Friday, 2 February 2018

EPF Dividend Rate for 2017 - Our Prediction!

It is that time of the year again where EPF will be announcing the Dividend Rate for 2017. The question is whether the Dividend Rate for 2017 will be higher than 2016's rate of 5.7% or lower? Based on a survey I am currently running on IME's Facebook page, it looks like a large majority of us Malaysians are expecting a better dividend rate for 2017!
85% says that 2017's Dividend Rate will be higher than 5.7%!
With the majority generally in agreement that 2017 will have a higher dividend rate, let us further verify this by taking a quick glance at the performance of EPF for Q1, Q2 and Q3 of 2017 versus the historical performance of 2014, 2015 and 2016.

EPF Historical Performance 2014, 2015, 2016 and 2017
As you can see from the table above, EPF performed extremely well for Q1, Q2 and Q3 of 2017 with record breaking investment income in the double digits region. These figures from Q1 to Q3 2017 alone are indicating that the 2017's Dividend Rate would  most likely be on the very high side.

So how much would the dividend rate be then?

IME's PREDICTION
Before I start, let me declare upfront that the prediction is statistically driven and is done purely for fun. I begin by first by establishing a few key information first.

Step 1 : Predicted Gross Investment Income for 2017
First I would need to predict the total investment income for 2017. To do so, I will need to find the (%) growth of historical Gross Investment Income of EPF and obtain that average (%) growth value as shown in the table below:
Average % Growth of Gross Investment Income = 11.67%
The Average (%) Growth of the Gross Investment Income between period 2010 to 2016 is +11.67%. Using that basis I am estimating that the 2017's Gross Investment Income would grow by 11.67% on top of the RM46.56 billion achieved in 2016.


Predicted 2017 Gross Investment Income

= Gross Investment Income for 2016 X Average (%) Growth
= RM46.56 billion X 111.67%
= RM51.99 billion


Step 2 : Predicted Income Distribution for 2017

The next important prediction I need to make is the Predicted Income Distribution for 2017. In order to do so, I will need to first find the average ratio between Income Distributed versus Gross Investment Income as shown in the table below:
Ratio Income Distributed vs Gross Investment Income
Based on historical data between 2010 to 2016, the average ratio is 0.882. That means based on the RM51.99 billion Gross Investment Income predicted for 2017, I am able to determine the Predicted Income Distribution for 2017 as shown below:


Predicted Income Distribution for 2017

= Predicted 2017 Gross Investment Income X Average Ratio 
= RM 51.99 billion X 0.882
= RM 45.855 billion


Step 3 : Predicted Amount Needed to Pay Each 1% Dividend Rate 

This approach is similar to Step 1 whereby I would need to determine the Average (%) Growth of the Amount Needed to Pay Each 1% Dividend Rate. Using historical data, the Average (%) Growth is determined as shown in the table below:
Average (%) Growth of the Amount Needed to Pay Each 1% Dividend Rate
Based on the table above, the Average (%) Growth is determined to be +9.53%. That would mean the Predicted Amount Needed to Pay Each 1% Dividend Rate for 2017 would be RM 7.125 billion.

Predicted Amount Needed to Pay Each 1% Dividend Rate for 2017
= Amount Needed to Pay Each 1% Dividend Rate for 2016 X Average (%) Growth
= RM 6.905 billion X 109.53%
= RM 7.125 billion


Step 4 : Putting it all together

Now all I have to do is to use these two predicted values as listed below:

  • Predicted Income Distribution for 2017 = RM 45.855 billion
  • Predicted Amount Needed to Pay Each 1% Dividend Rate for 2017 = RM 7.125 billion
By knowing the Predicted Income Distribution for 2017 and the predicted amount needed to pay each 1% dividend for 2017, I am now able calculate the predicted Dividend Rate for 2017 via the formula below:

Predicted Dividend Rate for 2017
= Predicted Income Distribution for 2017 / Predicted Amount Needed to Pay Each 1% Dividend Rate for 2017
= RM 45.855 billion / RM 7.125 billion per 1%
= 6.43%

SUMMARY
So there you have it, 6.43% is my prediction on the potential dividend rate for 2017. How close will this prediction versus the actual dividend rate? We will just have to wait for the official announcement somewhere near mid February 2018!

Cheers and Happy Investing to all of you!

Wednesday, 31 January 2018

I Just Invested into IME's Recommended Unit Trust Portfolio 2018!

That's right, I have just invested into our Invest Made Easy's Recommended Unit Trust Portfolio 2018 (specifically the conventional portfolio) via eUnittrust!

Just to recap, I released our recommended unit trust portfolio for 2018 on the 20th of January 2018 as shown below:
2018 Recommended Unit Trust Portfolio 
However, I have yet to make any investment into these funds as I was waiting for eUnittrust next Sales Charge promotion. Having said that, eUnittrust just launched their latest sales charge promotion campaign for 229 unit trust funds over the entire month of February 2018!


