Which Fund Is Better? - 21 Feb 2009

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Which Fund Is Better? - 21 Feb 2009

  1. 1. Which Fund is Better? Which Fund you think is better? or Which Fund is easier to sell/ convince people to buy?
  2. 2. Which Fund is Better? (Below is past performance) <ul><li>Fund A </li></ul><ul><li>6-month 67.8% </li></ul><ul><li>1-year 102.8% </li></ul><ul><li>2-year 135.1% </li></ul><ul><li>3-year 146.9% </li></ul><ul><li>5-year 251.1% </li></ul><ul><li>10-year 218.5% </li></ul><ul><li>Fund B </li></ul><ul><li>6-month -26.7% </li></ul><ul><li>1-year -24.6% </li></ul><ul><li>2-year -35.6% </li></ul><ul><li>3-year -29.5% </li></ul><ul><li>5-year -33.8% </li></ul>Period Ending 3 January 1994 Period Ending 2 May 1986
  3. 3. Subsequent Results <ul><li>Fund A </li></ul><ul><li>6-month -12.6% </li></ul><ul><li>1-year -9.7% </li></ul><ul><li>2-year -3.4% </li></ul><ul><li>3-year 14.2% </li></ul><ul><li>5-year -16.9% </li></ul><ul><li>10-year 28.4% </li></ul><ul><li>Fund B </li></ul><ul><li>6-month 26.0% </li></ul><ul><li>1-year 60.0% </li></ul><ul><li>2-year 31.1% </li></ul><ul><li>3-year 71.0% </li></ul><ul><li>5-year 125.1% </li></ul><ul><li>10-year 433.8% </li></ul>Both Fund A and Fund B Is the SAME Fund (PSF)
  4. 4. Lessons Learned <ul><li>Past Performance is no guarantee of future results. </li></ul><ul><li>- In fact, Past Performance is a poor benchmark of future performance. </li></ul>
  5. 5. Lessons Learned <ul><li>Buying when Past Performance looks good </li></ul><ul><li>will almost certainly give poor return in the future, </li></ul><ul><li>because you’re buying when prices are high ! </li></ul>
  6. 6. Lessons Learned <ul><li>On the other hand, buying when Past Performance looks bad </li></ul><ul><li>will almost certainly give good return in the future, </li></ul><ul><li>because you’re buying when prices are low ! </li></ul>
  7. 7. Lessons Learned <ul><li>Past Performance should be compared to a Benchmark. </li></ul><ul><li>- If a fund consistently Outperform its Benchmark over medium to long term, then it’s a good fund (regardless it’s a positive or negative return). </li></ul>
  8. 8. Lessons Learned <ul><li>If want to buy based on Past Performance, then buy: </li></ul><ul><li>a) When Past performance is terrible (which means prices are LOW currently) </li></ul><ul><li>b) Choose Equity Fund instead of Individual Stock, preferably a fund that is well diversified. </li></ul><ul><li>c) Choose a fund that Outperform its Benchmark. </li></ul>

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