QUESTION:
Hope you can explain to me further on this investment plan. Why some say (you also suggested this) it is better to invest in ASB than in private unit trust? Robert Kiyosaki also recommends investing for cash return than capital gain (ASB gives cash return right?). I understand that when he wrote, invest in capital gain is like gambling, predicting future. If I invest in ASB in 2006, I will get dividend of 7.3%.
If I invest in unit trust, say Public Islamic Dividend Fund, its 1st year Annualized Return is 30.94%. (The fund was launched in Feb 2006. Figure from Public Mutual Quarterly Fund Review, Qtr 1 2007). Their other funds too, (for moderate risk funds, less than 5 yrs), show their Annualized Return are between 13% - 40%.
I’m a bit confused why it is better invest in ASB? Because of no-load fund? But return is better in unit trust (example above). Yes I know past cannot predict future, and return is not guaranteed, but example above make me wonder whether I do miss anything anywhere? Appreciate your help.
ANSWER:
Let me first answer your question by talking about rates of return.
As you already know, rates of returns are measured on a yearly basis. Further, rates of returns have to be compared over a period of time, and not just for one or two years. This is because anybody can give a great return in one year. It could be down to luck – the manager just happened to buy the right stocks at the right time. So you should not get impressed by anyone or any fund or any investment giving a 20, 30, 50 or even 100% return in one year. But to give such return year in and year out takes skill, experience and knowledge. And not many people can do so. The few who has done so includes Warren Buffett, George Soros and John Templeton. For example, Warren Buffett Berkshire Hathaway Fund gave an annual rate of return of 22% for 40 years, and still counting!
While the funds you mentioned gave good returns this year, remember that the Bursa Malaysia is near the all time high now. Any fund launched last year will give exceptional returns at this point in time. But can they do so every year for the next five or ten years? The short answer is that it is going to be difficult for them to do it.
For a more comprehensive answer, please read my Handbook entitled Growing Your Money.
Still, at the end of the day, you will do fairly well investing in either private unit trusts or ASB. If you can do so consistently, you are already in the top ten percentile of the population when it comes to money. Most people cannot even save a single cent!
Sumber: Ezine Azizi Ali Jan2012 ed.