Full Info of Public Mutual Funds

Public Mutual has 88 funds which is not easy to analyse all of them just by browsing around. Investing base one word of mouth (the company, the agent, friends etc.) is really not a good practice. So its best to put all the basic info into a spreadsheet and analyse from there.

Below is a link to a spreadsheet I have compiled for my own use. All the info is gathered from Public Mutual Online yesterday. I plan to add more info to it as I go along so you may want to refer to the link instead of saving an offline copy.

link to google doc

For example, I want to know which bond fund I want to switch to ...

• so I use filter to show only Bond 'category'
• show only 1,000 initial investment
• sort by Total Cost

I got these to choose from: (all have the lowest fee at 1.035% )

PB Islamic Bond Fund

PB Fixed Income Fund

Public Bond Fund

Public Select Bond Fund

list of Public Mutual Funds

Public Mutual is the largest mutual fund company in zzzz, they have 88 funds !! HOW to choose wisely from 88 choices !? Its CRAZY !! If one can analyse all those 88 funds, one must be good at investing in stocks directly too!

Anyway below show the list sorted by Shariah compliant, followed by category of funds and lastly by fund name. This is the best way I can take a peek by the purpose of investment. Hope this is useful to you too ...

Fund Name	Fund Abbreviation	historical diff	Shariah	category
PB Islamic Cash Management Fund	PBICMF	PB	Shariah	Money Market
PB Islamic Cash Plus Fund	PBICPF	WHOLESALE	Shariah	Money Market
Public Islamic Money Market Fund	PIMMF	PUBLIC	Shariah	Money Market
Public Islamic Income Fund	PI INCOME	PUBLIC	Shariah	Fix Income
PB Islamic Asia Equity Fund	PBIAEF	PB	Shariah	Equity
PB Islamic Asia Strategic Sector Fund	PBIASSF	PB	Shariah	Equity
PB Islamic Equity Fund	PBIEF	PB	Shariah	Equity
Public Asia Ittikal Fund	PAIF	PUBLIC	Shariah	Equity
Public China Ittikal Fund	PCIF	PUBLIC	Shariah	Equity
Public Islamic Alpha-40 Growth Fund	PIA40GF	PUBLIC	Shariah	Equity
Public Islamic Asia Dividend Fund	PIADF	PUBLIC	Shariah	Equity
Public Islamic Asia Leaders Equity Fund	PIALEF	PUBLIC	Shariah	Equity
Public Islamic Dividend Fund	PIDF	PUBLIC	Shariah	Equity
Public Islamic Equity Fund	PIEF	PUBLIC	Shariah	Equity
Public Islamic Opportunities Fund	PIOF	PUBLIC	Shariah	Equity
Public Islamic Optimal Growth Fund	PIOGF	PUBLIC	Shariah	Equity
Public Islamic Sector Select Fund	PISSF	PUBLIC	Shariah	Equity
Public Islamic Select Enterprises Fund	PISEF	PUBLIC	Shariah	Equity
Public Islamic Select Treasures Fund	PISTF	PUBLIC	Shariah	Equity
Public Islamic Treasures Growth Fund	PITGF	PUBLIC	Shariah	Equity
Public Ittikal Fund	PITTIKAL	PUBLIC	Shariah	Equity
PB Islamic Bond Fund	PBIBF	PB	Shariah	Bond
Public Islamic Bond Fund	PIBOND	PUBLIC	Shariah	Bond
Public Islamic Enhanced Bond Fund	PIEBF	PUBLIC	Shariah	Bond
Public Islamic Infrastructure Bond Fund	PIINFBF	PUBLIC	Shariah	Bond
Public Islamic Select Bond Fund	PISBF	PUBLIC	Shariah	Bond
