Info&Tips || Ringgit Cost Average

Lama dah saya bercadang nak cerita pasa Ringgit-Cost-Average (RCA) ni;
baru kini berkesempatan.. kita mulakan dengan tunjukkan graph-turun-naik-turun seperti dibawah ni.

Source: UTC-Connect
#1 Building wealth by investing in unit trusts is more a matter of patience and persistence than of investment skill and luck.

“If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting what’s going to happen in the stock market.”
– Benjamin Graham, author of “The Intelligent Investor”

#2 Investing would be so simple if only one could predict when is the best time to buy or sell.
However, timing the market is impossible and many have made huge losses due to trying and consequently failing.

So?
One of the ways to ride out the ups and downs of the constant volatility of the stock market is to use ringgit cost averaging RCA method.
This method ensures we benefit from the historical strong returns shown in the long run and hedges the effects of retracement and slight downtrend in the short term.

What is RCA?

#3 Ringgit cost averaging is an investment technique intended to reduce exposure to risk associated with making a single large purchase by investing a fixed amount on a particular investment (such as unit trusts) at regular intervals (either monthly or quarterly), regardless of the unit price. 

The amount and frequency of your investments depend on your financial means and future goals.

How Dollar Cost Averaging Works?

“Save little save often – dollar (ringgit) cost averaging works, if you stick to it.”
– Paul Clitheroe, “Ten Key Steps to Wealth”, 2002.

Investing Lump sum or Monthly?
Situation: let’s say we want to save RM12,000 each year for our child’s education fund.
Instead of investing it in a lump sum and bear the risk of entering when the market is high,
we decided to invest RM1,000 into a unit trust fund each month as shown in the chart:

Results:
Average Cost Per Unit: RM0.1909
Unit Price as at December: RM0.2301
Value of Investment as at December: RM14,461.33

In this example, by using the method of ringgit cost averaging, the average cost per unit invested was only RM0.1909, instead of RM0.2500 if the investor has invested a lump sum in January.

Nota kaki~in this situation, investor tak perlu tunggu market beat the initial investment; the result already shown, those who stick with RCA, can gain the profits earlier! Jadi teruskan kaedah RCA.. tak kira ape jadi pada turun naik pasaran saham.. jika maintain invest/simpanan bulanan anda.. we totally can make profits!

Tips to Get you Started

“Those who put an investment programme in place will have a lot more money when they come to retire than those who never get around to it.”
- Australian financial author Noel Whittaker.

Many unit trust funds allow you to begin investing with a minimal amount with the option to make further contributions through regular deductions from your paycheck or bank account.

Already interested in RCA?

A few tips to help us put this RCA strategy to work for us:

• Get started as soon as possible. The longer you have to ride the ups and downs of the market, the more opportunity you have to build a sizable account over time.
• Stick with it. RCA is a long-term strategy. Make sure that you have the financial resources and discipline to invest continuously through all types of markets, regardless of price fluctuations.
• Take advantage of automatic deductions. Having your investment contributions deducted from your paycheck or bank account is an easy and convenient method to invest, and can help you get into the habit of investing regularly.
• Be prepared for losses!!! Dollar cost averaging does not guarantee that there will always be profits and no losses in your portfolio. Even though you paid a lower average cost than the average price of the units, you could still lose money if you choose the wrong time to exit the market, particularly when prices are low.

Building wealth by investing in unit trusts is more a matter of patience and persistence than of investment skill and luck.

#4The major decision that must be made is whether or not you are willing to forego immediate gratification to achieve your long-term financial goals. If you are, then dollar cost averaging can be a very effective way to help you get there.

Shariah Compliance in Islamic UT

Read here: List of Islamic Fund from PM

"The outlook for Islamic UT industry in Malaysia remains positive" 

Dr-Aida-Othman(ZI Shariah Director)

What does Shariah compliance refer to in Islamic unit trusts?

Shariah compliance in a UT fund means that a great deal of focus is placed on eac of the company securities which the fund invests into. The emphasis is on the primary activities of a company with regard to the goods and services offered. These activities need to be identified to ascertain whether they are against Shariah principles. IF they are found to be contrary to Shariah principles, the particular company's securities are then excluded from the list of Shariah-compliant securities.

The companies will be classified as Shariah non-compliant securities if they are involved in one of the following core activities:

• Financial services based on riba (interest)
• Gambling and gaming
• Manufacture or sale of non-halal products or related products
• Conventional insurance
• Entertainment activities that are non-permissible according to Shariah
• Manufacture or sale of tobacco-based products or related products
• Stockbroking or share trading in Shariah non-compliant securities 
• Or Other activities deemed non-permissible according to Shariah

How often will each fund be reviewed to ensure it remains Shariah compliant?

Each fund is reviewed and monitored by the Shariah adviser technically on a constant basic. (monthly-to determine whether the securities they invest into still remain as Shariah compliant)

source: 'Feature' column taken from The Bulletin  July 2010

Diversified Porfolio of Asset Classes

OK-ok. saya dah hutang sangat lama entry untuk topic 'Asset Allocation' ni.

intro: For more than 2 decades, PM has been Malaysia's largest private UT company with long standing experience in fund management. The company currently offers various types of funds to cater for the asset allocation needs of their unit holders.

the Basic Facts of Asset Allocation:

• the asset allocation refers to the allocation of investments among different asset classes in the portfolio to meet specific objectives.
• there are different types of funds such as equity, fixed income and money market funds provide investors with exposures of different asset classes.
• the weight of each asset class in an investor's portfolio will depend on the investor's risk tolerance and investment time horizon
• other factors investors should take into consideration include investment objectives, age profile, financial needs and changes in personal circumstance.
• to begin, investor should determine their personal assets allocation and seek advice from financial professionals on which funds are suitable for them based on their risk reward profile.

Source: 'Point of view' column  taken from The Bulletin January Issue.

The DO's and DONT's of Asset Allocation:

• DO tune asset allocation to long-term goals and objective
• DO review and comapre past performance of different asset classes
• DO review your portfolio's performance periodically (advisable every 6months-1year) to ensure it is in tandem with your long-term investment objective
• DON'T buy and sell assets rashly (investing should be done in a peace of mind)
• DON'T panic when there is a sharp move in markets
• DON'T time the market as it is impossible to do so