FAQ
1. What is the difference between purchasing and selling funds from Phillips and banks?
When buying mutual funds from banks, the customers’ choices are limited as the banks only sales to their Asset Management Companies.
However, as Phillips Fund SuperMart is a selling agent for 19 leading asset managements from the total of 21 Asset Management Companies, customers can choose the appropriated funds to their acceptable risk level.
When deciding to invest in the mutual funds, it is necessary for the customers to have an adequate information and recommendation from the professionals with the single license. Buying and selling through Phillip Fund SuperMart, we can assure you that you have contacted with the competent financial advisors who obtain single licenses. They can recommend you the right information by considering the customer’s ability to take risk as priority.
Moreover, we are the one and only company with the mutual fund analysts who focus completely on analyzing and recommending funds to our clients. The analysis is based on theory without any bias when giving investment recommendations.
2. Does customer have to pay more when buying mutual funds from Phillips Fund SuperMart than from banks/assets management?
When purchasing-selling via Phillip Fund SuperMart, the customer is quoted with the same offering price with the banks or assets management. Other additional services are extra services provided by the Company free of charge.
3. I am only familiar with making deposit with bank. Is it risky to invest in mutual funds?
There is a saying that knowledge in investment is something that we should not avoid. If we have the knowledge, we can manage to increase our money for a better retirement life. However, if we have never had the knowledge in the investment, and used to depositing the money with banks, investing in the mutual funds may be suitable way to start learning as the funds are manage by the professionals. The fund manager is a person with a knowledge and experience on the investment who is certified and receives the professional credentials from SEC. The fund manager is responsible for monitoring and managing the securities (stocks, bonds, and others) to meet the investment goals and objectives of the investors.
There are various types of investment risk in mutual funds, varied from low to high. If you are accustomed to making deposits at the banks, at the initial stage you may start investing in the money market fund, a low risk fund investing in the short term governmentbonds. The investor can also receive a higher return than the deposit interest rate.
When you have more knowledge and understanding on the investment, you may choose to invest in the higher risk funds for higher returns such as equity fund.
4. How can I invest in RMF/LTF if I want to get the tax privilege but don’t like the risk?
Beginning with RMF, the government established the Retirement Mutual Fund as the way to promote the saving for retirement to the people. Therefore, the RMF has an objective to invest in various risk level from low risk such as Money Market Retirement Mutual Fund to the high risk level such as Equity Retirement Mutual Fund according to the risk acceptance level.
Therefore, for the investors who are risk averse, Money Market RMF is the appropriated way to invest.
Money market RMF has a policy to invest in short term fixed income. It is similar to the Short-term Fixed Income Fund which offers the lowest risk appropriated for the risk averse.
LTF
LTF can be categorized into 3 categories by type of investment and risk of the fund which are
| |
Category |
Suitable for |
| 1 |
LTF investing mainly in stocks
Although the general equity fund and LTF have the policy to invest or maintain the equity security at least 65 percent on average in the fiscal year, LTF in this category is normally invest in equity security or stock more than 90%
Invest in stocks > 90%
|
- Risk-lover, venturesome
- Or when stock market index is not high (in our opinion)
- Economic cycle are at rise
|
| 2 |
LTF 70/30
Invest in stock not over 70% and 30% in Fixed Income or bank deposit
|
- High risk taker but want to reduce some risk in Fixed Income |
| 3 |
LTF invest in stock and derivatives
To reduce the risk from stock 65% stock + 65% or 55-65% short future depending on each fund |
- Risk averse
- Or manage the risk when stock index is high
|
However, in case the investor wants the tax privilege but does not like the risk, LTF in the 3rd category is the most appropriated. There are only 3 funds in this category and if you need the details in LTF in this category,
You can acquire more details from Phillips Fund Supermart’s Financial Advisors at Tel: 02 635 17 18
5. I want to invest in low risk fund but providing return more than the bank. Which fund should I invest?
You can invest in the money market fund investing in the Treasury bill, government bond orcorporate bond with the maturity less than 1 year, or financial institutions’ certificate of deposit, promissory notes from banks or debt securities with the due date less than 1 year. Those can be called Short-Term Fixed Income Fund.