Public Islamic Strategic Bond Fund	PISTBF	PUBLIC	Shariah	Bond
Public Sukuk Fund	PSKF	PUBLIC	Shariah	Bond
Public Islamic Asia Balanced Fund	PIABF	PUBLIC	Shariah	Balance
Public Islamic Balanced Fund	PIBF	PUBLIC	Shariah	Balance
PB Cash Management Fund	PBCMF	PB		Money Market
PB Cash Plus Fund	PBCPF	WHOLESALE		Money Market
Public Money Market Fund	PMMF	PUBLIC		Money Market
PB Capital Protected Dragon Fund		PB		Fix Income
PB Capital Protected Resources Fund	PBCPRF	PB		Fix Income
Public Capital Protected Select Portfolio Fund	PCPSPF	PUBLIC		Fix Income
PB ASEAN Dividend Fund	PBADF	PB		Equity
PB Asia Equity Fund	PBAEF	PB		Equity
PB Asia Pacific Enterprises Fund	PBAPENTF	PB		Equity
PB China ASEAN Equity Fund	PBCAEF	PB		Equity
PB China Australia Equity Fund	PBCAUEF	PB		Equity
PB China Pacific Equity Fund	PBCPEF	PB		Equity
PB Euro Pacific Equity Fund	PBEPEF	PB		Equity
PB Growth Fund	PBGF	PB		Equity
PB Singapore Advantage-30 Equity Fund	PBSGA30EF	PB		Equity
Public Aggressive Growth Fund	PAGF	PUBLIC		Equity
Public Australia Equity Fund	PAUEF	PUBLIC		Equity
Public China Select Fund	PCSF	PUBLIC		Equity
Public China Titans Fund	PCTF	PUBLIC		Equity
Public Dividend Select Fund	PDSF	PUBLIC		Equity
Public Equity Fund	PEF	PUBLIC		Equity
Public Far-East Alpha-30 Fund	PFA30F	PUBLIC		Equity
Public Far-East Consumer Themes Fund	PFECTF	PUBLIC		Equity
Public Far-East Dividend Fund	PFEDF	PUBLIC		Equity
Public Far-East Property & Resorts Fund	PFEPRF	PUBLIC		Equity
Public Far-East Select Fund	PFES	PUBLIC		Equity
Public Far-East Telco & Infrastructure Fund	PFETIF	PUBLIC		Equity
Public Focus Select Fund	PFSF	PUBLIC		Equity
Public Global Select Fund	PGSF	PUBLIC		Equity
Public Growth Fund	PGF	PUBLIC		Equity
Public Index Fund	PIX	PUBLIC		Equity
Public Indonesia Select Fund	PINDOSF	PUBLIC		Equity
Public Industry Fund	PIF	PUBLIC		Equity
Public Natural Resources Equity Fund	PNREF	PUBLIC		Equity
Public Optimal Growth Fund	POGF	PUBLIC		Equity
Public Regional Sector Fund	PRSEC	PUBLIC		Equity
Public Regular Savings Fund	PRSF	PUBLIC		Equity
Public Savings Fund	PSF	PUBLIC		Equity
Public Sector Select Fund	PSSF	PUBLIC		Equity
Public Select Alpha-30 Fund	PSA30F	PUBLIC		Equity
Public Singapore Equity Fund	PSGEF	PUBLIC		Equity
Public SmallCap Fund	PSMALLCAP	PUBLIC		Equity
Public South-East Asia Select Fund	PSEASF	PUBLIC		Equity
PB Fixed Income Fund	PBFI	PB		Bond
PB Infrastructure Bond Fund	PBINFBF	PB		Bond
PBB MTN Fund 1	PBBMTN1	WHOLESALE		Bond
Public Bond Fund	PBOND	PUBLIC		Bond
Public Enhanced Bond Fund	PEBF	PUBLIC		Bond
Public Institutional Bond Fund	PINBOND	PUBLIC		Bond
Public Select Bond Fund	PSBF	PUBLIC		Bond
Public Strategic Bond Fund	PSTBF	PUBLIC		Bond
PB Asia Real Estate Income Fund	PBAREIF	PB		Balance
PB Australia Dynamic Balanced Fund	PBADBF	PB		Balance
PB Balanced Fund	PBBF	PB		Balance
PB Indonesia Balanced Fund	PBINDOBF	PB		Balance
Public Balanced Fund	PBF	PUBLIC		Balance
Public Far-East Balanced Fund	PFEBF	PUBLIC		Balance
Public Global Balanced Fund	PGBF	PUBLIC		Balance

There is NO such thing as Passive Income !?

