161) Total & Annualized Return Calculators

161) Total Return & Annualized Return Calculators using Microsoft Excel.

Now you can calculate the Total Returns and Annualized Returns from the Annual Returns given.
The Annual Returns are published based on investment performance.

The Annual Returns exclude the Initial Service Charge, Switching fees and Transfer fees.
All distributions are reinvested.
However, it includes the Management Fee, Trustee fees, Auditor Fees, Broker fees and other investment related expenses. 

In the actual investment, the daily returns changes everyday. Some days it will be positive returns, while other days will be negative returns.

The formula for simple return calculation is shown below:

Simple Return = (End Value - Begin Value) / Begin Value

Begin Value is the initial amount you start with. It is also known as Present Value.
End Value is the new amount after some time. It is also known as Future Value.

Assumptions:
1) Single lump sum investment.
2) No additional amount added.
3) No amount withdrawn.


For example,
Initial investment was $1000 (Begin Value)
Investment value grown to $1200 (End Value)

Simple Return:
= (End Value - Begin Value) / Begin Value
= (1200 - 1000) / 1000
= 200 / 1000
= 20%
 
Annual Return is basically the Simple Return for 1 year period.

Total Returns are calculated using multiple Annual Returns numbers.
Annualized Return is calculated using Begin Value, End Value and years invested.
 
Their relationship can be shown using the formula below:

FV = PV (1+i)^n

FV = Future Value
PV = Present Value
n = number of years
i = Annualized Return


The file has the template and formula for your reference.


Go to this web link to locate the Excel file location:
https://drive.google.com/open?id=1YufKxq4PcsmJ79qCQu-79NIzOGbHE6RV

160) Rebalance Simulator

160) Investment Portfolio Rebalance Simulator using Microsoft Excel

Have you wondered what is your investment return will be, if you had done the portfolio rebalancing between 2 funds? For example, between 1 equity fund and another bond fund.

Watch the video below on the concept of Rebalancing during stock market ups and downs.

Use the Excel template and do your own analysis.

Notes on how to use the file:

1) You are required to key in (or change) the Annual Returns of the 2 different funds. 
The numbers are as per the light blue columns.

2) You can set your own percentages between the 2 funds.
The percentage numbers are as per the light red columns. You can maintain the same percentages or change them accordingly.

3) It is assumed you do rebalance once per year, in the beginning of the year.

If you are well versed in Excel, you can modify the template to rebalancing between 3 or more funds.

Go to this link to locate the Excel file location:
https://drive.google.com/open?id=12es5kI7a7jnKVtCRDFZTIId1Pw0d1sdl

159) How Much Future Value You Can Expect

159) How Much Future Value You Can Expect To Get?

 
Do you know how much you will get if you put certain amount of initial investment and continues to add on monthly basis?

With the monthly Direct Debit Instruction (DDI) you invested, can you achieve your goals?

You need to calculate and estimate the yearly Returns to know whether your monthly savings or investments can grow to the amount you want.

Is it possible to get $500,000 if you start with $10,000 and invest $1,000 regularly for 10 years? Let's say your investments give an average annual return of 8%.

If you are not sure, than you need to calculate the estimated value after 10 years.

How about you want to compare different combinations of:
1) Initial amount
2) Monthly amount 
3) Return rates
4) Period of years

Now there is an Excel file already created for you. Use and share it around.

Another way of using this file is estimate the total assets you will accumulate by listing all of them.
Use the current market price or NAV of your assets as the Initial Opening Amount.

There is the Total column to show the Total Asset Value of your investments.
This template is in the 2nd tab named "Assets".


You can download the Excel file from the link below:

https://drive.google.com/open?id=1Rn8NsjPkULzFECrp61VV1sgJBlGaGhZU

Other Links to: 

Invest & Expenses for Retirement Plan 

http://highlevelrules.blogspot.my/2017/09/invest-expenses-for-retirement-plan.html

Invest & Expenses for Education Plan
https://highlevelrules.blogspot.my/2017/09/invest-expenses-for-education-plan.html

158) Diversify Your 3PF into Unit Trusts

158) Why You Should Diversify Your 3PF into Unit Trust?

You should consider to diversify your retirement funds in 3PF and invests into Unit Trusts.

As you know, investing into equity funds is indirectly investing into company shares. You are buying into the companies businesses.

