I categorize Public Mutual Islamic Unit Trust Funds into three major categories; Big Capital, Small Capital and Overseas Funds. The definitions of these categories and the advantages and disadvantages are as follows:
1) Big Capital: The funds invest in big companies like Sime, Telekom, TNB, DiGi, PGB etc. These companies have deep pockets and so, won’t crash so easily when there’s downturn in the economy. However, these companies are already big and there's little room for growth. To me, it's always better to start with this fund
2) Small Capital: The funds invest in small companies with market capitalization of less than RM 1.25 billion (for PIOF) and RM 6billion (for PISTF). You probably would never have heard of these companies, but they do exist nonetheless. These funds are obviously riskier, since the companies, if in crisis, will not have the fortune of having much money to save themselves. However, this fund could also potentially give more returns, since the companies are small and thus have lots of room more for growth.
3) Overseas: The funds invest in overseas companies in countries like China, Taiwan, Hong Kong, Japan, Australia and Singapore. China is volatile, but, has the fastest developing economy in the world now. Also another advantage of overseas funds is that when one country's economy crash, for example, in Malaysia, economy in more stable/developed countries, like Japan and New Zealand can balance it out.
Public Mutual Islamic Unit Trust Funds are grouped into the three categories as per below (the grouping into Cash & EPF is just to show you which fund can be invested using EPF money):
| Cash | EPF | ||||
| Big Capital | Small Capital | Overseas | Big Capital | Small Capital | Overseas |
| PIttikal | PIOF | PAIF | PIEF | PISTF | None |
| PIEF | PISTF | PIADF | PIDF | | |
| PIDF | | PIABF | PISSF | | |
| PISSF | | PCIF | PIOGF | | |
| PIOGF | | PIALEF | PISEF | | |
| PISEF | | | | | |
I recommend having at least one type of fund from the three categories of Public Mutual Equity funds; Big Capital, Small Capital & Overseas, for diversification and to optimize our returns. Looking at the risks of each of the category, the Recommended Distribution between the funds is Big Capital: Small Capital: Overseas= 50%:20%:30%. The Recommended Distribution is based on my own analysis, but it is flexible according to your own investment risk appetites
Once you have one fund from each category, it should cover the whole range, and you don’t have to look at the other funds. By concentrating on three funds only, it is easier to do Switching (see Section on Switching below). Also, from my analysis, in the long term, there is no marked difference in returns between funds in the same categories. Thus it’s better to concentrate on building up the funds in the three funds only, and also avoid the hassle of managing too many funds
2. Public Mutual Investments using Cash
I am a proponent of Dollar-cost-averaging. Dollar-cost-averaging means investing consistently across all your investments. In other words, investing the same amount at regular intervals. This way, you automatically buy more units when prices fall and fewer units when prices rise. This also takes emotion out of the equation. It also prevents you from timing the market, which results in smoother and better returns than strategies that involve trying to time the market, such that you miss out on opportunities. Also, with good returns, having larger amount of money in the funds will ensure you maximize your gains. With power of compounding, the returns obtained from investing regularly can be even higher.
