Do you know Public Mutual Equity fund is a direct relation performance with KLSE? Yes it is but how it's happen? Public Mutual equity fund which 70%~85% of their asset allocated into our local market investment is mostly invested in company listed in KLSE. To make easier understanding, most of our blue chip company listed in KLSE having our fund as part of the shareholders likes Sime Darby, Tenaga Nasional, Telekom, Axiata, IOI Corporation, IJM Corporation, Gamuda berhad, Maxis, Petronas Chemical Berhad, Petronas Dagangan Berhad and many others company in all sectors such as technology, transportation, industrial, consumer products, construction and others.
All of these companys is actually the main player to make the KLSE index direction up or down. If majority of this blue chip company's share price up, then the KLSE index surely will up. Then it directly impact to Public Mutual local equity fund performance to move upward or downwards also. The chart below is to show the actual KLSE index movement in 6 Month from 29 April until 29 October 2011 and how the impact to the Public Mutual equity funds performance in same period of time. Look closely and you will find that the equity fund having a similar direction with KLSE chart. Some might ask why the price drop if the company fundamentally good in performance? The answer is investors who invest in share market only have 1 goals and it is PROFIT. How much profit? Maximum profit. How to get maximum profit, the simple answer is buy at lowest price and sell at the highest.
From this basic understanding will make the investors are very dynamic. Some people thinking to buy but some people do vice versa. Depends on how they do their judgment. What to judge and how to judge? Some investors are 99% invest base on technical analysis, some might not because they might depend on news or company's fundamental with strong performance and good future prospect so it's make them invest for long term as to enjoy company's dividend and capital gain.
Which strategy to use for investment in Public Mutual?
Everything is up to you and all strategy you can use depend on how big your fund size, how high the risk you can take and how long you can monitor your own portfolio. If you are not reliable enough to have that stands, you better use the best strategy recommended by Public Mutual company which are:
1)Invest for medium (3 to 5 years) to long term (5 years above) and
2)Do regular invesment to get the Ringgit Cost Averaging benefit.
By using this strategy, you are actually minimize you risk almost to 0% (no loss) and maximize your return better than EPF or ASB return. Let me take you an example of Public Ittikal Fund which offered more than 14 years ago. This fund having a similar trend with our KLSE index which also experience the tumble period during recession in 2007~2008. However, in the long term it's can give return on investment of 250%!!!
Current market direction
Once you understand the relation between Public Mutual equity fund performance vs KLSE index, you should consider to understand more what to happen next on our KLSE. If you ask me, then i'm surely give the answer "it's time to invest" base on my previos articles on market outlook as at 27 october 2011... The bull is charging..