Couple of days ago we shared our blog post on Market Prediction and Investment Opportunities for 2018 : What and Where to Invest?? in which we recommended the following markets to invest into:
- LONG TERM (1 Year) : Emerging Markets - India, Brazil and China
- SHORT TERM (Monthly monitoring using indicators from The Guided Investor) : India, Brazil, China, Australia, Germany, UK and Hong Kong
Taking a similar approach as 2017's portfolio,
we will construct a diversified portfolio allocation consisting of
funds investing into emerging markets and developed markets, standby
cash invested into money market fund and lastly a certain percentage
allocated into gold funds as an insurance in the event the equity market
fares badly.
Invest Made Easy Investment Portfolio Allocation
This is how our recommended portfolio allocation would look like:
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| % allocation of IME's Recommended Unit Trust Portfolio 2018 |
From the above, we have 20% allocated into Gold, 15% each into long term
funds for India, Brazil and China, 5% each into UK, Australia and
Germany and 20% into money market.
Key points to observe:
- Hong Kong's 5% allocation is lumped together with China because because there is no Unit Trust fund that's specifically invested into Hong Kong stocks only. In addition, Greater China Unit Trust Funds in Malaysia are normally invested into China stocks listed in the Hong Kong stock market.
- Allocation for India, China and Brazil under the "attractive to invest recommendation by The Guided Investor" are also lumped together with the long term emerging market allocations.
- From an investment strategy standpoint, if these countries (India, China, Brazil and Hong Kong) are not attractive to invest anymore as indicated by The Guided Investor, we will proceed to sell 5% of the portfolio allocation.
- Similarly if these countries becomes attractive again, we will purchase/buy amount equivalent to 5% of our portfolio allocation.
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| A country is attractive to invest into if above 75%. It becomes unattractive when the percentage drops below 75% Check out The Guided Investor for these Indicator which change on a monthly basis |
What are the Recommended Unit Trust Funds for our portfolio?
Now that we have our recommended investment portfolio, it is time to
identify the best funds which are suited for the portfolio. We will
select the funds based on the following criteria:
- Funds must be listed on an online unit trust platform. This is because an online platform offers a large variety of funds, therefore making portfolio construction much easier. The other reason is because of the low entry sales charges (between 0% to 2%) for funds.
- Similar funds are compared in terms of annualised returns. This helps to pick the best among the listed funds.
- Funds are also selected based on how much exposure a fund has to a particular country. This is needed especially when building a Shariah compliant portfolio where the options are limited.
1) Recommended Unit Trust Fund for GOLD allocation (20%)
Recommended Conventional Fund: RHB Gold and General Fund
Justification : Currently there is only one conventional feeder
fund in Malaysia that's invested into Gold miners stock and that fund is
RHB Gold and General fund. Therefore it is a straightforward decision
for us to pick this fund to represent our Gold allocation for the
Conventional portfolio.
Recommended Shariah Compliant Fund: Precious Metal Securities Fund
Justification : Currently there is only one shariah compliant
feeder fund in Malaysia that's invested into Gold miners stocks and that
fund is Precious Metal Securities fund provided by AmFunds Management
Sdn Bhd. Therefore this is also a straightforward decision for us to
pick this fund to represent our Gold allocation for the Shariah
portfolio.
2) Recommended Unit Trust Fund for India Market (15%)
Recommended Conventional Fund: Manulife India Equity Fund
Justification : Our preferred fund when investing into India equity market. Key reasons why we favor this fund are:
- Have performed well on yearly basis (2015 : +19.32%, 2016 : +4.50% and 2017 : +31.21%)
- Available on our recommended online unit trust platform
- The only fund that invest purely into India Equity market.
Recommended Shariah Compliant Fund: TA BRIC & Emerging Markets Fund
Justification : There are limited unit trust funds in the Shariah
category that are invested into the Emerging market area. As a matter
of fact Morningstar only list one shariah compliant fund under the
Emerging Market category which is this fund. Therefore it is only
logical that we are recommending this fund for the Shariah portfolio.
The December 2017 factsheet for this fund indicates that it has
allocated 14.02% of its total investment into India as shown below:
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| TA BRIC & Emerging Markets Fund (Geographic Allocation) |
With no other option available, we are going to go with recommending
this fund as the preferred shariah compliant fund for our India
portfolio.
