Division of Income.

How do we look at the money in hand?

We receive our paycheck monthly and immediately allocate several parts of it to pay our personal and household debts, our children's education and living expenses, our very own living expenses, et cetra et cetra!

To be able to become a responsible person, a good money management skill is required so that the future will not be bumpy, hazy or a liability. A general misconception among Malaysians all and sundry is that practicing good money management will lead us to become a rich and wealthy person with high purchasing power. This is utterly untrue!!

Practicing and cultivation sound knowledge in personal money management will surely avoid yourself from being in a financially constrained life and this will undoubtedly would invite an adverse and strained life not only to us but also to those who are on our dependent list. 

In a newspaper article dated February 27, 2016 (THE STAR), it was reported that individual bankruptcy cases are down by 18%. This should be seen as a good progress in arresting the high rising number of people who are declared bankrupt annually. Malaysians in general are being more aware in managing their own personal finances. Keep it Malaysians!

Managing personal finances in Malaysia would be a daunting task going into the future at the back of rising cost of living and escalation of demand in obtaining quality life. Malaysians should abstain themselves from committing to financial liabilities beyond their monetary capacity to finance their debt.

A quick awareness on managing money will normally begin from understanding the role of money in our everyday life's activity. The Equation below explains it.

You might already know the functionality of that equation on the left but ask yourself just how much depth are you allocating in to practice managing expenses and allocating savings within the parameter of your income? 

Just how many of us actually due to greediness and distortion in understanding, are managing their finances beyond the boundary of the income circle? I believe many, though i wish i am wrong!

The box on the right illustrates a simple yet profound insight into acquiring a sound and good management of personal finance to begin with. Embrace the concept and work your way through achieving the financial freedom that you aspire for.

Amanah Saham Malaysia (ASM)

The unit trust funds that Permodalan Nasional Berhad (PNB) distributes had vastly attracts many malaysians into owning a certain portions of units. To some, Amanah Saham Malaysia (ASM) funds is the golden opportunity they could not resist purchasing, as it generates a promissable stable and high return with contrast to other unit trust funds distributed by Unit Trust Management Company (UTMC). In fact, the returns outpaced the one year tenure of any prevailing Fixed Deposit schemes offered by local financial and banking institutions. Therefore, seeing a sight of long curving queue of people waiting infront of selected distribution agents of PNB ready to purchase the 'Dana' ASM is not a surprise to many.

But wait!! Think first before you decide. Is ASM the right fund to buy?

Below, i have pen down some salient points that you might not have known or told of about the characteristic of this ASM, in contrast to the other funds of UTMC's.

There are 2 major points which an investor should weigh prior to decision-making, and they are the fund's published selling unit price and secondly the fund's ability to declare distribution. Investors make a placement judging on this two sources of income.

1. UNIT PRICE

Amanah Saham Malaysia(ASM)

It is high and it is fixed!! The unit price stays throughout the life of the fund. And because of the price is high, the number of units purchased are always low.

With an initial capital of Rm1000, and if the selling price is Rm1.00, you will be given only 1000 units.

If you purchase a unit of ASM that cost Rm1.00, that fund will remain valued at Rm 1.00 at anytime in future.

We refer this as NO CAPITAL GAIN.

Other Unit Trust Management Company (UTMC) funds.

In contrast to ASM, other UTMC's funds carry a much lower selling price and the price does not remain stagnant indefinitely. The unit trust prices are quite volatile and it fluctuate based on the principle of demand and supply factor. As a result of this changes in price, the feature provides an investor the possibility of reaping capital gain, i.e. the growth of unit prices. In the same token, an investor may also face depleting unit prices, i.e. the fall in unit prices.

Suppose you buy an unit for Rm 0.2500 now, and the fund's price has the potential to move upwards. Lets say if it moves to Rm 0.3000 a unit, the difference of Rm 0.0500 a unit will be the gain for you! We refer this as CAPITAL GAIN!

If an investor with a capital of Rm1000 purchases a unit trust fund that sells at Rm 0.2500 (ignoring the sales charges), he/she will be earn 4000 units, which is 4 times more than ASM units of the same initial investment. Is not this great?

So, with regards to unit price, ASM scheme does not stand out to funds of other UTMC.

I will write about the other source of income, i.e. Distribution, in the next web blog soon.

Regards,
Dave

Between ASN funds and other UTC's funds - Which is better? RE-PUBLISHED

1. PRICE PER UNIT (also known as NAV) AND NUMBER OF UNITS.

          When a comparison is made, generally the Net Asset Value (NAV) of Amanah Saham Nasional
          (ASN) will always be greater than any other NAV of (Equity type) funds that belongs to other Unit  
          Trust Company (UTC)
          This in return will leave the account holder with lesser units than those who purchase (Equity type)
          funds from other UTC.
          Example: In reality the NAV of ASN is always RM1.00 per unit and the NAV of funds (Equity
          type)  of UTC will
          generally starts at RM0.25 a unit (new fund launch price). So if you invest RM 10000, your units if
          you purchase ASN, assuming sales charge is 5.50%, will be (RM 9478.67/1.00) = 9478.67 units.
          Alternatively, if you purchase a new fund from other UTC, and assuming the sales charge is 5.50%,
          your units now will be (RM 9478.67 / 0.25) = 37914.68 units.
          What it means?? It means, given a same invested amount, ASN gives lesser units
          than of other Equity type funds from any UTC.

          In Unit Trust Scheme, your return is directly related to the number of units you purchased.

•           More units = Higher return.
•           Less units = Lower return.

         Price per unit between this two types of fund also varies tremendously. ASN's price a unit (which is  
         normally RM1.00 a unit) is way too high when compared to RM 0.2500 a unit of equity funds from
         other UTC. So, if next time if you want to decide to buy unit trust funds, please observe the price per
         unit and with that price do check how many units you would be given!!