DDI through PMO

*Direct Debit Instruction (DDI) through PMO (Public Mutual Online via Public Bank) 

is tentative will be available end of Aug 2010 (please wait for official memo soon) .

Please take note that the user has to be PBeBank.com subscriber in order to register PBB DDI through PMO.

Ini yang saya suka PMO ni, sungguh menyenangkan me life as kurang rajin investor. Terbaru, we can set up DDI tru PMO jer.. tak perlu melalui UTC or ke branch. sangat mudah untuk sesiapa yang belum membuat DDI untuk investment mereka! 

In the meantime, we(Source: mlkbranchbulkmail) are pleased to enclose herewith the sequence of screen shots for registration of DDI through PMO for your information:
1) Click Transaction Requests, then PBB Direct Debit Instruction (on left panel) and List of DDI/SI will be reflected for unitholder information;
2) Click Enrol new PBB DDI and all accounts by First Holder will be reflected for UH selection; select account number for DDI;
3) Enter DDI details, ie. amount and deduction date, click next to proceed to PBeBank.com;
4) Sign in to PBeBank.com;
5) In PBeBank.com, select bank account no. for DDI (pac must be entered);
6) Confirm DDI details including bank account;
7) Complete and back to PMO;
8) print digital proof.

Investment Strategy || Part II

Dah baca investment strategy part 1 belum?
not yet? 
sila lah singgah entry strategy investing in UT ni dulu k?
kalau rase malas nk bace, just glance tru the bold sentences k?

Protection vs Diversification

The Q is: Do portfolio protection or structured funds make good investment sense to the long-term retail investors?
Fifty-seven capital protected structured funds have been launched in the Malaysia by unit trust companies over a period of five years and ten months to May 31, 2010. They attracted total investments of RM8.5 billion from largely long term retail investors.
The key attraction of this product is that capital losses to the investor’s principal or capital arising from market volatilities can seemingly be reduced or even removed by the product’s defensive investment portfolio structure whereby a significant proportion of its investment portfolio (up to 95%) is invested in fixed income securities or bonds for capital protection. Capital gains for the product would then be secured through investing the balance of the fund’s portfolio in call options on selected market indexes that enables the product to participate up to a limited extent (called the participation rate), in gains made by the index over a specific time period.
By virtue of this conservative investment structure or strategy, it is obvious that capital gains receivable from such products would be limited or capped by the portion of the fund’s investment portfolio being invested in call options. One then begs the question, having examined the above product structure and its rationale, as to whether structured products are an alternative at all to a simple good old fashioned buy-and-hold investment strategy when investing in share markets.

Findings of a research study conducted on the performances of structured capital protected funds by academics from the prestigious London Business School, may now help to shed light on the “attractiveness” of these structured investment products.
This study, presented under Chapter 3 of the Global Investment Returns Yearbook 2007 produced for ABN AMRO by three London Business School experts – Elroy Dimson, Paul Marsh and Mike Staunton – showed that investing in risk-protected investment was, by far, inferior when compared to a simple buy-and-hold strategy of a well-diversified portfolio of assets.

Dimson, Marsh and Staunton time-tested the performances of various popular risk protection/structured strategies against the long-term historical returns (performances) of the U.S. and British stock markets spanning over a century, from 1900 to 2006.
They found strategies seeking to control risk or protect the downside risks to an investment portfolio (as is the case with structured capital protected funds) would, by the same stroke, curb the potential upside returns of the investment.

Worse, the upside potential is more likely to be eroded by more than the quantum of risk reduced. Hence, it would seem investors of structured products are far better served by adopting a more balanced portfolio strategy to protect against equity market risk.
**For a one-year investment period, diversified portfolios of equities and bonds offer far more superior long-term risk-to-reward ratios than structured/protected portfolios.