21st century personal finance is moving away from saving and focus into the income arena. In short, the gurus are now educating public that saving is NOT good enough, hence sourcing for passive incomes on the another hand is a BETTER solution, than just saving alone.

While the concept is definitely true and correct but unfortunately as the hypes go bigger and bigger, the idea of passive income has been abused and more scams started to appear in the market, as if they were the gurus as well. Except the 'passive income' they refer to is barely promoting their own original same old products. The personal finance market has become so competitive that even some real gurus have no choice but to go beyond the line in their marketing effort - Robert Kiyosaki is no exception in spreading "Saving is bad".

Although passive income is very well defined here using income ratio 1:100 but is there really such thing as Passive income ? When I looked up dictionary, these words come up

PASSIVE : not participating, inactive, not reacting, inert or quiescent.

None of these words correctly describe a well implemented passive income. I use my best judgement to find a good location, a value property and a pay master tenant. I setup a profit take target and an exit strategy in my investments before I leave and let them auto pilot. All of these are very participating, actively applying my knowledge and experience, reacting appropriately when necessary etc.

The word "Passive" also gives people a psychology of No Need To Do Anything; As if an easy to get rich scheme with a better cover.

Hence this article wants to pursue all readers to stay away from the term Passive Income. Its negative, misleading and now abusive by the over-stress marketing effect. Instead, think of Smart Income !

There is no hard and fast rules for Smart Income. Any income can be earned the regular way or the Smart way !

An employee can use minimum of his time effectively to earn the highest salary or benefits. A self employ can easily leverage on Internet to earn income repeatedly. A business owner can employ a system to run his business. An investor can setup an autopilot mechanism.

So no matter which income quadrant you are in, it is possible for you to turn that income into a smart one. Its a matter of HOW you earn your income, NOT WHAT you do.

Are you pursuing smart income ?

21st century Economy Politic Quadrant

The Economy-Political Quadrant may seems like telling where to keep or invest your money despite good or bad time.

It indeed works very well during 20th century. Unfortunately comes to 21st century, not only has the year changed, personal finance arena has changed drastically as well.

Gold has been speculated so much that it MAY no longer be the standard of money.

There used to be only 'property' in the city. Now there are satellite towns, suburbs ... agriculture lands and even dust bins ( recycle ) have become valuable estates too. While property remains the right category to invest into whenever economy is booming, but predict the right future seems like tougher than buying lottery.

Government bonds used to be de-Facto action when a country is stable. But in today's world, a country is as smart as a taicon's finance. One day they are the LARGEST, the next day they are GONE.

Stock market used to be the back bone of a country's economy. However, the market of derivatives has become so HUGE that the REAL and PHYSICAL is NO LONGER more real than VIRTUAL

So in 21st century, the element of Stock-Property-Funds-Gold is really questionable. However, one fundamental that doesn't change is that

you will have to identify what to do at what time that is BEST for YOU !

Hope you will find your own very best Economy-Political Quadrant soon !

Economy Politic Finance Quadrant

There are 2 BIG main external factors affecting our investment decisions

• Economy
• Politic

When the time is really bad (economy downturn and politically unstable), its best to park your money under something that is really stable, ie Gold. Which is by definition usable anywhere you go in anytime.

When its good time, invest direct to the stock market would yield very good return.

When the economy is not so good in a strong country, the government bonds or related money market would be able to yield higher return than just gold.

However, the most dispute solution in good economy unstable country is investment in property. This is mainly due to easier rental and higher chance of capital gain.

By simply moving money around depends on the political and economy situation, one was able to achieve more than 12% compound return for the past 20 years. That is equivalent to a 10X return.

But by no mean this is easily done. Some of the concerns include;

• how would one know exactly when economy/politic turns good/bad ?
• is Gold the ONLY option ?
• property may not easily liquidated
• how to choose which property or stock market ?

