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Thursday, December 21, 2006

Why Unit Trust Dividend So Low? ASB Give More!

This is one the objection that most unit trust consultant will face while promoting their funds in Malaysia. What the prospects don't realize is that private unit trust funds gave two kinds of returns. The returns are given through distribution and capital gain. So when we are calculating a return of a private unit trust, we should add the dividend with the difference of price bought and price sold.

Example how to calculate is shown below:

Year 0 1 2 3
Price bought (P0)/ Since inception RM 1.00
Dividend RM.0.10 RM0.10 RM0.10
Price Sold (P1)/Point of Valuation RM 1.20

Total Return =

S Dividend + (P1 - P0)

P0

=

(RM0.10+RM0.10+RM0.10) + (RM1.20-RM1.00)

RM1.00

=

RM0.50
RM1.00

=

0.5

=

50% over three years

ASB is a fixed price unit trust that only gives return through dividend once a year. That is why ASB dividend declaration seems much bigger than other private unit trust funds. All the gains are put in the dividend declared. If you save RM10,000 in ASB in March, your money will still be RM10,000 in September. But investing in private unit trust, when the market is rising you will be able to gain a return, even though investment period is not one year yet. One of my customer who invest through his EPF since March 2006 has gain a return of 13.15%. He can sold part of his unit right now and still have his initial investment value of RM35,000. So, investors out there, use the formula above to calculate your return on a lump sump investment.

2 comments:

Fashionasia said...

great blog kakTi.
Always wanted to know more about funds... So are u based in KB or KL?

KakTi said...

Thank you fashionasia. I'm based in KB.

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