Monday, July 6, 2009

Choose a mutual fund using numbers ?

Making investment decision based on historical records is NOT the best way. However, it is one of the FEW methods that is measurable. This method cann't say much about the future but it absolutely show evidence to what they have promised before ie. the goal of the fund itself.

There are 38 mutual fund companies in Malaysia, more than 530 funds have been launched in the market. There is about 160 billion ringgits Net Asset Value all together. Making it the largest component (20%) in the whole Malaysia stock market.

Below shows all the funds performance information for 4 companies;
Public - 67 funds,
OSK - 34 funds,
AMB - 15 funds and
TA - 16 funds.

That is a LONG list to look at. However, if we focus on a few criterias ;
1. Funds that are more than 5 years old
2. Funds that have received good ratings from 3rd party
3. Equity or moderate to high risk fund, ie. exclude bond and income
More than 75% of the funds can be filtered out immediately!

Then just plot some graphs to look at each of the remaining funds, try to see if one is MORE "Apparently Better" than another.

This is the short list result from this exercise;
PB Growth
Public Growth
Public Ittikal
Public Regular Savings
Public Savings
AMB Ethical Trust
AMB Value Trust
OSK-UOB Equity Trust
OSK-UOB Kidsave Trust
TA Growth
TA Islamic
Still a long list to work with ? One may further compare the funds and pick the highest return fund, but that is Highly NOT advisable. Playing with numbers any further than this stage would be considered as obsessity and may result totally irrelevant investment decision.

This list tells the following;
1. These funds have been managed well. The reasons could due to talent, regulation, the goal of the funds ... no matter what the reasons are, they have been managed well for the past 5-10 years.

2. They have performed BETTER than other funds in comparison.
It may also carries these implications:
1. It is unlikely these funds just get lucky continously for 5-10 years
2. Despite all the potentially bad things that may happen,
However, the list DOES NOT mean these ;
1. These are the best funds,
2. These are the funds to buy now,