Taking advantage of the CNY sales charge promotion, I have invested into the following:
  • A total of RM8,000 invested into funds according to the % allocation of the conventional portfolio (excluding money market because I have set aside spare cash elsewhere). 
  • RM2,000 into RHB Gold and General Fund
  • RM1,500 into Manulife India Equity Fund
  • RM1,500 into CIMB-Principal Greater China Equity Fund
  • RM1,500 into AmSchroders European Equity Alpha Fund
  • The remaining RM1,500 was to be invested into Advantage BRIC Fund. However this fund is currently not available in eUnittrust and will be replaced instead with Global Emerging Market Opportunities Fund.
Here's how the Revised IME's Recommended Unit Trust Portfolio 2018 looks like this:
Revised IME's Recommended Unit Trust Porfolio 2018
SAVE ON SALES CHARGE!
With the ongoing sales charge promo, I was able to purchase all the funds for the conventional portfolio at 1% to 1.5% sales charge. However if you are investing more than RM5,000 per fund, the sales charge campaign allows you to enjoy between 0% to 1% sales charge!

Proof of my investment and the sales charge discount as shown by this screenshot of the transaction I just made at eUnittrust!
eUnittrust fund purchase - Click to Enlarge
TAKE ACTION NOW!
With the ongoing sales charge campaign by eUnittrust, this is the right time for an investor to invest into unit trust without having to pay a hefty sales charge upfront. If you are clueless about what to invest, feel free to check out these two blog post I have shared over the month of January 2018:
If you're following our recommended unit trust fund portfolio, make sure to also keep track of the changes in the country attractiveness to invest by logging into "The Guided Investor". It's free to use by the way.

Never heard of eUnittrust? Well find out more about it by checking out this blog post below:
Lastly, if you need help or advise on matters related to unit trust, feel free to contact me (PM) via Invest Made Easy Facebook page

That's all I have for this blog post.

Wishing all of you an awesome week ahead!


Saturday, 20 January 2018

IME's Recommended Unit Trust Funds Portfolio 2018

Couple of days ago we shared our blog post on Market Prediction and Investment Opportunities for 2018 : What and Where to Invest?? in which we recommended the following markets to invest into:
  • LONG TERM (1 Year) : Emerging Markets - India, Brazil and China
  • SHORT TERM (Monthly monitoring using indicators from The Guided Investor) : India, Brazil, China, Australia, Germany, UK and Hong Kong
Taking a similar approach as 2017's portfolio, we will construct a diversified portfolio allocation consisting of funds investing into emerging markets and developed markets, standby cash invested into money market fund and lastly a certain percentage allocated into gold funds as an insurance in the event the equity market fares badly. 

Invest Made Easy Investment Portfolio Allocation
This is how our recommended portfolio allocation would look like:

% allocation of IME's Recommended Unit Trust Portfolio 2018
From the above, we have 20% allocated into Gold, 15% each into long term funds for India, Brazil and China, 5% each into UK, Australia and Germany and 20% into money market.

Key points to observe:
  • Hong Kong's 5% allocation is lumped together with China because because there is no Unit Trust fund that's specifically invested into Hong Kong stocks only. In addition, Greater China Unit Trust Funds in Malaysia are normally invested into China stocks listed in the Hong Kong stock market. 
  • Allocation for India, China and Brazil under the "attractive to invest recommendation by The Guided Investor" are also lumped together with the long term emerging market allocations.
  • From an investment strategy standpoint, if these countries (India, China, Brazil and Hong Kong) are not attractive to invest anymore as indicated by The Guided Investor, we will proceed to sell 5% of the portfolio allocation.
  • Similarly if these countries becomes attractive again, we will purchase/buy amount equivalent to 5% of our portfolio allocation.
A country is attractive to invest into if above 75%.
 It becomes unattractive when the percentage drops below 75%
Check out The Guided Investor for these Indicator which change on a monthly basis
What are the Recommended Unit Trust Funds for our portfolio?
Now that we have our recommended investment portfolio, it is time to identify the best funds which are suited for the portfolio. We will select the funds based on the following criteria:
1) Recommended Unit Trust Fund for GOLD allocation (20%)
Recommended Conventional Fund: RHB Gold and General Fund
Justification : Currently there is only one conventional feeder fund in Malaysia that's invested into Gold miners stock and that fund is RHB Gold and General fund. Therefore it is a straightforward decision for us to pick this fund to represent our Gold allocation for the Conventional portfolio.

Recommended Shariah Compliant FundPrecious Metal Securities Fund
Justification : Currently there is only one shariah compliant feeder fund in Malaysia that's invested into Gold miners stocks and that fund is Precious Metal Securities fund provided by AmFunds Management Sdn Bhd. Therefore this is also a straightforward decision for us to pick this fund to represent our Gold allocation for the Shariah portfolio.

2) Recommended Unit Trust Fund for India Market (15%)
Recommended Conventional FundManulife India Equity Fund
Justification : Our preferred fund when investing into India equity market. Key reasons why we favor this fund are:
  1. Have performed well on yearly basis (2015 : +19.32%, 2016 : +4.50% and 2017 : +31.21%)
  2. Available on our recommended online unit trust platform
  3. The only fund that invest purely into India Equity market.
Recommended Shariah Compliant FundTA BRIC & Emerging Markets Fund
Justification : There are limited unit trust funds in the Shariah category that are invested into the Emerging market area. As a matter of fact Morningstar only list one shariah compliant fund under the Emerging Market category which is this fund. Therefore it is only logical that we are recommending this fund for the Shariah portfolio.

