Understanding Distribution of Income

As investors it is important that we are aware of the meaning of distribution of income in our own investment.




Equity Funds

The realized income comprises capital gains and dividend income. Capital gains are generated when the fund sells its investments that have appreciated in value while dividend income is earned from the fund's holdings of companies' shares.

                                                        DEPENDS:-

• market uptrend      /       market downtrend     
• stronger corporate earnings       /    weaker corporate earnings
• higher capital gains & dividends       /     lower capital gains & dividends
• higher distribution of income     /   lower distribution of income

When the market is in a favorable market condition the capital gains will increase and when the market is in a challenging market conditions the dividend income will decline. Therefore , there is a positive relationship between the market conditions with capital gains and dividend income.

Fixed Income / Bonds

Income distribution derived from :-

1. coupon income from bonds
2. capital gains from selling bonds
3. interest income from deposits

Generally , fixed income / bonds funds pays distributions to unit holders on a fixed schedule ( semi annually / annually) due to the bond issuers are usually government entities and corporations that are obligated to pay interest / coupons at a fixed intervals. Hence, the risk are lower as compared to equities.

However , investors should also know that bond prices and interest movements are in a negative relationship which means , if at any point of time the interest increases, the bond price will fall which also means that there's an impact to the capital gains generated. Conversely , when interest rates decline , bond prices appreciates and the funds are more able to generate higher quantum of capital gains.

Hence in both equities and bonds funds , investors are advised to stay in the medium to long term in order to ride out the short term volatility in both funds as well as taking the advance of the compounding interest.  Click here for compounding interest understanding

I hope that now you have a better understanding on the distributions and its always good to invest based on your financial goals and for a better portfolio management to have both funds in a certain percentage  range from 70:30 , 60:40 , 50:50 based on your own risk profile classifications.

What is Mutual Funds / Unit Trust

A few days ago , a few people came up to me and asked me what is Mutual Funds /  Unit Trust ( MF/ UT), hence my topic of the day. 



So what is MF/ UT to you ? 

To some of us, it is a form of investment / another option to place you funds in to earn a better return. 
Then comes the next question. What is investment to you ? When we say we are investing into anything we are actually putting in some cash / time into something in order for us to earn a certain return. The return could be in terms of better interest / skills set / knowledge / etc... for our own future benefits. 

Yes, you got it right, MF / UT does gives a better return in general as to compare to fixed deposits and other instruments. The key here is we need to know our objectives on investment and the duration we need to achieve it. Why do we need a duration or a time frame ? Because that's only make it more meaningful. Investing is not an overnight thing its a medium to long term thing. 

* take a look at my older post for more insights*

Sp MF/ UT is basically a pool of funds collected from different individuals / corporate which is known by investors. Yes that's include me and you . If you are investing or plan to invest in MF/ UT then you are an investor or potential investor. 

Thereafter the pool of funds will be entrusted and managed by professionals which are known as fund managers. These fund managers will then select the company stocks that is suitable based on the risk tolerance of the funds and objectives of the funds as well as the types of the funds.
( equities , money markets, bonds, balance , mixed assets, index )

At the end of the day what we all are looking for is the return as i mentioned above. So how does the returns earns. Well in MF/ UT our returns are based on :-

1. Capital Appreciation 
Increase in the fund price 

2. Income Distribution 
Dividends.

3. Combination of (1) & (2)



Benefits of MF / UT :-

1. Well Diversified - Different Asset Classes

2. Managed by Fund Managers

3. Lower Risk - Stocks Selections and Types of Funds

4. Liquidation - Redemption is able to be credited to your account in 5-7 working days

5. Flexible - Invest at your own pace ( monthly, quarterly , semi annually, yearly, additional investment, lump sum)

6.Legacy - Nomination to transfer the wealth accumulated to your love ones.

7. Affortable - as low as RM 1000 and monthly investment of RM100

8. Hedge against inflation and low interest risk.

9. Peace of Mind - Rest assure that it is well managed by the professionals

10. Better Funds Accumulations for the future.



So here is some simple basic information you need to know about MF / UT . I hope it helps you in more understanding. If you would like to know more on the How to get started do not hesitate to contact me or email me at charissim.ristyle@mail.com