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.

Compounding Interest

There is investor of mine once asked me , "Charis , what is this term compounding interest ? ", "How does it benefits me ?". So then , hence today my topic will be Compound Interest. 

What is Compound Interest? 

Basically compound interest is your initial principal + accumulated interest over the periods.

In other words it is  basically interest on interest.

So like I mentioned earlier on the questions my investor asked, I replied that when you opt for reinvestment you are already benefiting the value of compounding interest. I will show you the reason behind below :-

Let say you invested RM10,000 with the rate of return of 5% on a compounding interest basis. 

Year 1 :  RM 10,000 * 5% =  RM 500     = RM 10,500

Year 2 :  RM 10,500 * 5% = RM 525      =RM 11,025

Year 3 :   RM 11,025 *5% = RM 551.25 =RM 11,576.25  

Therefore the total interest received  = RM 1576.25
( RM 500 + RM 525 + RM 551.25)

As compare to simple interest / without compound interest :-

Year 1 : RM 10,000 * 5% = RM 500 = RM 10,500

Year 2 : RM 10,000 * 5% = RM 500 = RM 10,500

Year 3 : RM 10,000 * 5% = RM 500 = RM 10,500

Total interest received = RM 1500

As you can see , obviously with compounding interest it is more worth while if you understand the basis of Time Value of Money, which simply means that money available today is worth more than the future unless money itself an generate interest themselves. Hence, we are need to invest our money in different platform in order to make our money value more value in near future. 

Therefore, the higher the number of compound periods the greater the compound interest value. Compounding interest also aids in boosting up the investment value over the long term periods.

PM me for more info on how to have a better returns for your financial goals. 

charissim.ristyle@gmail.com

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

The CPD of Wealth

Good day everyone , first and foremost i would like to apologize for not constantly updating. I am back now with all geared up and ready to go. 

As you can see today's topic will be "The CPD of Wealth" . What is the C P D? 


Without the CPD the financial planning will not be complete. CPD is an essential in financial planning in determining an your personal short and long term of financial goals. 

So let's us start with the first letter :-



C : Creation 

We first need to create before we build. By creating it only we can move the next level. How do we create ? We need to first take the first step in knowing your own goals for the short to long term. It is only upon knowing those you're able to plan and work on it in achieving it. 

In all goals settings we need to know that there is no short cut. Therefore, we need to know the 5 main elements in goals and objective settings. These are :-

S -Specific

M- Measurable 

A- Achievable 

R- Realistic 

T - Timely





P : Protection 

Often so we learned to build and accumulate our wealth we forgot that we need to protect it so that our wealth so that our love ones are the one who is able to share the joy and happiness of what we have build. Therefore the next step is to protect yourself and your wealth . The thing you need to do is get an insurance that protect your funds, Yes you heard me right , yes there is, Get yourself a PA ( Personal Accident ) too. 




D : Distribution 

As you can see once we build something we need to protect it and once we protect it we need to learn how to distribute it when its necessary. Therefore we need to be prepared and get all ready with our Will / Wasiat Writing as well as Trust Nomination services so that the wealth that is preserved can be distributed accordingly to your next in kin.

Therefore  ,  wait no more ! 

Dof eel free to drop me an email or comment if you wanna know more on the options availbale in the market. No harm knowing no harm trying ! 

Nothing is too late but if you are doing nothing then is too late !