What I Learnt As An Analyst - 2nd Edition (eBook)

Sharing of experience in investment and analysis

Peter Lim Tze Cheng (Autor)

eBook Download: EPUB

2020 | 1. Auflage
247 Seiten
Bookbaby (Verlag)
978-1-0983-1006-6 (ISBN)

Infos

What I Learnt As an Analyst - 2nd Edition by Peter Lim Tze Cheng is not a get rich quick scheme nor is it a book on secret tips and tricks. This book on investment and analysis provides investors with valuable knowledge of analyzing companies. The knowledge that generally comes with years of experience. The author was not afraid to put out hard-hitting truth about investing in companies. He enlightens his readers on investment by owning up to his own mistakes. A point that he has made numerous times throughout this book is that there is no one way to go about investing. This book is based on the experiences and ideas of one man. A very raw piece of work on investment for professionals of the field and newcomers alike.

Textauszug

CHAPTER 1:

WHAT IS UNIT TRUST?

Unit trust is actually a type of Collective Investment Scheme (“CIS”). CIS is a concept where a group of investors pool their money together in order to take advantage of having a bigger pool of money to invest. If you have RM100 available to invest, you can’t buy much. But if 100,000 people each chip in RM100 into a pool, the pool will have RM10 million available to invest. The extent of investment choice and diversification that the RM10 million pool can achieve is definitely much greater than what RM100 can do. And this is the inherent advantage of a CIS.

Difference between Investing in Unit Trusts & the Share Market

[1]. Investing in the Share Market

To buy shares, investors need to go through a securities/stockbroking firm as the middleman to conduct the transaction. Assume you wish to buy shares of Company A which is currently trading at RM1.30 for each share. You decided that you want to buy at RM1.25 a share. You then call your remisier (an agent, for the stockbroking firm, who holds the license issued by the Securities Commission) to inform him or her about the trade.

What your remisier will then do is to find a seller who has Company A’s shares and wishes to sell at RM1.25 a share. If the remisier finds a willing seller at RM1.25, he will match and complete the trade. If he is not able to find a seller at the price you want, then either you have to revise your price to RM1.30 a share or wait for other sellers who are willing to sell at RM1.25.

Figure 1 below shows the relationship. An alternative to a remisier is an online trading platform, where investors would be able to trade and manage their own transactions.

Figure 1: Investing in Share/Stock Market

One may ask why would we still need remisiers in this technological age, when we can trade on our own? Remisiers actually play a very important role for investors who just started investing in the stock market. They would be able to guide and “hand-hold” investors on “what-to-do” and “what-not-to-do” when investing. In addition, remisiers can help to monitor the trades on the investor’s behalf, compared to the investor having to keep checking on his trades.

The mathematics for unit trust and share investments works the opposite way. Say Company A’s share is trading at RM1.30 a share. Shares are traded at a “lot” of 100 shares. So, at the minimum you must buy 100 shares of Company A, which is RM130, excluding brokerage charges. If you are buying two “lots”, you will have to pay RM260 (RM1.30 x 200 shares) before brokerage charges.

[2]. Investing in Unit Trusts

Unlike investing in shares, investors who wish to invest in unit trusts would need to get in touch with unit trust agents. Unit trust agents are representatives of unit trust management companies, and hold the license issued by The Federation of Investment Managers Malaysia.

Now assume you want to invest in Fund B and you approach a unit trust agent for Fund B. The agent will assist you in submitting your request to the unit trust management company (“UTMC”) of Fund B. For unit trusts, there is no matching of trades needed. All buying and selling of unit trusts is between the investor and the unit trust management company, transacted at the Net Asset Value of the unit trust (or NAV, which we will explain further later). What this means is when you want to invest in Fund B, the UTMC of Fund B would need to sell you the units in Fund B. When you want to sell your units in Fund B, UTMC of Fund B will buy the units from you.