More details form this link: 
http://highlevelrules.blogspot.my/2017/11/easy-way-to-invest-into-businesses.html

Here is a list of reasons to consider:

1) Asset Types
You decide on what asset type funds you want to invest. 
a) Equity
b) Balanced, Mixed Asset, Tactical Allocation
c) Bond
d) Money Market

2) Switching
You can decide to switch between different funds depending on the market situations.
a) Switch into equity funds for market growth potential.
b) Switch into bond funds to preserve capital during potential market downturn.
c) Can consider a simple strategy to switch out the equity funds profits into a bond fund and preserve the profits.

3) Diversification
Let your money get invested into more areas as a diversification strategy.
a) Local and foreign country funds
b) Single country, multiple country or regional funds
c) Large or small market capitalization
d) Diversify into different asset type funds


4) Small Percentage
a) You can only withdraw from Account 1.
b) You can only withdraw amount above the basic savings amount. Also only up to 30% every 3 months. Only can use a portion of your total 3PF money.


More details from this link: 
http://highlevelrules.blogspot.my/2017/11/percentage-in-unit-trust-using-3pf.html

5) Higher Risks for Higher Returns
a) You can decide to take higher risks to get potentially higher returns. 
b) Lower risks normally gives lower returns.


6) Insurance
a) You may get FREE life insurance coverage by investing into funds that provide insurance.
b) You may also buy Group Insurance as a Unit Trust investor.
c) You may get FREE Personal Accident insurance by becoming a special "Gold member".

Note: The Insurance is only available depending on UTMCs and funds.

7) Investment Reports
a) You can get weekly, monthly, quarterly market reports on the funds you invested.
b) View Annual and Interim reports on you funds.
c) Get details on the investment, Yearly Returns, Income & Expenses, Asset & Liabilities, etc.
d) Reports on companies, sectors, countries and investment amount as invested by the funds.

8) Online Monitoring & Transactions
a) You are able to monitor your investments via online system.
b) Can do fund switching via online.

9) Become "Gold Member"
a) Your 3PF investments will also accumulate "gold membership points" and help faster to become a "Gold Member."
b) Become a "Gold Member" and be rewarded with more benefits.

Note: The "Gold Member" is only available depending on UTMCs and funds.

10) Financial Consultation
a) You get to talk and discuss about your retirement planning with a trained Consultant.
b) You can also discuss on other financial requirements like Children education, insurance, will, wasiat, hibah, trust nominations, etc.

More details on What UTC share with their clients?

http://highlevelrules.blogspot.my/2018/01/what-utc-share-with-their-clients.html

More details on UTC Types And Services

http://highlevelrules.blogspot.my/2018/01/utc-types-and-services.html

Please contact your Unit Trust Consultants for a more detail discussion.

157) How to Compare Funds Performance

157) How to Compare Unit Trust Funds Performance?

A question when unit trust investors start to compare Unit Trust funds performance.
How to compare different funds performance? Especially when the funds are from different companies.

It will be good if you get the details of the funds and compare them. Having a general statement about one fund is better than another can be very misleading and unfair.

Basically, you need to compare Apple to Apple. 
Comparing the performance from the same type of funds.

Here's a list of factors to consider:

a) Fund Performance
This is the most obvious. Most people will compare and look for the highest return percentage.

b) Asset Types
The funds should be in the same asset types. You compare equity with equity, bond with bond and money market with money market. It is not fair to compare the performance of an equity fund with a bond fund because they belong to different asset types.

Comparing Investment with Fixed Deposit returns is also not proper. Fixed deposit is considered as savings.
Equity, Balanced, Mixed Asset or Tactical Allocation funds have different percentage range of asset types.

i) Equity fund will have about 75% to 98% into equity.
ii) Balanced fund will have about 40% to 60% into equity.
iii) Mixed Asset fund will have about 30% to 70% into equity.
iii) Tactical Allocation fund will have about 30% to 98% into equity.
iv) Bond fund will have 0% into equity.

c) Risk Level
You may have already  know about the saying, "Higher Return, Higher Risk" 
Risk are measured by the price volatility.
Equity funds have higher volatility compared to bond funds.
Growth funds have higher volatility than Dividend funds.
Foreign funds have higher volatility than Local funds. This is because there are additional country risk and currency risk.
When the currency exchange rate is volatile, the foreign funds performance will be even more volatile.

d) Local & Foreign Exposure
Local funds invest mostly in this country. Funds with foreign exposure have a certain permitted percentage to invest into other countries. For example, up to 30% can be invested into foreign countries. Those with 100% local can only invest in this country.

e) Foreign Country
A foreign fund invests mostly into that country's stocks. For example, a China fund invests into stocks listed in China and China based companies listed overseas.


f) Funds Classification or Category
The funds to compare must be in the same Classification or Category. Those funds in the same classification or category are grouped together. They have similar market capitalization and countries.