The advantage of the money market fund is providing the lowest risk with the regular return. The fund usually offers a higher return comparing to the banks. Most of money market funds are less fluctuated.
Money market fund is highly liquidated because this type of fund provided by every asset management company can be traded every working day. Therefore, when you are in an urgent need for money, you can resell to and receive the cash back on the next working day (T+1) although you cannot receive your money back immediately, you have a change to get a higher return.
6. Many of you may not notice that there is a Deposit Protection Agency (DPA) in Thailand. What are its responsibilities?
The Cabinet issued Deposit Protection Act effective on August 11, 2008 with the Deposit Protection Agency which is the government agency that is a non-governmental or state enterprise unit. It is a juristic person, supervised and formulated the policy by the board of directors consisted of chairman, representative from the Ministry of Finance, representative from the Bank of Thailand, and expert members appointed by the Cabinet.
Main responsibilities of DPA are
1. To provide the deposit protection for the depositors.
2. To collect contribution from insured financial institutions, to accumulate the contribution in the deposit protection fund that shall be used for reimbursement to depositors should an insured institution failed, and to act as a liquidator of the failed financial institutions.
http://www.dpa.or.th/Detail.aspx?menu=22&id=50
7.The government will insure only 1 million baht deposit. When and why the government makes a guarantee?
On October 28, 2008 the Cabinet had a resolution to specify the coverage amount in the Royal Decree as follow:
| Year |
Period |
Protected Amount |
| 1 |
11 Aug. 08 – 10 Aug. 09 |
Full amount |
| 2 |
11 Aug. 09 – 10 Aug. 10 |
Full amount |
| 3 |
11 Aug. 10 – 10 Aug. 11 |
Full amount |
| 4 |
11 Aug. 11 – 10 Aug. 12 |
Not exceed 50 million baht |
| 5 |
11 Aug. 12 onwards |
Not exceed 1 million baht |
Deposit protection is a system established by the government in order to strengthen the financial institution system and protect depositors within a certain coverage amount against the loss of their deposits placed in a financial institution. Depositors will be reimbursed within the stipulated period of time without having to wait until the liquidation process is finalized.
Deposit protection aims to protect the retail depositor which is the major depositor in the system from affecting when the financial institutions bankrupt. The financial institutions in the system are protected automatically according to the Act. Depositors do not have to worry or process anything for the protection. Moreover, in case the financial institutions’ licenses are revoked, the Deposit Protection Agency will return the deposit in the amount specified in the Deposit Protection Act.
Currently, the deposit protection system exists in 106 countries.
8. Why can the law only protect the deposit of only 1 million baht (11 Aug 12)?
To provide the full deposit protection to the majority depositors in the system as 98.5 percent of Thai depositors deposit at less than 1 million baht each meaning that if a financial institution collapses, 985 out of 1,000 depositors receive full deposit amount. The rest or 15 out of 1,000 depositors will receive the initial amount of 1 million baht and the portion exceeding 1 million baht will be distributed from the sales of assets from the financial institution with license withdrawal from the Deposit Protection Agency.
9. What is the coverage amount per depositor per financial institution?
The highest amount a depositor will be reimbursed regardless the number of accounts he has with 1 financial institution. The calculation method is as follow
If a depositor has several accounts, in one branch or in different branches, of the same financial institution, the amount of all deposit accounts shall be aggregated.
Example: Deposit accounts of Mr. Somchai are as follows:
Bank A
Chaingmai branch 500,000 Baht
Lumphoon branch 700,000 _ Baht
Total deposit amount 1,200,000 Baht
|
Bank B
Bang kapi branch 650,000 Baht
Pattaya branch 100,000 Baht
Total deposit amount 750,000 Baht |
As of December 31, 2008
If Bank A bankrupts, Mr. Somchai will receive reimbursement of 1,200,000 Baht. |
If Bank B bankrupts, Mr. Somchai will receive reimbursement of 750,000 Baht. |
| If both Bank A and Bank B fail,
Mr Somchai will receive reimbursements of Baht 1,200,000 Baht from Bank A and 750,000 Baht from Bank B. |
As of November 15, 2012
If Bank A bankrupts, Mr. Somchai will receive reimbursement of 1,000,000 Baht. |
If Bank B bankrupts, Mr. Somchai will receive reimbursement of 750,000 Baht. |
| If both Bank A and Bank B fail simultaneously,
Mr. Somchai will receive reimbursements of 1,000,000 Baht from Bank A (deposits exceeding the insured amount could be claimed from the liquidation process) and 750,000 Baht from Bank B. |
10. How would the deposits in joint accounts be insured?
The portion owned in the joint account of a depositor will be aggregated with his single accounts. In the case that the proportion in the joint account cannot be identified, the amount would be equally divided among owners of the joint account.
