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Thursday, August 16, 2007

Single pricing... How many units will I get and how much shall I pay for my investment?

On 9 October 2006 Securities Commission announce the initiatives to accelerate growth and enhance investor protection in the unit trust industry. One of the initiatives are single pricing. below is an excerpt from the newspaper announcement:

A single pricing regime will be introduced at the beginning of the second quarter 2007 to ensure there is full transparency and disclosure of up-front costs. Unlike the current dual pricing regime where prices are quoted inclusive of charges, under the single pricing arrangements, prices will reflect the net asset value of a unit and all charges will be separately disclosed. The enhanced transparency of prices and charges will allow investors to compare the costs of investing in unit trusts associated with different channels of distribution and should lead to a more competitive cost environment.

So with this new ruling how many units will you get and how much shall you pay for your investment?

Below is an example of how the calculation is done when the fund NAV per unit is RM0.2500.

Units credited to your account:
= Amount invested /NAV per unit
= RM10,000/RM0.2500
= 40,000 units

Service charge per unit :
= NAV per unit x Service Charge (%)
= RM0.2500 x 5.45%
= RM0.013625

Total service charge incurred:
= Service Charge per unit x Units credited to investor
= RM0.013625 x 40,000 units
= RM545

Following the above, the total amount you should pay will be:
= Amount invested in PIABF + Service charge incurred
= RM10,000 + RM545
= RM10,545


fhm said...

PIABF looks like conservative profile. Is it true conservative profile is not much different with fixed income?

KakTi said...

Yes it is a conservative to moderate fund, but the return is not the same as the fix deposit. Another fund that have the same risk profile is Public Islamic Balanced Fund with a current return of 14.88% per year. No fixed deposit are giving that kind of return.

fhm said...

Dear Kakti

What's ur comment about current market situation, which all funds were down due to US crisis?
Is it a good time to buy more? Or wait till the end of Aug?

KakTi said...

I'm not an expert on the market. But from the comment by expert and bank negara officials.. our current situation is temporary. Our economy have strong fundamental and will survive. If you want to buy shares direct from the BSKL, then you are advised to wait as the panic selling is not done yet.

However for unit trust fund will depend on what fund you want to invest.

If you want to invest in the new fund launched you should just invest when the fund is launched on 21st August 2007. The fund will be sold at 25cent per unit and also is offering a low service charge of 5.45%. And investor who do submit a direct debit form so that every month a min amount of RM100 (may be higher)is invested in the fund will also enjoy the 5.45% lowered service charged.

For all other funds I advised you to adopt dollar cost averaging priciple investing a small amount onced a month because we don't know when is the lowest point. This way you will get a lot of unit when the price is low and at the same time averaging the cost of the fund when you bought it at a high price.

Ok that's all for now... I have to go ..:)

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