. . . which can be explored further.

Mutual Fund vs Stock fees

Typically equity mutual fund service fee is 5.5% and stock investment is 0.7%. Other than that, another significant difference between them is that mutual fund normally require a minimum investment of $1,000 whlie stock usually charges a minimum fee of $40.

	Mutual Fund	Stocks
Minimum Imposed Fee	None	$40
Minimum Investment Amount	$1,000	None

( Mutual fund fee could range from 1-2%

while stock investment can be as low as 0.05%

but those are not really apple to apple comparison )

So first of all, this $40 minimum could become the first trick in your invesment. $40 fee to a $1,000 investment is 4% alone. In stock investment, the fee is per transaction if buy and sell on different days. So a total of $80 out of $1,000 is 8% !! In stock investment, you must understand MOTS : Minimum Optimized Trading Size especially for speculators in order to really enjoy the low percentage fee as advertised.

In addition, this 0.7% is not the only fee imposed for stock investment. This 0.7% is called Brokerage fee. There are also Clearing fee and Stamp duty. Clearing fee is usually 0.04% and Stamp Duty is $1 for every 1,000. However, when you use 0.7% as the brokerage fee, other fees are small enough to be ignored. This is not the case when your brokerage fee is the lowest like 0.05%, then you effective total fee would easily become 0.18%.

Mutual fund on the other hand is simpler and straight forward. ( they charge much higher fee, ofcourse they should make our life easier )

Meaning when you invest $1,000 into a mutual fund, $55 is paid for the service. Assume there is no market movement and you withdraw immediately, you will get back $945.

Says you buy a $3.08 stock with $5,901.30 ( just slighly more than MOTS), your effective fee would be about 0.84% per transaction or 1.68% in total. But assume if you sell it without any market movement, you will have to find a buyer. So withdrawal is not as automatic as mutual fund. If no one wants to buy your shares when you want to sell it, you will NOT be able to liquidate your invesment !

Lets assume you got into a high volume stock where liquidity is not a problem at all. But you may NOT be able to sell at $3.08. There is always a buy and sell spread. Basically how much you can sell depends on how much people want to buy from you. Anything from $0.005 onward is possible. But in a liquid sell, the sensable price you can sell is most probably $3.06. The 0.02 difference is called the tick size and you can learn a bit about them on this post. Note that when your selling price is $3.06, your effective fee rate becomes 0.85% and not 0.84%, an ignorable difference but nevertheless different.

So to wrap this up, you will get back $5,764.98 if you sell immediately of the stock you just bought ! That is an equivalent of 2.31%

So now you can see how a 0.7% turns into 2.31% in stock investment even when you are senstive about MOTS.

Mutual fund ? Its still at 5.5%, not much trick there. Simple and straight foward.

So it is NO Doubt Stock fee is much lower than Mutual Fund fee but it may NOT be as low as you think it is.

Investment Type	Published Fee	Put In	Get Back	Effective Rate
Mutual Fund	5.5%	$1,000	$945	5.5%
Stock	0.7%	$5,901.30	$5,764.98	2.31%

You may also be interested in these articles

Number of Stock transactions may affect fees% when compare with a mutual fund

Insurance vs FD vs Mutual Fund

Myth of Putting All Eggs in One Basket - Diversification is Bad ?

Fund Managers are Lousy - same problem different size means different problem

Why Fund Manager still lost money even when they know they will ?

Calculate how much is a stock wroth buying

How to earn in stock market no matter up, down or side way

or read all about mutual fund articles here

or read all about stock articles here

One of the myth not answered yet

due to lack of commenters :

not all stock prices are created equal

WHY and WHAT we can do about it ?

Fund Managers Are Lousy !

I attended one pursuing session urging us to take their classes on technical stock assesment.  Half way through the following conversation took place :

speaker : You know who uses our services ? ( Technical Chart )

( pause a bit, no one answer, then speaker continue )

speaker : Profesionals ! ... You know who are the pros ?

