Funds for all seasons [Bangkok Post, Thailand]
(Bangkok Post (Thailand) Via Acquire Media NewsEdge) Dec. 09--As the year draws to a close, investors are on a shopping spree for long-term equity funds (LTFs) and retirement mutual funds (RMFs), the two types of money pools that offer tax savings.
Individual taxpayers are eligible to invest 15% of total annual income in each of the two funds, not exceeding 500,000 baht a year.
Investment in LTFs requires a five-year lock-up period during which they cannot be sold. Investment is not required every year, but tax benefits occur only in the tax year when the investment is made.
At the moment there are 52 available LTFs, which can be classified into three types according to risk.
High-risk funds plough 100% of net asset value (NAV) into equities; medium-risk funds put 70% of NAV in equities and the rest in deposits; low-risk funds invest a portion of NAV in derivatives with the aim of protecting principal.
Given the dozens of LTFs on the market, which fund is the best choice? Even though past performance of a fund does not guarantee future returns, it can at least serve as a guideline for narrowing options.
The Association of Asset Management Companies said the Good Corporate Governance LTF (CG-LTF) was the top performer in the five years to the end of last month, with a 34.95% annual total return, pipping the Value Plus-Dividend Long Term Equity Fund (VALUE-D LTF) at 34.91%.
The MFC Islamic Long Term Equity Fund (MIF- LTF) yielded 34.06%, the Aberdeen Long Term Equity Fund (ABLTF) 33.49% and the Krungsri Dividend Stock LTF (KFLTFDIV) 33.41%.
At the other end of the scale, the 1 Am Smart Long Term Equity Fund (1SMTLTF) yielded a 1.03% annual total return, trailing the K Strategic Defensive LTF (KASDLTF) at 7.32% and the SCB Smart Long Term Equity Fund (SCBLTS) at 8.19%.
For three-year annual total return, the Bualuang Long Term Equity Fund (B-LTF) was best at 21.93%, followed by the Big Cap Dividend LTF (BIG CAP-D LTF) at 18.89%, the Phillip Long Term Equity Fund (P-LTF) at 18.88%, ABLTF at 18.42% and the 1 AM Selective Growth Long Term Equity Fund (1SG-LTF) at 17.69%.
The worst performers by three-year return were 1SMTLTF at 1.56%, KFLTFDIV at 1.97% and the SCB Inter LTF (SCBLT4) at 3.94%.
Investors should do their homework to find out which stocks make up each LTF.
Teera Phutrakul, the founder of JT Financial Planners, says procrastination is a stubborn disease. With the stock market's high volatility offering a chance for fund buying, he often wonders why investors wait until December to buy these funds.
He recommends adopting a dollar cost averaging technique, whereby investors put a fixed amount into the funds every month.
Peet Yongvanich, the managing director of Morningstar Research (Thailand), said Thai investors are investing more and more in RMFs as they become aware of risk and return on investments. Investors wanting to check a fund's performance can do so through Morningstar Research.
Selecting a good fund is difficult for novice investors, but past performance can inspire confidence. Four- and five-star funds help to screen for fundamentals, and the fund manager's expertise and ability is also important.
"If a fund manager leaves a fund, it may be difficult to maintain the fund's performance in the future," said Mr Peet.
Investors can also ask advice from a financial planner. "In my personal view, investors should diversify into foreign assets to reduce local market volatility, and there will be some markets with a better upside next year such as Japan, the US and Europe," he said.
Boonchai Kiattanavith, the chief executive of Thanachart Fund Management, warns that the Thai stock market in 2014 could lag other bourses due to the economic slowdown.
High-growth markets next year will include the US, Europe, Japan and China, and investors should allocate 20-25% of assets to these areas, he said.
Many RMFs and LTFs with foreign investments exist. Thanachart's best global equity fund posted a year-to-date return of 20% compared with 16% for its best local equity fund.
With wealth management trending in Thailand, Citibank is also focused on the segment. It has joined with seven asset management companies to offer LTFs, RMFs and other funds, says Vira-anong Phutrakul, the head of retail banking at Citibank (Thailand).
(c)2013 the Bangkok Post (Bangkok, Thailand)
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