Wednesday, April 18, 2007

Will my $30K grow into a $1mil gold pot? Episode 2

Will my $30K grow into a $1mil gold pot? Episode 2

Apologies for "missing-in-action" for a long while... hey 27 days in this instant-gratification, can't-wait-a-second, e-Era is like ages? Hmmm... back to the topic on hand...

=== Part 1 ===

First things first, if you have not read the first episode, you may like to do so before proceeding. Otherwise, some of the stuff may not really make sense... :)

Remember about the winning combinations of $33.8k, 12% compounded, 30 years = $1+ mil??

Well, with my limited financial intelligence (what do you expect? I'm a comp sci grad!), I could not find a financial instrument that could have that kind of consistency returns, at least over the last 10 years.... okay, I admit, I probably did not search hard enough...

The only one stock that I could verify to be possible is BRK shares, which is not that tough to figure out... Just read Mr Buffett's most recent letter to shareholders....

=== Part 2 ===

A couple of weeks ago, a good friend of mine, let's call her Mrs A, asked me for my opinions about unit trust investment... Okay, I am bias, in fact, my brain is "telling" me that Mrs G is lazy and leaving the difficult job to the fund manager, who may or may not be better at picking stock than any Tom, Dick or Harry...

However, being a nice guy, I explained to Mrs A, that I usually do not "do" unit trusts as my perception is that its returns is not really that fantastic over long periods of time (say 10 years or more)... and plucking from the air, I blabbered something like its going to be 6-8%....

However, I did promised her to look at what's in the market and see if there are exceptions... Glad that I did, sometimes it pays to be a nice guy?! :)

=== Part 3 ===

Over last couple of nights, I diligently poured over the websites and finally found 1 'independent' website (www.fundsingapore.com) which is run by an independent financial organization in Singapore...

From the website I could virtually perform a "data mining" of the performance of the unit trusts... it was a great exercise.... the only problem was I had to collate the information on the performance of the fund over the last 10 years and "annulized" back its returns... well, with a little *rusty* skills in Excel, I managed to get it up... and guess what, WOW!!!

=== Part 4 ===

If the information I gathered and my improvised formulae is correct, there are actually 5 funds which returned 11.81% to 12.79% over the last 10 years! Impressive! Not many stocks can boast about such returns over the last 10 years!

Hey wait!! This seems to fit into my winning combinations of $33.8k, 12% compounded, 30 years = $1+ mil?!?!

Okay, before I reveal these 5 funds, I must admit, there are critical flaws in the above "mini" research:

  1. I am assuming the past performance will be repeated in the future, by the fund managers. This is a risk, as we all know, the fund managers may be changed by the management, anytime.
  2. The past 10 years performance may have been influenced / skewed by the fact that these economies experienced fast-paced growth over the last 10 years, which may not hold true in the next 30 years.
  3. With my limited experience & finance knowledge, a lump sum investment into Unit Trusts does not seem to be logical as there would be not any dollar-cost-averaging effect.
  4. The data I gathered from the above website expressed return on investment as "...Bid-Bid, including the reinvestment of income...". It may mean that the initial sales charges has been ignored???!!!

So, forget about my "winning" combinations... it probably will not work for Unit Trusts... Anyway, in the current climate, where I'm quite bullish about the US economy over the next 12-24 months, I'm just not ready to put so much money (hey $30k is a lot to me!) into any product...

=== Part 5 ===

Okay the final listing... I hope you do not yawn at the funds.... enjoy the list! :)

  1. First State Regional India, 12.79% annualized returns over last 10 years.
  2. AXA Life-Fortress Fund B, 12.77% annualized returns over last 10 year
  3. Schroder Singapore Trust A, 12.69% annualized returns over last 10 years.
  4. Lion Capital Singapore Trust, 12.08% annualized returns over last 10 years.
  5. DBS Shenton Thrift, 11.81% annualized returns over last 10 years.

Oh ya, if you are wondering, I did share the above list and more with Mrs A. In fact, the full list consists of a total of 33 funds, with returns from 6.78% till 12.79% annualized returns... I do hope she benefited from the mini-research... and before I sign off, the usual disclaimer applies...

Happy investing!

Warm regards,
Fu Chin

Disclaimer: Completeness, accuracy and opinions based on information and comments mentioned via this website cannot be guaranteed. Investors should always conduct their own research before making investment decisions.

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