( then he continued )

speaker : Fund Managers !

student : but .... its hard to say isn't it ?

student : all those mutual funds drop like hell so they are not any better than us.  How to say they are pros ?

The speaker didn't answer well and almost no one signed up with their offers.

Basically its a matter of size.

I used to sell lemonade when I was a boy.  I made about 100-200% profit a day.  Then when I grow up I built a factory to sell lemonade, I would be happy if I can earn 10-15% a year.

Selling lemonade from my garage required $100 capital while a facotry took up $1 million.  

Things get complicated

when size grows !

It is very hard for a $100,000 guy to understand how to handle $2 billions.

BIG guys like mutual fund managers do have some 'limitations' because they are BIG !

1) They cann't simply buy or sell too much funds by law, coz they may 'manipulate' the market at ease

2) They promised investors to keep '80%' of the fund in the market to qualify as 'quity' fund etc.

Buy Term Invest The Rest

In one of the old post I shared how to best use of your money among insurance, fix deposit and mutual fund ( click to see old post).

Basically it says if bad thing happens within the first 5 years, insurance is the better choice because you get $100,000+ while your FD/Mutual Fund saving is only starting to accumulate at $10,000+. However for the next 10-20 years FD and mutual fund are clearly better choices because they are more flexible and provides better returns, $300,000 and $600,000 respectively.

So the answer is to build your own portfolio !

I went back to insurance company P and asked for a Term Insurance quotation for $100,000 which costs only $313 a year for 5 years. So I minus out $313 from my yearly saving $17,920. On year 1-5, I would only save $17,607. And because I am greedy so I pick mutual fund over Fix Deposit as my saving vehicle.

Wa lah ! If I die within the first 5 years, I will get more than $100,000 which is slightly more than the insurance plan earlier - actual amount would be $ 119,016 even for the 1st year where $100,000 paid out by the Term Insurance, and the rest is from my own saving.

If I survive through the 10-20 years period, I will still have all my saving plus its earned interest !!

Best of BOTH WORLD !! Isn't it ?

This is called

Buy Term Invest The Rest

Insurance vs Fix Deposit vs Mutual Fund

Insurance

I search around and found this, one of the best Endowment Insurance Policy I can find.  

Just a reminder that "Endowment Insurance" is a type of insurance you go for when you are aiming at SAVING !  ( read old post for more info )

Basically this plan says if you save $18,000 for 10 years, you will get $300,000 by the year 20th.

That is about D O U B L E your investment, not to mention the F R E E benefits you get from the insurance side.

There is a GUARANTEE payment of $100,000 to your loved ones should you not live through the period ...

Fix Deposit

If you save the same amount of money every year for 10 years .... you will have $18,547 by the end of 1st year ( assuming 3.5% Fix Deposit rate ).  That alone, is triple of what you get on above plan.  Like wise, every year onward is ALWAYS higher than the insurance plan above.  

Pink graph is Fix Deposit @ 3.5% and Blue graph shows the return from insurance return above (P).

By the end of year 20, both FD@3.5% and Endowment Insurance provide similar returns at $300,000

Mutual Fund

My personal past 15 years of mutual fund return is 8-12%.  So lets says my next 20 years of mutual fund return is at 8% ... 

Yellow graph (return M) shows the potential mutual fund return ...

A whopping of $600,000 return by end of year 20 !!!  That is D O U B L E again for the other $300,000 !!!  By Doing NOTHING but choosing a different finance tool !!

So from the perspective of saving, Mutual Fund and Fix Deposit are clearly better option ...

However ...

Should things don't go as planned and you are no longer able to save ( passed away ), the insurance will pay $100,000 immediately in year 1 comparing to $18,000-$20,000 on the other 2 options.

So from Unexpected Incident point of view, Insurance clearly win over Fix Deposit and Mutual Fund.

At the end, what should you do ?  Answer to be revealed soon but actually has been hinted before ...

Mutual Fund Interim Report

This is one of the oldest fund I have kept - Public Index Fund from Public Mutual.

This particular one is Interim Report - published 6 months after last annual report.