One of the easiest way is to compare funds in the same Lipper Classification or Morningstar Category.
The rating agencies already done the grouping and have their own ratings published in their own website. Their results are also published by the UTMC's own Quarterly and Monthly reports.

g) Same Period
The comparison is also to be based on the same period. Market performed differently in different years. For example, the stock market crashed in 2008. It is not fair to compare fund performance in 2007 vs 2008.

Yearly returns (1 Jan to 31 Dec) are commonly used for comparisons. All UTMCs will publish their funds yearly returns.

h) Longer Time
Better to compare a longer period (many years) instead of only 1 year. Funds that only performed very well in 1 year is not consistent. You need to look at consistently good performance over many years. Most of the financial goals are over a long period.
Investment is a marathon, not a 100m sprint race.

i) Same Terms
Be aware of the different definitions of returns. Know the differences between:
i) Annual Return
ii) Total Return
iii) Average Total Return
iv) Annualized Return

j) Other benefits
There may be other extra benefits given to the investors, such as:
i) Free insurance
ii) Optional Group insurance
iii) Will writing, Wasiat, Hibah, Trust Nominations
iv) Gold membership
 
k) Other Considerations
i) UTC's service level and knowledge
ii) Company branches locations
iii) Company reputations

Fund performance is only 1 of the comparison factors. Do look at the details of the funds for a more proper comparison.

You can use the factors listed above to compare and decide which funds are the best for you.

156) Cash Flow Template

156) Cash Flow Template

You may probably know your current income.

But,

Do you know how much is your current expenses?
Have you listed down all your expenses and monitor where your money goes?


You will have different expenses amount in different months.
For example, your car insurance and annual policy insurance are paid once a year.
For the parents, December and January will have more expenses. More money is needed to prepare the children to go to school.


Knowing where your money goes is the first step to monitor the expenses. You need to set aside budget for those bigger expenses.

I had prepared a Microsoft Excel template for you to monitor your income and regular expenses.
You may add more rows to suit those expenses not listed in the template.
There is also a chart to compare your monthly Income vs Expenses.

Here's the link to Download and Save As a new Excel file.
https://drive.google.com/open?id=1H6TKruRi1FpZnuTyUdIjkJJ3AS9Z6mTm

May you have more Income than Expenses for Life.

155) Components of a Unit Trust NAV

155) What are the Components of a Unit Trust NAV?

In a Unit Trust fund, there are 3 main asset types:
a) Stocks or Shares
b) Bonds
c) Money Market instruments

Equity funds will have all 3 asset types.
Bond funds will have bond and money market instruments.
Money Market funds will have money market instruments only.

Stocks

For Stocks, the value changes during the market open times. They are traded among different investors. One investor will want to buy and another will want to sell. The buy and sell transaction happens when both agreed on a certain price.

If the selling price is higher than the buying price, then there is Capital Gain.
If selling price is lower price than buying price, then there is Capital Loss.

Stocks also may receive Dividends as the income. Dividends are paid out as part of profit given to investors. Some stocks pay dividend a few times in a year. Upon receiving dividends, the Unit Trust fund asset value increases.

Bonds

For Bonds, they are also traded by bond buyers and sellers in the bond market. Similarly like stocks, bond prices also changes depending on market conditions. There is also Capital Gain or Loss depending on buying and selling prices.

Bond buyers receive Coupon Payment as interests. The coupon payments are calculated and accrued daily. The Unit Trust fund asset value increases daily.

Money Market

For Money Market, there is no change to the value. For an easy understanding about Money Market, just think like Fixed Deposit. The value is same in the beginning and at the end. There will be interest paid for the money placed in the financial institutions.

Money Market depositors receive Interests. The interests are calculated and accrued daily. The Unit Trust fund asset value increases daily.

Total Asset Value

The Total Assets in the funds are calculated on the total current market values of all the stocks, bonds and money market instruments held by the fund.

Capital Gain/Loss

Capital Gain or Loss depends on the differences between the buying and selling of the assets. If selling price is higher than buying price, then there is Capital Gain. The Gains and Losses of all transactions are added to calculate the net difference.


Total Income

Total Income are calculated from the total dividends, coupon payments and interest received.

Total Expenses

In Unit Trusts, there are expenses incurred while managing the funds. The expenses are Management fee, Trustee's fee, Audit fee, Tax Agent's fee, Brokerage fees, administrative fees and expenses. The Expenses reduce the Total Asset Value.

