Mirror Mutual Fund Performance


If you think mutual fund is not enough for you and you want to be more in charge of your investment, guess what is the best for you? Create your own mutual fund.

Seriously, can I do that?

Not legally as you have to get license and whatnots but on personal scale, it’s as easy as buying stocks.

I know you are joking but why would I do that?

The biggest advantage of buying your own fund is that you can evade the enormous 6.5% initial fee and 1.5% annual management fee. Let’s see how the fees eat up your profit.

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The diagram uses 6.00% initial fee and 1.5% annual fee. At the end of the 5-th year, you almost lose 33% of your profit to the fees. Scary huh?

Scary indeed. What do you mean mirrorring?

Most of mutual fund hold shares of certain group of blue chip companies which are expensive, relatively stable and collectively have high impact on index fund. That’s why we could see high correlation between composite index performance and mutual fund performance.

High portion of mutual fund are those of blue chip shares. So it’s easy for us to replicate mutual fund performance by buying the same shares. Furthermore, it’s clearly indicate the percentage of shares bought in the prospectus or annual report.

Any disadvantage?

Mutual fund managers are backed by elite group of analysists. They know better when to buy and sell. However, as blue chips are expensive and more stable, buying/selling decision are seldom made. So there are less things to worry about.

Blue chips price are also expensive. With the same amount of money, you’ll get less shares than other cheaper shares.

You also need trading license to buy and sell. So it needs a little more stuff to do before you could start trading.

Final words

Here I just give a general approach. You might want do more research on your own. Start slow, get experience and don’t do what panic people do.

Good investing.

  1. #1 by goalcentre.com on December 31, 2007 - 9:09 am

    Where do we get that program? It seems interesting though. Thanks for the sharing! Now i can be my own fund manager! ๐Ÿ™‚

  2. #2 by Wai Yien on January 3, 2008 - 12:27 pm

    Curious how do you compute or arrive at Profit after fees?

  3. #3 by goalcentre.com on January 5, 2008 - 11:09 am

    Yeah i am confused on that matter as well. Could you enlighten us?
    Thanks! ๐Ÿ™‚

  4. #4 by chua on January 12, 2008 - 8:48 am

    Hi,
    I’m also curious how you get the amount of fee for 5 years & 10 years.
    Bear in mind, initial fee 6% should be added ONLY once into the amount of fee no matter how many years you invested, that is $600.
    If not wrong, the correct amount of fee for 5 years & 10 years should be $1607 (26%) & $10039 (18%).
    Thanks..

  5. #5 by skfc2o on January 12, 2008 - 4:49 pm

    Thanks for the advise. Maybe i should start to invest on my own. I’ve learn a lot from your website.

  6. #6 by Nadlique on February 1, 2008 - 9:51 pm

    Hi ๐Ÿ™‚

    Just thought of sharing my views.

    Mirroring mutual funds would be a rather impossible task for individual investors with a small capital. Impossible in the sense that the level of diversification that can be achieved by mutual funds can’t be be mirrored by individual investors (you can, but sometimes it’s just not viable to do so). Mutual funds hold 30, 40 or even more financial instruments in their portfolio. Unless of course, we’ve got a huge sum of money, then that might be possible. Compare a person who has an initial capital of RM10,000 versus a mutual fund that has a capital of say, RM1 billion.

    However, when I say it is quite impossible to mirror mutual funds, I have to say, matching or even beating the performance of mutual funds, can be rather easy. True, we can only dream of having the sort of resources that mutual funds have. These fellas sometimes have a whole floor of research analysts at their disposal but individual investors can beat these folks with just limited resources, any time.

    So, all in all, mirroring mutual fund’s portfolio diversification, quite hard.

    Matching or beating mutual fund’s performance, pretty easy.

  7. #7 by jhuan on June 9, 2008 - 1:51 pm

    Nadlique Says:
    February 1st, 2008 at 9:51 pm

    mirroring mutual fundโ€™s portfolio diversification, quite hard.
    Matching or beating mutual fundโ€™s performance, pretty easy.

    ————————————–
    I agreed with what Nadlique had just said. Simple investment in a few stock counters are pretty much easier to monitor by any individual.

    Another approach to investment would be diversification. Some money goes to mutual fund for long term e.g retirement- stable income. Invest in a few blue chip counters for capital gain. Also can consider annuity offer by insurance company (stable stream of income yearly).

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