This parts below shows how much return this fund gives for the past years.  A few highlights are

• Financial Year Ended 31 Jan
  
• Lipper method  

Normally I ignore this part because unless you purchase the fund on 31 Jan, else those return doesn't really mean much to you.  Another use of these numbers are to compare with another fund that also has financial year ended on 31 Jan and also used Lipper method to calculate the return, else these numbers really don't mean much to normal investors.

This part is one of the most popular questions in this blog.

When you have invested into a mutual fund, their interim or annual report would include something like this.  It lists down some of the businesses it invest into.

Here I should also explain that in real life, fund manager has to change the ratio and buy sell stocks quite actively.

That also means they may or may not be able to list down all the stocks they transact.

In below graph, the black line is the fund, the red line is the index the fund compares to.  This is also something that is ambigous and normal investor shouldn't hold too strong on to.

Basically this says, since 2003 this fund has gain 70% to date, 10% more than the index gain.

Again, the pick of 2003 is the key.  If you bought this fund in 2003 then this graph is very relevant.  Else no.  For example, if you draw the same graph using mid 2007 as the starting reference point, then you would get 

So basically if the reference time is relevant to you, then you want to make sure the fund outperform the index in up trend and drop less during down trend ( earlier post talked about that )

This is the part saying who manage this fund.  Unfortunately, for big company it would usually just say the fund manager is a company.  So its quite hard to determine exactly who is the person you should follow.

What's Wrong with Mutual Fund ?

If these Fund Managers are so Expert, why in the world they do not withdraw from the market before the market crash ?

A well establish mutual fund company normally has a large invesment sum of money to invest with.  Sometimes one mutual fund company alone can have more than all the money traded in the stock market one day.  That also means, a fund manager can put ALL money into a crashing market and still make the market trends up that day.  Like wise, when a fund manager pull out all the money, the market literrally collapse into Nothing left.

So when the goverment grant the license to the mutual fund company, certain limits are imposed too.  In generally there is a limit a fund manager can dispose off their stocks in a day.

So, let's say the limit is $100,000 per day.  And the fund manager has $1 million to dispose off.  It will take 10 days or 2 weeks before that fund manager is totally out of the situation they are trying to stay away from.

But nothing happen overnight !  Whatever the problem is, a good fund manager should have insider news and know things well in advance !  ( well, if not insider news then through other methods, they should have known ... )  That is true, they do know in advance but ...

Your fund manager promised you something ( prospectus ), and that something is usually achieved by putting your money into the market.  So a fund manager cann't simply take out all your money just because he thinks he knows the future.  Says if a fund manager does take out all your money when he predicts a drop.  But then it goes up indeed and you see your fund doesn't perform the up trend, you must have more questions, don't you ?

If all a fund manager does is to put your money into FD ( very safe) and then charges you 5% service charge, does that sound appealing to you ?  

So a Fund Manager must put maximum money into the market as much as he can at any one time.

All these factors combined, these are what you can expect when you invest into a mutual fund :

1. Best Fund Manager : the Fund outperform the market when it goes up and lose less when the market is down.

2. Normal Fund Manager : the Fund goes up together with the market up trend and lose less in down trend.

3. Bad Fund Manager : A fund that does not follow market trends or no activity.

Mutual Fund - service charge

Equity Mutual Fund is a fund that invests into stock market directly, usually either to (1) gain maximum capital appreciation or (2) receive constant dividen payout as an income.

The standard advice is to read the prospectus, understand the purpose of the fund before buying it.  Public Mutual is the largest private mutual fund company in zzzz and this is a sample of prospectus.  All the important stuff are highlighted at the top.

First thing that put people off is the varies charges and fees.  The biggest chunk is Service Charge at about 5%.

Because I put mutual fund in between Fix Deposit and Stocks in my pyramid, I can compare mutual fund with either FD or Stocks.

Mutual Fund vs Fix Deposit

The way I understand bank is they promised me a FD return and then use my money to earn a bigger return.  But bank does not disclose how much their cost is.  So if mutual fund is doing the same as what bank does, and if they disclose 5% as their 'cost', its ok for them to charge me 5% as long as my final return is larger than FD.  