Total NAV

Total Net Asset Value is calculated by adding up all the Assets value, Capital Gains or Losses, Dividends, Coupon Payments & Interests received and minus the Total Expenses.

The Total NAV is calculated on daily basis to get the NAV of the day.

154) Returns from Different Unit Prices. 

Is there any difference on the returns from lower & higher unit prices?

Is it better to buy a lower unit price funds compared to a higher price units?

By buying a lower unit price funds, you can get more units and at a cheaper price.

Let's take 2 funds as a case study.
Fund A at $0.25 per unit and Fund B at $0.80 per unit.

You invested $1,000.
Assume the service charges are the same and paid separately.

Fund A:
Unit price: $0.25
Number of units = $1,000/$0.25 = 4000 units.

Fund B:
Unit price: $0.80
Number of units = $1,000/$0.80 = 1,250 units.

Let's say both funds made 10% returns in 1 year.
Using the formula: FV=PV(1+i)^n

Fund A: 

New Unit price: $0.25 (1+ 10%) = $0.275
Number of units = 4000 units
Total value = 4000 x $0.275 = $1100.

Fund B: 
New Unit price: $0.80 (1+ 10%) = $0.88
Number of units = 1250 units
Total value = 1250 x $0.88 = $1100.

Both Fund A and Fund B gave the same result in terms of Dollars.

In conclusion, the beginning fund price does not really matter. A higher or lower unit price does not indicate a fund is better than another fund.


What is more important is the percentage return.

Let's look at the Formula for Future Value, the value of your current investment will grow to, in the future.

Formula: FV=PV(1+i)^n

FV = Future Value (End value)
PV = Present Value (Begiin value)
i = Annualized returns
n = number of years.

Unit price is not part of the equation.

What is important is that the Future Value depends on the Present value, annualized returns and number of years invested.


More info from this link:

Factors Affecting Investment Returns 

http://highlevelrules.blogspot.my/2017/08/investment-return-mathematics.html

 

153) Distribution Reinvestment for Lower vs Higher Value Units

153) Distribution Reinvestment for Lower vs Higher Value Units

There is a concept where it is better to buy a lower price units compared to a higher value units. How to compare?

You have the same distribution amount and you reinvest the distributions back into the funds. 
You will get more units and more value if the unit price is lower.

Let me explain with an example.

Let's say you invested into 2 funds with $1,000 each.
Fund A at $0.25 per unit and get 4,000 units.
Fund B at $0.80 per unit and get 1,250 units.

The funds declared $0.01 distribution and reinvested.
2 scenarios:

Fund A:
Fund A gives you 4,000 x $0.01 = $40.00
Fund price after distribution =$0.25 - $0.01 = $0.24
$40/$0.24 = 166.67 extra units
Total A units = 4,000 + 166.67 = 4,166.67

After some time, the unit price increased back by $0.01.
Thus fund A unit price is back to $0.25

Total A Value = 4,166.67 units x $0.25 = $1,041.67

Fund B:
Fund B gives you 1,250 x $0.01 = $12.50
Fund price after distribution =$0.80 - $0.01 = $0.79
$12.50/$0.79 = 15.82 extra units
Total B units = 1,250 + 15.82 =1,265.82
After some time, the unit price increased back by $0.01
Thus fund B unit price is back to $0.80
Total B Value = 1,265.82 x $0.80 = $1,012.66


Clearly, Fund A gives you more total value.
From number of units x unit price, you will have more units and higher value from Fund A.

So, what is the issue in this scenario?

It is calculated with different Return Rates.


Fund A was calculated with $0.01/$0.24 = 4.17% returns.

Fund B was calculated with $0.01/$0.79 = 1.26% returns.

This comparison is already biased towards giving Fund A higher returns.
So it is not a fair comparison.

To compare, funds should be based on the annual returns percentage. 
The fund performance reports in Quarterly Fund Reviews do not have the unit prices stated. 
They are always based on percentage returns.

Please consult your Unit Trust Consultant for further information and proper planning. 

More related articles:

Lower vs Higher Unit Price of the Unit Trust Funds
https://highlevelrules.blogspot.my/2018/01/lower-vs-higher-unit-price.html


Benefits of Distribution in Unit Trust:
https://highlevelrules.blogspot.my/2017/11/benefits-of-distribution-in-unit-trusts.html

Difference between Dividend vs Distribution
https://highlevelrules.blogspot.my/2017/11/dividend-vs-distribution.html

152) Can You Retire with 1 Million Units?

152) Can You Retire with 1 Million Units of Unit Trust Funds?