3) Recommended Unit Trust Fund for Brazil Market (15%)
Recommended Conventional Fund: Advantage BRIC Fund
Justification : While there is one other fund that's specifically
investing into the Brazil Market, we could not pick that fund as our
recommended fund because it is not available on the online unit trust
platform.
Instead we are picking Advantage BRIC fund as our recommended fund due
to its large allocation of investment into the Brazil market (19.89% to
be exact as shown below):
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| Advantage BRIC Country Allocation as of 30 Nov 2017 |
In addition this fund has also performed rather well in the past, returning +37.48% in 2016 and +16.50% in 2017.
Recommended Shariah Compliant Fund
Fund Name : TA BRIC & Emerging Markets Fund
Justification : As mentioned earlier, there's only one shariah
compliant fund that's invested into the Emerging market. Therefore to
represent the Brazil portfolio, we are going to go with TA BRIC &
Emerging Markets fund which has allocated 16.09% of its total investment
into the Brazil equity market as shown below:
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| TA BRIC & Emerging Markets fund allocated 16.09% into Brazil market |
4) Recommended Unit Trust Fund for China + Hong Kong Market (15%)
Recommended Conventional Fund: CIMB-Princial Greater China Equity Fund
Justification : One of the top performing Greater China funds in
its category with a 5 STAR rating given by Morningstar. The other
awesome point is that this fund has generated double digit % returns
since 2012!
As for country allocation, we see that this fund has exposure into China
(67.40%) and Hong Kong (16.00%). This jives with our portfolio
recommendation of merging the China and Hong Kong market into a single
portfolio allocation.
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| CIMB-Principal Greater China Equity Fund Country Allocation |
Recommended Shariah Compliant Fund: Eastspring Investments Dinasti Equity Fund
Justification : This fund has been our fixed recommendation for
Shariah compliant China fund since 2017. This fund is also the highest
rated Shariah compliant Greater China fund, earning a 4 STAR from
Morningstar. In terms of performance, this fund has return 20.62%
annualized over a 3 year period and is the best performing shariah fund
in this category.
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| Eastspring Investments Dinasti Equity Fund Country Allocation |
In terms of country allocation, this fund has 43.16% allocated into
China and 23.67% into Hong Kong, making this fund the perfect candidate
to match our portfolio recommendation of merging the China and Hong Kong
market into a single portfolio allocation.
4) Recommended Unit Trust Fund for UK, Germany and Australia Market (15%)
Before going into the recommended funds, there's a need to highlight the
lack of country focus unit trust funds available in Malaysia. In order
to meet our portfolio allocation, we have to select funds that has large
exposure into these markets.
In the case of Australia, we have also analyzed funds under the Asia
Pacific category, hoping to find a fund with large exposure into
Australia market. However, we were unable to find any fund that has a
large exposure into Australia. Despite there is one particular fund
that's investing purely into Australia, we could not recommend that fund
as it is not available on the recommended online unit trust platform.
In summary we have decided that we will forego investing into Australia and split the 5% allocation to Germany and UK. Our portfolio now would now have 7.5% allocated to Germany and 7.5% allocated to UK as shown below:
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| % allocation of IME's Recommended Unit Trust Portfolio 2018 without Australia |
Recommended Conventional Fund: AmSchroders European Equity Alpha Fund
Justification : We pick this fund purely on the basis of its
country allocation whereby 34.78% is allocated into UK and 3.36% is
allocated into Germany as shown below:
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| AmSchroders European Equity Alpha Country Allocation |
In addition, the small exposure into Australia is an added bonus for this fund
Recommended Shariah Compliant Fund: RHB Islamic Global Developed Markets Fund
Justification : This fund is also selected based on its country
allocation whereby 11.25% is allocated into Germany and 8.81% allocated
for UK as shown below:
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| RHB Islamic Global Developed Market Country Allocation |
SUMMARY of IME's Recommended Unit Trust Funds Portfolio for 2018
Here's a summary table of our 2018 Recommended Unit Trust Funds portfolio:
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| 2018 Recommended Unit Trust Funds portfolio - Click to Enlarge |
Cheers and Happy Investing
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