I have created a ‘Calculator for Public Mutual Investments using Cash.xls’. In it, you just put your current age, your preferred monthly investment amount and you can see the amount of investments after returns by year or age. An output table below the input table will display Investment after Returns, at age 55 (RM) and the Ratio of Investment after Returns to Amount invested. For comparison purpose, I also put the returns given by other major investment vehicles like ASB, Tabung Haji, Fixed deposit and EPF. The rate of returns used in the calculator are as follows:
| No | Investment vehicle | Return (%) | Remarks |
| 1 | Public Mutual | 10 | Annualised return for 10-year period for Public Ittikal |
| 2 | ASB dividend | 7.51 | Dividend: Average for the past 10 years |
| | ASB bonus | 1.8 | Bonus: Average for the past 10 years |
| 3 | Tabung Haji | 4.48 | Dividend: Average for the past 10 years |
| 4 | Fixed deposit | 3.69 | Rate: Average for the past 10 years |
| 5 | EPF | 5 | Dividend: Average for the past 10 years |
For example, if you are 25 years old, and you invest RM200 monthly, the output table will show the following:
| No | Investment vehicle | Investment after Returns, at age 55 (RM) | Difference with Public Mutual return (RM) | Amount invested (RM) | Ratio of Investment after Returns to Amount invested |
| 1 | Public Mutual | 506,098 | - | 74,400 | 6.80 |
| 2 | ASB dividend | 345,251 | 160,846 | 74,400 | 4.64 |
| | ASB bonus | ||||
| 3 | Tabung Haji | 158,617 | 347,481 | 74,400 | 2.13 |
| 4 | Fixed deposit | 137,656 | 368,442 | 74,400 | 1.85 |
As you can see, Public Mutual gives higher returns than the other major investment vehicles. And the returns are more than six-fold the original amount invested too
You can also use the calculator to see amount of investments after returns for lump sum investments. To do this, just leave the ‘Your monthly investment (RM)’ field blank, and put the ‘Your current investment value (RM)’ field with the lump sum value
Dollar-cost-averaging can be done by performing a Standing Instruction, where automatic investment will be done by your banks (either Maybank or Public Bank). To apply for Standing Instruction, you will need to sign a Standing Instruction form which you can get from me.
3. Public Mutual Investments using EPF
Again, I am going to promote Dollar-cost-averaging here. As you know, EPF allows withdrawal from Account 1 once every three months (or four times a year) into unit trust investments. However, unlike Cash investments, where you can perform Standing Instruction to implement Dollar-cost-averaging, there is no facility to do this with EPF money. Furthermore, there are many variables to EPF money; eg the EPF minimum balance requirements with age, your current balance in Account 1, your salary increment percentage, and the discipline in utilizing the maximum 4-times-a-year allocation, which makes it harder to implement Dollar-cost-averaging with EPF money. This results in irregular investments, where, at one withdrawal, you will be investing too much, and at another withdrawal, you will be investing too little, due to insufficient funds, which is not what Dollar-cost-averaging is all about. By calculating properly, we should be able to distribute the money evenly across the four withdrawals. I have created a ‘Calculator for Public Mutual Investments using EPF.xls’ to optimally Dollar-cost-average EPF money investments in Public Mutual Unit trust fund. In ‘input & outputs’ tab, just enter the required information in the yellow cells:
i) By entering your age and your current Account 1 balance, it will automatically calculate the Optimal amount per Public Mutual Investment (such that amount invested is always consistent for 4 withdrawals a year) for Year 1. This appears in tab, ‘inputs & outputs’, in field, ‘Optimal amount per Public Mutual Investment for Year 1 (such that amount invested is always consistent for 4 withdrawals a year) (RM)’
ii) By entering your current monthly gross salary and expected salary increment %, it will automatically calculate the Optimal amount per Public Mutual Investment (such that amount invested is always consistent for 4 withdrawals a year) for Year 2 until your age is 55 years old. This figure can be found in tab, ‘EPF calc’, column, ‘Optimal amount per Public Mutual Investment (such that amount invested is always consistent for 4 withdrawals a year) (RM)’, and rows Year 2 and so on
iii) To cater for the discipline part, here is what you can do:
1) For Year 1, use the figure you calculated in 3ai) above. Sign/thumb-print four EPF Public Mutual investment forms in advance for the investments for one year and submit them to me together with the calculator. Using the calculator, I will look in tab, ‘inputs & outputs’, field ‘Optimal amount per Public Mutual Investment (such that amount invested is always consistent for 4 withdrawals a year) (RM)’ and use it for your 1st year investments. Every 3 months, as soon as you are eligible to withdraw EPF money again, I will immediately submit the EPF forms with this amount
2) At the end of the year, I will email you your annual Public Mutual Investment Updates on your funds Performance for your review.
