contributed into 3PF for next 3 months.
He invested again after 3 months for the sixth time.
He is 31 years now.

Amount in Account I = $70,000 - $12,300 - $8,610 - $6.027 - $3,018 - $2,113 = $37,932
Basic Saving @ 31 year old = $33,000
Balance = $37,932 - $33,000 = $4,932
Max 30% = $4,932 x 30% = $1,479.

So, total amount into Unit Trust = $12,300 + $8,610 + $6,027 + $3,018 + $2,113 + $1,479 = $33,547.

After invested 6 times, it is $33,547/$100,000 = 33.55%.

Let's assume no additional amount contributed into 3PF for next 3 months.
He is older another year. He is 32 years now.

Amount in Account I = $70,000 - $12,300 - $8,610 - $6.027 - $3,018 - $2,113 - $1,479 = $36,453.
Basic Saving @ 32 year old = $37,000
Balance = $36,453 - $37,000 = -$547.
It is below the Minimum Basic Amount.
No longer able to invest more.

NOTE: Losing all in Unit Trust is almost impossible. For more details, refer to my blog link below:
http://highlevelrules.blogspot.my/2017/07/can-you-lose-all-your-investment-in.html

 
Now, which do you prefer?
A) Keep all your retirement money in the 3PF.
B) Invest a small percentage into Unit Trust.

Get more information on:
Why You Should Diversify Your 3PF into Unit Trust?
http://highlevelrules.blogspot.my/2018/03/diversify-your-3pf-into-unit-trusts.html

Would you like to know more about investing in Unit Trust? 


Please contact your Unit Trust Consultant.
Have an open discussion on the Benefits & Risks of Investing In Unit Trusts.
There are certain strategies you can use to manage your investment better.

The Unit Trust Consultant will be able to guide you on your retirement and other financial goals.