About 4 weeks ago, I shared in the article entitled “Should We Invest into Bond?” about the beauty of investment through unit trust using the DIY online method which I have been promoting here. In the time of market uncertainty, the bond fund will be our investment darling. It gives us a steady flow of income to our portfolio much higher than FD from banks. The return can be as high as 8 -13 % per annul as of the record reading currently.
This figure of earning can be fabulous to any investor especially when the market is confirmed bearish for a year or so (Let’s just leave another bearish market darling ~ gold-related funds aside for the time being). That’s the reason why I can assure you that investing through unit trust the DIY method can be fruitful regardless of whether the market is bullish or bearish.
In the bearish market, bond funds will help us collect big returns steadily. In the bullish market, equity funds which I have shared through articles Equity Fund I and Equity Fund II will give us even much higher returns. Sometimes it can be as high as 40% or more annual return if we do it correctly or if the market graces us. However, the market does not always tell us whether it is moving bullish or bearish or even sideways. That’s why we need to have a proper risk management strategy whenever we invest.
The mixture of Bond Fund and Equity Fund
A mix of use between a bond fund and equity fund together in any portfolio will give us good risk mitigation of our investment at any time. For example, in a high-risk market, we shall employ a very conservative portfolio allocation between bond and equity in a ratio of 80% and 20%. In a bullishly looking market, we can deploy the opposite ratio such as 20% and 80%. Whereas when we are not sure of the market direction, we can adjust the ratio to 50% to 50%.
In a risky market condition such as the current market scenario, I would recommend the conservative strategy of placing 80% and 20% between a bond fund and equity fund. In this way, whenever an unexpected market crash coming in, you would be very happy and welcome its happening. Because it provides an excellent opportunity where you can intra switch your fund unit from your bond fund to equity fund to do “bottom fishing.” After the crash subsided, or when everything goes back to normal and showing profit, you can rearrange your risk ratio back to the previous proportion. This rearrangement will be similar to profit taking for stock investment practices.
The above strategic management using a mixed bond fund and equity fund for investment is the simplest way to explain things out for readers. I hope readers can grasp the basic concept of how wonderful it can be or should be using the unit trust to invest through the DIY online method. There is still a lot more to share and explain in detail. But I choose not to confuse readers here because of the limit in space and time; I shall leave the freedom for you to come to join the online investment course if you want to know more, especially for new investors and proficient in Mandarin. For experienced investors, I believe you can explore more on your own.
Fixed Income Fund
Aside from bond funds, another extremely useful class of investment in the unit trust is called money market funds. Investing through bond fund though it is conservatively safe, it is still nevertheless come with risk. Such risk according to Fundsupermart (FSM) is between 2-5 on a scale between 1-10. That means the bond fund will still have its troubled times, probably once in between 2 to 3 years. When this risk of the bond market is brewing, we need to switch all our bond funds to money market funds for security sake or to lock up our profit. The money market’s risk is “0” rating. That means it will always be going up，never down, at an annual rate slightly higher than the bank FD rate but only slightly lower than the bond fund.
These money market funds are such as Pacific Cash Fund, RHB Money Market Fund, BIMB Dana Al Fakhim, Kenanga Islamic Money Market Fund, and others as found in the FSM investment platform. These funds are attached as a compliment to different fund houses. They all serve as intended and useful purposes within their respective fund houses.
In an event of bond fund rout, the money market fund’s return will be higher and therefore is much more preferred. In defensive purposes, these money market funds are as good as the bond fund. They provide us a holding base whereby we can facilitate free switching between equity and defensive base for life. I shall mix these two classes of funds in all my future writing and call them Fixed Income Fund. This fixed income fund will be collectively referred to as our “best defense weapon” in all our future references. Please take note.
After reading the above information, I believe you understand why I love to use the unit trust investment online DIY method so much. The bottom line is free switching for life if you know how to maximize this providence in FSM using its credit system. Somehow if you still have any questions about the topic we have just discussed, welcome to drop a few words to me either personally using my email found in “contact me” or openly in “Leave a Reply” comment section below.
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The view and opinion expressed are personal views of the author and are subject to change based on market and other conditions. This write up does not constitute sole advice for investment decision. Investors are advised to do further reading and research to conclude individual decision.