Mutual Fund, Anyone?

It didn’t take me too long to transition from being a sceptic on mutual/trust funds to receptive to being a sceptic again. This happens after I have read completely the prospectus and realized how much I would make the agent richer and, in the process, myself poorer.

You see, in Malaysia, I could use major portion of your retirement plan (EPF — Employees Provident Fund) in an approved scheme to invest in unit trust funds. The problem I quickly see is the service charge at the time when I buy units from a fund could be as high as 7%. So the minute I withdraw my hard-earned EPF money, I am poorer my a large amount. Another thing I could not accept is up to 5% of the sales proceed (my money) will go to the agent as sales commission!

Let’s put this whole thing in perspective. If I can withdraw RM100,000 into this investment scheme, I will be immediately RM7,000 poorer. And the worse thing I will make the agent RM5,000 richer. Instantly. Now let assume that, yearly, this agent can get 40 unsuspecting clients (about 3 person a month) who can “invest” this kind of money. He will net RM200,000 a year! That is one BMW 3-series in a year time. Cash! (Ok, maybe not a BMW but a Saab would be well within reach). How long would it take for a trust fund to give me a 100% return on my RM100,000 investment?

So I would be skeptical that this unit trust agent focus would be on getting me to become rich but rather on getting new “investors” as quickly as possible because the lucrative sales commission is just too good. I think the presenter in one of the free investment seminars my wife and I attended 2 or 3 years back was right — do not put too much of your trust in unit trust funds.


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