SMART GUIDE TO FUND
RULE # 1 Choose low cost funds
In certain instance, the sale charge could mean the difference
between good returns and poor return. Always go for low cost funds
wherever possible. In fact there are a few no load funds available
that you can choose. The general rule is the lower the cost, the
better the performance returns.
RULE # 2 Consider the cost of advice
Unit trust agents, life insurance agents as well as financial
planners can provide good advice on your investments. However do
consider the cost of advice. Check out the qualifications and
experiences of the financial advisor before you make a decision. If
you are new to fund selection, it is better to go through a
RULE #3 Do not over depend on past fund performance
Selection of a particular fund should be an interaction between your
risk profile and investment objectives. Do not just depend on past
fund performance as your sole criteria in fund selection.
RULE # 4 Donít own too many funds
Owning too many funds would inevitably lead to over diversification
and thus may lead to under performance. Anything more than four
types of funds is definitely too many.
RULE # 5 Awareness of asset size
Usually when a fund asset size gets too big, it may be difficult to
achieve an optimum return to the investors. However, be careful with
a fund asset size that is too small. In Malaysia, our fund asset
size can be quite small and thus the costs can be quite high.
RULE # 6 Use past performance to determine consistency
Past performance can be a good guide to determine the consistency of
a fund. Go for those funds that has at least six years in the top
two quartile and a maximum of only one-year in the bottom two
RULE # 7 Buy your fund and hold it
Fund investment is meant for the medium to long term time horizon.
Regularly trading can result in losses because of the costs
involved. Buy your fund and hold it for a reasonable time frame.
Jeffrey Chiew Kim Chwee
ChFC, RFC(USA), CLU, LUTCF