The December 2017 factsheet for this fund indicates that it has allocated 14.02% of its total investment into India as shown below:
TA BRIC & Emerging Markets Fund (Geographic Allocation)
With no other option available, we are going to go with recommending this fund as the preferred shariah compliant fund for our India portfolio.

3) Recommended Unit Trust Fund for Brazil Market (15%)
Recommended Conventional FundAdvantage BRIC Fund
Justification : While there is one other fund that's specifically investing into the Brazil Market, we could not pick that fund as our recommended fund because it is not available on the online unit trust platform. 

Instead we are picking Advantage BRIC fund as our recommended fund due to its large allocation of investment into the Brazil market (19.89% to be exact as shown below):

Advantage BRIC Country Allocation as of 30 Nov 2017
In addition this fund has also performed rather well in the past, returning +37.48% in 2016 and +16.50% in 2017.

Recommended Shariah Compliant Fund
Fund Name : TA BRIC & Emerging Markets Fund
Justification : As mentioned earlier, there's only one shariah compliant fund that's invested into the Emerging market. Therefore to represent the Brazil portfolio, we are going to go with TA BRIC & Emerging Markets fund which has allocated 16.09% of its total investment into the Brazil equity market as shown below:
TA BRIC & Emerging Markets fund  allocated 16.09% into Brazil market
4) Recommended Unit Trust Fund for China + Hong Kong Market (15%)
Recommended Conventional FundCIMB-Princial Greater China Equity Fund
Justification : One of the top performing Greater China funds in its category with a 5 STAR rating given by Morningstar. The other awesome point is that this fund has generated double digit % returns since 2012!

As for country allocation, we see that this fund has exposure into China (67.40%) and Hong Kong (16.00%). This jives with our portfolio recommendation of merging the China and Hong Kong market into a single portfolio allocation.
CIMB-Principal Greater China Equity Fund Country Allocation
Recommended Shariah Compliant FundEastspring Investments Dinasti Equity Fund
Justification : This fund has been our fixed recommendation for Shariah compliant China fund since 2017. This fund is also the highest rated Shariah compliant Greater China fund, earning a 4 STAR from Morningstar. In terms of performance, this fund has return 20.62% annualized over a 3 year period and is the best performing shariah fund in this category.
Eastspring Investments Dinasti Equity Fund Country Allocation
In terms of country allocation, this fund has 43.16% allocated into China and 23.67% into Hong Kong, making this fund the perfect candidate to match our portfolio recommendation of merging the China and Hong Kong market into a single portfolio allocation.

4) Recommended Unit Trust Fund for UK, Germany and Australia Market (15%)
Before going into the recommended funds, there's a need to highlight the lack of country focus unit trust funds available in Malaysia. In order to meet our portfolio allocation, we have to select funds that has large exposure into these markets.

In the case of Australia, we have also analyzed funds under the Asia Pacific category, hoping to find a fund with large exposure into Australia market. However, we were unable to find any fund that has a large exposure into Australia. Despite there is one particular fund that's investing purely into Australia, we could not recommend that fund as it is not available on the recommended online unit trust platform.

In summary we have decided that we will forego investing into Australia and split the 5% allocation to Germany and UK.  Our portfolio now would now have 7.5% allocated to Germany and 7.5% allocated to UK as shown below:
% allocation of IME's Recommended Unit Trust Portfolio 2018 without Australia
Recommended Conventional FundAmSchroders European Equity Alpha Fund
Justification : We pick this fund purely on the basis of its country allocation whereby 34.78% is allocated into UK and 3.36% is allocated into Germany as shown below:
AmSchroders European Equity Alpha Country Allocation
In addition, the small exposure into Australia is an added bonus for this fund

Recommended Shariah Compliant FundRHB Islamic Global Developed Markets Fund
Justification : This fund is also selected based on its country allocation whereby 11.25% is allocated into Germany and 8.81% allocated for UK as shown below:

RHB Islamic Global Developed Market Country Allocation
SUMMARY of IME's Recommended Unit Trust Funds Portfolio for 2018
Here's a summary table of our 2018 Recommended Unit Trust Funds portfolio:
2018 Recommended Unit Trust Funds portfolio - Click to Enlarge
31 Jan 2018 : Changes to Conventional Portfolio
Advantage BRIC Fund is not available on eUnittrust platform. We will be replacing this fund with Global Emerging Market Opportunities Fund.
Revised 2018 Recommended Unit Trust Funds portfolio - Click to Enlarge

We hope that our analysis and recommendation would help  Malaysian investors to make wiser decisions and have a successful 2018 investing year!

Cheers and Happy Investing

P.S : 
  • If you like this post, please help share our Facebook page with your friends and families!
  • Find out how you can use eUnittrust to managed your own unit trust investment! Just click HERE
  • I've recently launched an online learning platform called Unit Trust Made Easy to help Malaysians to kick start their own unit trust investment. For further details, check it out HERE