The unit trust fund’s investments are managed by a fund manager, which is employed by the UTMC. The fund manager’s role is to make the investment decisions and manage the investments on behalf of the investors.

From Figure 2 below, one can see that unlike investing in shares, the investor only deals with the UTMC when the investor is buying or selling units, and the investment decision is handled by the fund manager of the UTMC.

Figure 2: Investing in Unit Trusts

Now instead of a listed company, Fund A is a unit trust and has a Net Asset Value (or NAV) of RM1.30. For investment into unit trusts, subject to the prospectus of the fund (i.e. the rules of the fund), investors can invest any amount. Assume that you now only have RM100 to invest.

The differences between buying shares and unit trusts can be summed up by the diagram below.

What is NAV?

NAV, or Net Asset Value, is the total investment owned by the fund, including cash, minus the liabilities owed by the fund. Liabilities owed by the fund consist mainly of expenses that the funds have yet to pay its service providers, such as brokerage charges, management fees, etc.

Table 1 below shows the example of the calculation of NAV.

Table 1:

Assets

RM

Investment

2,000,738

Amount due from Manager

26,955

Dividends receivable

7,715

Cash & bank balances

15,622

Total assets (a)

2,051,030

Liabilities

Other payables (b)

27,638

Net Asset Value (a – b)

2,023,392

Units in circulation (c)

4,819,524

NAV per unit (NAV ÷ c)

0.4198

For those who are keen to understand more on financial statements, Part II will give a basic guide to understanding financial statements.

Types of Charges & Fees

Generally, all types of investments incur charges or expenses. For investment in shares, the charges are known as “brokerage charges”.

In the case of unit trusts, the fees and charges can be categorised as direct (fees that you incur directly when you invest in a fund) and indirect (fees that you incur indirectly). All this information can be obtained from the unit trust’s prospectus, which is available for the public either via the website of the unit trust management company or through their distributors and agents.

[1]. Direct Charges

Direct charges are charged directly to investors. Sales charge, repurchase /redemption charge, and switching fee are the three main direct charges relating to unit trusts.

Sales charge

The sales charge usually serves as the commission for unit trust agents. It is charged at the inception of the investment. Sales charge is common among equity and balanced funds. As mentioned earlier, sales charges can range from zero to five percent in our local context.

Assume that Fund A imposes a 3% sales charge and an investor invest RM1,000 into the fund. This means that the RM1,000 invested amount would have included the 3% sales charge. The sales charge would be RM29 (i.e. RM1,000 ÷ 103% x 3%). The amount of investment that goes into Fund A would be RM971 (i.e., RM1,000 minus RM29 sales charge).

Redemption / Repurchase charge (or exit fee)

Repurchase or redemption charge is the opposite of sales charge, i.e., it is charged when the investor withdraws money from the fund.

Assume Fund B imposed a redemption charge of 2% and its NAV is RM0.85. You wish to redeem 4,000 units from Fund B. The value of your redemption would be RM3,400 (RM0.85 X 4,000 units). The redemption charge would be RM68 (2% X RM3,400) and your net proceeds from the redemption would be RM3,332 (RM3,400 minus RM68).

Usually, a fund will only have either sales charge or redemption charge, and not both together. A redemption charge is mainly imposed by fixed income funds, as fixed income investments require a longer investment tenure, and any constant movements in the fund, which is caused by investors withdrawing money from the fund, will affect the investments of the fund. Thus, redemption charges serve to manage the outflow from the fund by discouraging investors to withdraw their money within a short period of time.

Switching fee

Switching fee is the fee paid if an investor wishes to switch between different funds provided by the same unit trust management company. For instance, the investor of Fund A may wish to switch their investment from Fund A to Fund B, both of which are...

Produkt-Details

• Erscheint lt. Verlag: 14.4.2020
• Sprache: englisch
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management
• ISBN-10: 1-0983-1006-3 / 1098310063
• ISBN-13: 978-1-0983-1006-6 / 9781098310066