To further stress their point, Dimson, Marsh and Staunton engaged three popular portfolio protected strategies outlined below in their research to elaborate on their findings:

(i) the annual stop-loss strategy

Under the annual stop-loss strategy, the investor selects a particular stop-loss floor for his investments. Once this floor price is breached, the protection strategy immediately kicks in to convert risky assets into cash to protect its downside from further decline for the rest of the investment period. The portfolio thus exits completely from equities after a market drop had breached the stated floor, and it misses out completely on subsequent market rebounds/upsides or recoveries for the rest of the investment period. As a result, its returns would naturally be lower than that of a conventional buy-and-hold approach which stays fully invested in the broad market, and participates in future market rebounds.

(ii) the profit lock-in strategy

As its name suggests, the second strategy, known as the profit lock-in strategy, seeks to lock in profits and assure the investment of its capital gains once it reaches a certain target return by moving swiftly out of riskier assets into cash for the remainder of the investment period. This ensures that the gains made will not be lost again in case the markets subsequently weaken. Research findings by Dimson, Marsh and Staunton highlighted that over the long-term, lock-in portfolio investment strategies lowered the funds’ annualised equity returns to a level that was only slightly above that for U.S. bonds and Treasuries. These returns were, of course, significantly lower than that of annualised U.S. equity returns which investors of a diversified portfolio would receive in the long-term.

(iii) the “costless” collar strategy

In the third strategy, Dimson, Marsh and Staunton attempted to hedge against market declines through a costless collar that revolves around the fund selling a call option to generate some income, and using part of this income to buy a put option to protect the portfolio on the downside (hence the term “costless” protection).

However, this would result in a tight collar band between portfolio protection and returns –
the higher the level of protection required, the lower would be the expected investment returns and vice versa – since the investor/fund can only participate in a market run-up to a maximum of the call strike price.
U.S. research findings showed that a portfolio based on this strategy which is rebalanced monthly to limit its downside loss to 1 percent a month, resulted in a long-term annualised return of only 1.12 percent when compared to 9.77 percent from a simple buy-and-hold strategy. Once this protection floor is lowered to -10 percent (marking a huge, significant increase in portfolio risk), the returns to the portfolio improved to 9.3 percent.
Dimson, Marsh and Staunton hence concluded thus that structured/protected strategies are sub-optimal since one would be able to achieve the same given return or better, by simply allocating his assets between equities and cash. In a similar vein, one would also be able to reap higher returns using the same approach for a given level of risk. Over the period 1900 – 2006, U.S. equities were able to achieve an annualised return of 9.8 percent (at volatility of 19.8 percent) versus protected portfolios’ annualised return of 6.9 percent (at volatility of 18.6 percent).

It can, thus, be concluded that while protected strategies may reduce risk, they are done so only at a “relatively high” price to returns. The long-term investor would truly be much better-off in terms of both risk and return had he just stayed with portfolio diversification of his assets, rebalancing it whenever necessary. In truth, structured products are hardly considered an efficient method to control portfolio risk. Research has again proven that in the case of long-term investors, portfolio diversification and not portfolio protection paves the way to higher returns at minimal risk.

And unlike short-term investors, long-term investors are not penalised by short-term market downturns because of their long-term investment horizon. For them, portfolio diversification represents a far better and less costly option than seeking portfolio insurance through investing in a structured product or fund. This is more so in light of the experts’ key findings confirming the under-performance of protected portfolio strategies against the conventional buy-and-hold investment approach.

Source: UTC Connect.

So?
As conclusion?
it is less hassle if you make your investment for a long term ;)

Market Volatility

FAQ: What is current market situation? 
Macam mana nak handle market volatile?? 
Boleh untung ke beli UT dalam situasi sekarang ni?

Spend time to read this article.

Source: Article from UTC Connect.

Market Volatility: Friend or Foe?

Pop Quiz: Are you the type of investor who gets worried or panics whenever the stock market drops by three percent a day? If you are, it is time you stop looking at your investment portfolio on a daily basis. After all, investment fortunes are made over the long run and not overnight.

