An interesting concept. While to structure a low risk fund is generally much easier, I still think that a proper retirement strategy does not only depends on the fund companies alone, the retirees themselves should also do their bit. Someone who’s retiring in 3 years time but still would like to see 20% return every year might be expecting a rather unrealistic result.
New unit trust funds for retirement savings
The Securities Commission (SC) will collaborate with the unit trust industry to introduce a new category of unit trust funds (UTFs) that will fulfil the needs of investors who wish to save for retirement purposes.
“The introduction of the funds is part of SC initiatives to accelerate growth and enhance investor protection in the unit trust industry,�? the SC said in a statement.
It said the new UTFs would have lower investment costs and a more conservative investment strategy.
To really see the effect of a money-make-money investment, I believe that one of the most important element will be time. The longer time you have the better chance you have to see your money works harder with the prevailing interest rate. Since there are quite many who don’t like the idea of slow wealth accumulating process, evident with the flourishing Get Rick Quick or Skim Cepat Kaya industry in Malaysia, to inform the investors that accumulating wealth takes time, they will probably give you a “Huh?” reaction.
Hence, a proper retirement saving trust fund should also take into account the minimum investing age or probably a locked-in period on the fund.
Another important element is the responsibility of the fund companies to discharge their fund’s characteristics, especially the risk level and various charging mechanism to the public IN PLAIN ENGLISH. If it’s too hard to explain in layman’s term, then at least strive to give some examples. Let the investors feel that you care about their money!
For example, in the prospectus or marketing brochures, don’t just put PTR= 0.68 times and expect the investor to find what that means in the dictionary. Elaborate that PTR= 0.68 times means that over a period of 12 months, the Fund has been buying new securities or selling off securities at a rate of 0.68 times. The higher the rate, the more expensive it is to maintain the fund, since higher turnover rate translate to higher transaction cost.
Well, that might still be rather unintelligible, but I hope you get the idea. Fund companies should do their best to explain everything in clear cut language, without the need to interpret further.
To increase fund companies’ accountability, you can even stick the Fund Manager’s portrait photo on the funds they manage. Why not? Wouldn’t the average investors want to know the face of the man behind the money they are investing with? And it seems 100% logical that if one good Fund Manager is bailing out from the fund, investors should also get wind of it, since fund performance is very much related to the fund manager’s expertise.
Wouldn’t you want to invest in the fund above?
Well, there are a lot more factors that can help increase the transparency and accountability of fund companies and I believe the investors have every rights under the sun to take action on companies that do not fully disclose the necessary information to protect against their money.
Though I’d like to believe that the fund companies need our money more than we need theirs, I think the direct interest of both the companies and investors are mutual- to generate more money when the market closes for the day. However, if there’s a fund company that constantly put investor’s interest first, I am buying!
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Thomas Eng