I was asked by a Unit Trust Consultant to comment on this question.

He further explained on this concept:
1) You have 1 million units of a Unit Trust fund.
2) Each unit declares a distribution of 6 sen per unit per year.
3) 6 sen x 1,000,000 = RM60,000 per year.
4) RM60,000/12 = RM5,000 per month.

You get a passive income of RM5,000 per month. You are not allowed to withdraw the investment money. Only use the distribution payout. This way, you can have money every month forever.

Note:
a) The fund declares distribution consistently every year.
b) The distribution amount is at least 6 sen per year. More is better.
This is a great idea. 

However, there are few things that you need to consider.

Which fund can give you 6 sen distribution every year?

If you only look at distribution, there are many funds that declares distribution on annual basis.
Upon further checking, not many can give you 6 sen per year.

A distribution is actually returning you part of your Net Asset Value of the fund.
Let's look at the numbers in detail.

Can a 80 sen per unit fund gives you 6 sen distribution?
Scenario A: 80 sen per unit fund that declares 6 sen distribution, will be valued at 74 sen after distribution.
80 sen - 6 sen = 74 sen.

Distribution yield = Distribution amount / unit price after distribution
Distribution yield = 6/74 = 8.1%

Can a 25 sen per unit fund gives you 6 sen distribution?
Scenario B: 25 sen per unit fund that declares 6 sen distribution, will be valued at 19 sen after distribution.
25 sen - 6 sen = 19 sen

Distribution yield = 6/19 = 31.5% 

Which is more possible? Scenario A or B? 
Answer: Scenario A with a lower Distribution Yield.

Please also note that Distribution yield is NOT the same as annual returns. 
A fund that declares distribution may even have a negative annual return.


Let us look from the Ringgit & Sen perspectives.

Distribution payout: RM60,000.
The fund increased back to the initial fund price after 1 year.
Eg. 80 sen became 74 sen after distribution. Then increased back to 80 sen after 1 year.

Scenario A: 1,000,000 x RM0.80 = RM800,000
RM60,000/RM800,000 = 7.5% withdrawal per year.

Scenario B: 1,000,000 x RM0.25 = RM250,000
RM60,000/RM250,000 = 24% withdrawal per year.

From the 2 scenarios, it is also important for you to know the fund prices.

Number of units is only half of the equation for total value.

Total Value = Number of Units x Unit Price

QUIZ: Can I retire with only 100,000 units?

ANSWER: NOT SURE. It Depends on the price of each unit.

Yes, if each unit is RM20 each.

No, if each unit is RM0.20 each.

The more Correct Question should be:

"Can You Retire With 1,000,000 Ringgit?" 

When you retire, you need to pay for the things you buy with Ringgit or Dollars. 

Not with the units. 

Only the Unit Trust Management Company will accept the Unit Trust units and convert the units to Ringgit.

Please consult your Unit Trust Consultant for further information and proper planning. 

More related articles:

Benefits of Distribution in Unit Trust:

https://highlevelrules.blogspot.my/2017/11/benefits-of-distribution-in-unit-trusts.html

Difference between Dividend vs Distribution

https://highlevelrules.blogspot.my/2017/11/dividend-vs-distribution.html

151) How A UTC Motivates Himself/Herself

151) How A UTC Motivates Himself/Herself.

Answers compiled from UTCs who responded to this question posted in Facebook on 1 Mar 2018.

Ainulashikin Jasmon Target oriented

Thomas Fong Soh Seong Passive income

Jessica Chong Lifetime career

Felix Khor Free oversea trip

Wan Hanazriah Unlimited income

Michelle Sing Naturally motivated from within

Pinky Leong Passion

John Lim Investors’ happiness achieving their financial goals

TF Cheah Financial Freedom

Amanda Han no enough money to use

Shankar Rajoo passive income and time 

Azi Rahman Career Benefit

June Hoe Career Benefit
Kausalyaa Palaniandy Motivational video
Kueh Jia Liang Check positive post everyday.
Penny Lee How My future career benefits will be very much depending on how much effort I put in now
Wina Jakiwa Always think about children.
Samantha Liang Think of my parents
Lim Chai Loy I produce superstars.
Carie Loh Career Benefit is my motivation
Ismadi Mohamed Helping more people achieving their financial goals.
Ayu Dlaila Think of my BIG WHY

Nanthakumarashwaran Balsamy Radiar  Have a mind set of customer FIRST, not commission FIRST.

Kelly Tls Positive thinking

Elvin Yu Kiam Teik We have to do better than yesterday.