3) For Year 2, use the figure you calculated in 3aii) above. Sign/thumb-print four more EPF Public Mutual investment forms in advance for Year 2 investments. Using the calculator, I will look in tab, ‘EPF calc’, column, ‘Optimal amount per Public Mutual Investment (such that amount invested is always consistent for 4 withdrawals a year) (RM)’, and row Year 2, for the investment figures for Year 2.
4) For Years 3 and so on, repeat steps no 3aiii2) and 3aiii3) above.
By doing the above, you can now Dollar-cost-average EPF money investments in Public Mutual Unit trust fund. The computed Potential Total Investment after returns can be achieved if you follow this dollar-cost-averaging method.
For example, for a 25-year old, with Account 1 amount RM30,000, salary of RM3,500/month, salary increment of 5% per year, below is what the Calculator will compute:
| No | Item | Output |
| 1 | Potential total investment after returns, at age 55 (RM) | 2,098,098 |
| 2 | Total EPF Money invested at age 55 (RM) | 435,994 |
| 3 | Ratio of total investment after returns, to EPF Money invested (1 divided by 2) | 4.81 |
| 4 | Total Value, at age 55, of EPF money if kept in EPF Account 1 (RM) | 897,584 |
| 5 | Difference (1 minus 4) (RM) | 1,200,513 |
| 6 | Total EPF balance at age 55 (RM) if money is invested in Public Mutual | 416,842 |
As you can see, Public Mutual gives higher returns than if the money is kept in EPF
Notes: the calculator is also useful to compute the followings:
1) To automatically check, for the first year (assuming we take 1st month as value of investment for the next 3 investments that year), whether there is sufficient fund to withdraw the same amount for the rest of the year.
2) Your estimated EPF balance at age 55 (item 6 item table above). The calculator ensures that there will always be balance in your Account 1 for diversification purpose. As you know, EPF invests in safe investments, ie 70% in bonds and 30% in stocks, while equity unit trusts is opposite of that and more aggressive (with potentially more returns), ie >70% in stocks and the rest in bonds. As we get older we should be less riskier to invest in the stock market (unit trust) and let the money grow in EPF. This calculator has a factor for investment which reduces as we get older to cater for this.
This system is not 100% perfect. For example, it cannot take into account the additional salary bonuses you get which increases your Account 1 dramatically. However, you can adjust it accordingly as new information comes in, eg increase in Account 1 balance due to bonuses etc. The system also has a limitation such that in the first year, it always tends to invest much more than available such that when you do the check, it will say, ‘No’, ie the investment amount will cause insufficient funds for the remainder of the year. This can be resolved by adjusting the figures accordingly outside the system.
4. Switching Guidelines
Switching from Equity funds to Bond funds (where the returns are almost fixed) is used to lock in profits. Switching (where only Administration fee of RM25 will be charged per switch) is recommended to avoid the Service Charge fees when reentering the market (which occurs when you Sell, then, Buy, via normal transactions). The rule of thumb for a good time to switch is: Sell (Switch from Equity to Bond fund), when the funds have generated more than 30% return, and Buy (Switch back from Bond to Equity Fund), when the stock market has dropped by more than 10%. However, to those who Switched, do not wait longer than six months to reenter the market. If the market continued to perform well in six months’ time, Switch back, so that your money will not be stuck in the Bond funds (where the returns are low). My strategy for switching is (or called eligible for switching) when:
a) You have more than RM20,000 in your fund (so that Switching fee of RM25 will not be too high a percentage). This is why I promote concentrating on maximum of three fund only, because, by concentrating on the three funds, it’s easier to reach the RM20,000 minimum switching amount when it is a good time to switch, rather than spreading your investments too thin into too many funds.
b) Balance in the equity fund after switching is RM10,000, so that there will always be money available to be invested
Note: You can get both the Cash & EPF Calculators if you become my Client or downline Agent. Please do not hesitate to contact me if you want to be either one
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