My FD return now is 3%.  So if they charge me 5%, then their fund return should be AT LEAST 8%.  So I browse each and every fund for their past 1 year return from this link.  

Unfortunately a lot of fund shows a huge drop in late May and I don't really know why.  Before I find out why, I also decided I should look for one fund that is as steady as FD and should have a Always Up trend.  ( a new requirment I add after I browse these graphs )

Finally I found one, like below.

So this seems like one mutual fund that I can use to replace my Fix Deposit.  From the chart itself, it seems like despite the current market down turn, its producing 50% return for the past 1 year.  So I would consider this to replace my FD.  

Mutual Fund vs Stocks

My stock invesment is charging me 0.7% each time I have a transaction.  Meaning each time I buy and sell a stock, I am charged 1.4% of its average price.  Mutual fund charges me at 5% which is quite high.  However, if I buy sell 4 stocks, then the total charges I have paid is 5.6%; which is quite equivalent to the charges I paid to mutual fund.  So if I can find one mutual fund that already invest into 4 or more stocks that I am interested in, then its worth while for me to buy that mutual fund, else I will pass.

Like wise, the factor is 4x.  Says if my normal stock investment practice is buy and sell within one year, then the only time I would buy that mutual fund is if I plan to keep that mutual fund more than 4 years.  On the other hand, if I buy sell a stock more than 4 times a year, then it may be worth while to buy the mutual fund and keep for one year instead.

So finally I come up with a formula for myself about mutual fund investment as an alternative to stocks, for my own portfolio :

Basically the formula says, instead of me buying and selling many stocks many times, I may as well leave it for the fund manager to do it.  The 5.5% charges is relatively low IF compare to my large number of transactions.

Like wise, if I am interested in one particular company and plan to buy its stock to keep for life, then I should NOT consider mutual fund at all.

I have 2 sets of stock invesment account, (1) one is long term where I plan to keep them forever, (2) the other is where I 'play' with the speculation using all kind of methods.  Account (1) has nothing to do with mutual fund.  But I use a lot of mutual fund as the 'base' for my Account (2).

In Account (2), one month alone may already have more than 20 stocks transations.  So the 5% charges in mutual fund does not really bother me that much relatively.

I also have many mutual funds before I learn to buy stocks and started my own businesses.  Most of my mutual funds are more than 15 years old.  So 5.5% / 15 years = 0.367% per year.  Agains, doesn't bother me that much, especially when I don't need to do anything about them - a passive generator.

When I was shopping for what mutual funds to buy, I also learn that buying mutual fund means buying an industry.  For example, I know that    - h a l a l -   business in zzzz is a good business in the sense that they will produce good income regardless, due to varies specific reasons including the unique economy policy.  I personally pursue for absolute freedom in open market so I do not really support those policies.  Hence I really have no interest to learn nor understand those businesses.  As a result I will not be able to buy those stocks with informative decision.  But I do have the 'general' idea that they will earn money despite the market fluctuation.  So Ittikal fund is one of the biggest portion in my portfolio for the past few years.

When I have some GENERAL ideas 

about an industry or a trend 

but I do not have interest

to learn the details

I choose a mutual fund

that matches my GENERAL idea.

And personally I do not mind paying someone 5% to help me check if my general idea is correct or not, for the next 5-10-20 years.

Note :  Not all mutual funds are charging 5.5%.  Some are lower than the others.  You may shop of cheaper fee mutual fund but I don't really recommend that.  Because when a fund manager is using 'lower fee' to attract investors, that also implies that fund manager has 'no confidence' that his portfolio can do better than the other fund managers.  If he is 'not sure' about his return, then most probably he is more speculating than performing fundamental invetments.

Lastly, do remember that Fund Manager is more important than the fund itself.

Bond

Bank lends your money to others to earn an income and in return promise you a lower fix interest rate.  This promise is usually govern by authority to make sure bank fullfills that promise.  Else someone else may take over to continue pay you the promised return.