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Wouldn’t investing be so much easier if the stock market moved according to a strict set of agreed rules or guidelines over time? For example, imagine if prices rose in the first week of every month, remained steady for another week, before gradually falling back to the previous levels. (imagine: repeating pattern up and down up and down consistently)

With this knowledge in mind, you can probably buy during the period of low prices and sell at higher levels. Repeating this process every month should provide you with ever-increasing wealth as long as your buying and selling does not affect the hypothetical market gyrations.

Unfortunately, markets do not follow these patterns in reality.
Attempting to ‘time’ buying and selling decisions in the short-term is risky, and something that very few professional investors manage to do successfully on a regular basis. This is because markets are unpredictable – they can rise gradually over a number of days before suddenly falling and losing the previous gains. Unexpected news, either specific to one company or the economy as a whole, can significantly influence stock prices in the short-term. Psychological factors such as changes in risk appetite due to fear or greed can also affect markets over the short-term. In the chart below, you can see the volatility of the FBM KLCI Index over the past 5 years.

Source: Bloomberg KLCI, July 2010.

Looking Past Short-Term Volatility for Long-Term Gains

Over the long-term, equities and real estate have generally outperformed both bonds and money markets. However, unlike real estate, equity prices may experience extreme volatility over the short-term. During these uncertain periods, it is normal for most investors to be anxious and worried about the value of their investments.

Due to the volatility in the markets, many experts advise investors to take a long-term view for their investments. This is because a longer time frame is needed for companies to grow their businesses. In addition, research shows that, historically, the longer you stay invested, the less likely you will lose money and the higher the possibility of making a profit. Profits of well-managed companies will continue to grow with time and be able to withstand short-term periods of cyclical weaknesses.

Market Volatility Presents Investment Opportunities

American billionaire Warren Buffett is commonly referred to as the world’s most successful investor. For over 50 years, Buffett has continued to grow his fortune – not through complex strategies or a magic formula, but by adhering to basic investment principles in a disciplined manner.
When the U.S. stock market fell following the ill-fated technology boom of the 1990s, many investors were selling their holdings in fear or watching nervously from the sidelines. On the other hand, Buffett applied the golden rule of investing – buy when prices are low – and quietly went about accumulating over-sold ‘cheap’ stocks in a number of stable, quality companies such as Gillette and Coca-Cola.
The market soon realised that quality blue-chip firms in bricks-and-mortars businesses were unaffected by the technology crash and were still making sustainable profits. As such, they quickly returned to their previous valuations. After hitting a 5-year low of 7,286 points in October 2002, the U.S. Dow Jones Industrial Average Index rebounded by more than 40 percent by the end of 2003. Buffett, having selected better stocks than the market average, performed even better.

Therefore, in the current market volatility, think rationally and keep your emotions in check. As long as you have a long-term horizon, view the short-term weakness as a potential opportunity for investing at attractive prices.

Adopting Ringgit-Cost Averaging 

Must Read this entry
In volatile market conditions, investors should consider Ringgit-cost averaging (RCA) for their investments. This technique works by investing a fixed amount of money in regular intervals, regardless of how the market is performing. It is a disciplined approach whereby investors invest no matter how the market is doing, thus helping to avoid the poor decisions most people make when trying to time the market. (warning!!! NEVER time the market!!)

When the markets are down, many people become fearful and reluctant to invest (somehow this is quite true huh?). That may help avoid some losses in the short-term. However, when markets eventually rebound, individuals who have avoided investing because of the earlier volatility will miss out on the gains.

Those who invest a fixed amount every month, on the other hand, will be positioned to benefit when the market bounces back as they would have invested at bargain prices.

The Folly of Market Timing

During periods of market volatility, investors might be tempted to delay making investment decisions or sell existing holdings in the hope of buying back in when prices are lower. Ideally, market timing seems to be an attractive method of investing but it seldom works in practice.
Just as sharp falls in stock markets tend to occur over short periods of time, the best gains are similarly concentrated. Because these gains often occur just after a market decline, an investor who tries to avoid falls is likely to miss the best gains.