Simple Fund Performance Analysis

As a Malaysian investor, we cannot avoid the big juggernaut that is Public Mutual. It has possibly the strongest marketing agency and it does deliver certain results, which is why it is the top Mutual Fund company in Malaysia in terms of Asset Under Management.

But it also has one of the highest sales charges among mutual funds, so let’s try and analyze if it is worth it. Listed below are all Public Mutual funds as of 6th July 2016:

public 1public 2public 3public 5public 6public 7public 8

public 9

In interest of time and simplicity, we will look at the best 10 & 5 year performance to see which fund is best. (feel free to self-analyse other factors yourself)

Unsurprisingly, the two funds that performed the best are Public Small Cap and Public Islamic Opportunities. (Funds mentioned hereon are not a recommendation to buy them.) It is not surprising that small cap funds did the best over the long term as they have more risk/volatility in them. For those who didn’t understand what I just said, please take the time to find out what is Small Cap and what is their strengths and their limitations.

So how would this two funds from the same fund house stack against other fund houses?

performance 1performance 2

Disappointingly, not the best. Which means the extra sales charge was not rewarded in extra performance. In fact the alternatives did better with lower sales charge. Double whammy. In table form:

table

So an average 1.5%~2% difference annually between the best funds over 10 years (without factoring sales charges). With the power of compounding interest and time-value of money, the difference then widens to:

compounding

An extra RM700,000 over 20 years. How nice it would be for us to have an extra 700k in retirement. But imagine if you are owning some other funds unlisted here, which most likely has a lower performance… the difference will be even… BIGGER. (Imagine if you put your money in FD…)

The wrong choice made now will haunt us 20 years down the road. The wrong choice would have wasted our biggest ammo, which is our time, and in that context, there will be no do overs.

Of course I’m not advocating that we take all the risk even with all this data backing us. The point is, if we take the same equivalent risk, wouldn’t we want to have the superior result?

Of course, the question is rhetorical. Like Brexit, we have a choice in the matter and the more we understand about the consequences, the better we can make our choice. Fortunately or unfortunately, every time we procrastinate, is also a choice already made that ensures the consequences we may or may not see.

……………..

For advance practitioners, here’s a graph on the volatility:

volatility

Obviously I picked this graph to show RHB Smart Treasure has high volatility compared to its performance. Imagine a line lining the dots and RHB Smart Treasure sits outside the line. (Again I’m not recommending this fund, please do your own due diligence). So even when picking funds with better performance, there is still the skill of picking the fund with the better performance WITH the lower volatility.

 

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s