When a company does the same, its call bond.  When a company needs to raise some money, they issue bonds to you.  You buy their bond and they promise you a fix return.  Bond is also govern by similar authority as the Fix Deposit in banks.  However, if a company fails to fullfill their promised return to you, there may or may not be anyone step in to continue paying you the promised return.  Sometimes glitch may happens in bond too.  ie. a global event like huge disaster affected the whole finance world and globally the bond pay out rate is revised downward.  For that short few months, those bond funds due in maturity may be affected - paid out in lower rate than promised and there is nothing much you can do to pursue your right.

Bond Fund to Bond is just like Mutual Fund to Stocks.  So a Fund Manager helps you to select all the Good bonds so that your bond return is almost as good as Fix Deposit, but with higher return.

A large sum of Fix Deposit is actually correlated to bonds, that's why in stable market, bond fund return is usually a little bit higher than Fix Deposit interest rate.

Mutual Fund ...

Some observes that I put Mutual Fund in between FD and Stocks in my Pyramid.  So they ask why I jumped from Bankings Fix Deposit to Stock Market without talking about Mutual Fund first. 

No particular strong reason really, but my final proposal to Personal Finance is a bit related to Mutual Fund, so perhaps that's why I want to end the pyramid with Mutual Fund !?

Anyway, remember that bank has one special investment division just to buy shares to earn money.  Well, there are also company out there doing the same but not for the bank but for general public like us. Instead of receiving incoming money from Saving Accounts, mutual fund company receives investment money directly from us.  Then the money is used to buy the share of BEST companies in stock market.  Then the profit is share with all the investors.

So theoritically if Bank earns 12% and give you back only 3% in FD, 

then Mutual Fund company should be able to give you a return of 12% !!

People who work in Mutual Fund company need salary too.  So they get paid from the total pool of investment money too.  So you should get 12% return minus the cost of running such a mutual fund company.

There is only one minor correction.  Mutual Fund company does NOT receive money directly from you.  Because if they do, they may run away with your money without actually investing in stock market.  So to protect our rights, our money is actually given to a 3rd party called Trustee.  This Trustee is like a saving account in our names.  So it can only be paid out to us.  However, we also tell this Trustee that the Mutual Fund company we appointed can 'redirect' our money to stock market.  Therefore, Mutual Fund company invest our money without actually owning our money.

Remember I said all our money goes to bank ?  Well normally this Trustee is closely related to banks, if not already a part of them.

The brain of a mutual fund is the Fund Manager.  It could be one person or a team.  How good the performance of a mutual fund depends on how good the Fund Manager is.  Normally a mutual fund will buy 10-20 stocks.  So in a way, when you buy One mutual fund, your money is spread out to the 10-20 stocks that mutual fund buys.

So you may say, "so I diversify my investment even with only little money !!"

Sorry, Wrong again !!  That is still a convinient Myth about diversification.  One may argue its way to make above statement true but definitely not the Right way to perceive it in Personal Finance point of view.

When you buy a mutual fund, you buy the trust of the Fund Manager.  Basically you think that this particular Fund Manager can do as well as the bank and give you good return.  Once you trust him, that is counted as one !  No matter how much or how little money you put in, you trusted only One Fund Manager.  The Fund Manager may use your money to buy only one stock, it may buy 10-20 stocks.  Remember how the stocks are being purchased ?  They will always buy the BEST stock first, then followed by 2nd best etc.  So if you start with a very new Fund Manager, most probably he also start with only one stock.

So why bother mutual fund ?  Because buying mutual fund is easier and usually start with smaller amount of money.

1.  There are less than a hundred mutual funds to choose from while there are thousands of stocks.

2.  There are already many benchmark helping you to decide which mutual fund has done well in the past

3.  Mutual fund survives by having your business so they will proactively tell you what they do and why you should use their services.  Comparing to stock investment, the business owner doesn't really want to tell you their businesses strategy and master plan before it happen.  Mutual fund tells you up front what they plan to do with your fund.

Last tip is ... if you find a good Fund Manager, stick with Him, NOT the FUND !