Example: Mr. Somchai and Mrs. Somying have deposits in Bank A as follows:
| Account name |
Amount (Baht) |
Mr. Somchai’s portion |
Mrs. Somying’s portion |
| Mr. Somchai |
800,000 |
800,000 |
- |
| Mrs. Somying |
350,000 |
- |
350,000 |
| Mr. Somchai and
Mrs. Somying
|
900,000 |
450,000 |
450,000 |
| Total |
2,050,000 |
1,250,000 |
800,000 |
As of December 31, 2009
If Bank A has been revoked its license,
•Mr. Somchai will be reimbursed the amount of 1,250,000 Baht.
•Mrs. Somying will be reimbursed the amount of 800,000 Baht.
As of November 15, 2012
If Bank A has been revoked its license,
•Mr. Somchai will be reimbursed the amount of 1,000,000 Baht. Deposits exceeding the insured amount of 250,000 Baht, will be received from the liquidation.
•Mrs. Somying will be reimbursed the amount of 800,000 Baht.
11. Does the scheme also include the juristic persons’ deposits? How?
The scheme provides protection for juristic persons in the same way as individual account.
12. If I need more details on Deposit Protection Act, where can I search for the information?
13. Why I need to separate the investment into many portions?
Each category of financial assets such as equities, and fixed Income offers a different rate of return each year and it is difficult to estimate. Also, if we put all of our investment in only one asset type, it is considered risky because if that type of asset had a problem such as before the Tom Yum Kung crisis in 1997, the SET index reached the highest at 1,753.73 while after the crisis, it reduced to 207.40 in 1998 or 88.17% decrease, those invested in only one assets may be tremendously affected. Therefore, we should manage our risk by diversify our investment in various types of assets as saying “Don’t put all eggs in one basket”.
If you need more information of the suitable investment portion
please contact Phillip Fund SuperMart’s Financial Advisors at Tel: 02 635 17 18. Our officers are ready to offer you the service.
14. I’ve just started working. Why shouldn’t I put all of my investment in the high risk stocks?
It is true that when we have just started our working lives, we are at the early age and have more time before our retirement, so we can tolerate a high risk as we still have time for the recovery. However, investment only in stocks may be risky similar to when we run with all of our energy, it is possible to fall down and be injured.
Supposing that we were young and put all of our investment in the stocks when the market is at the crisis, we could be extremely loss and if we were in urgent need for money from the investment in the stocks, we might be forced to sell at the price much lower than investment cost with no choice.
It is comparable to putting all eggs in one basket. When the basket falls, extreme damage occurs. On the other hand, if we spread the risk or “Putting our eggs in many baskets” and one basket falls, other baskets will still remain. This means we should not invest in only one asset but spread our investment in various types of assets. For the Youngs, you should own a highly liquidated asset or reserve the money for an emergency. Most measures suggest that you should have the reserve at 6 times of your salary in case of urgent need of money such as car maintenance, sickness or resignation as this amount may help you on the problems.
15. .I used to invest in the Fixed Income Fund invested in the government bond but loss when sell. Why did it happen?
Risk-averse investor or investor who wants to spread their investment usually selects to invest in the Fixed Income Fund in the portfolio. Normally, Fixed Income Fund has the lower risk than the equity fund.
The Fixed Income Fund can be separated to investing in the government and corporate bond. Government bond may be in terms of Treasury bill, government bond, BOT bond which have lower risk from default. In terms of corporate bond, there is a higher risk in terms of financial stability and default.
Fixed Income Fund
can be categorized by portfolio aging into 2 groups
1) Short term Fixed Income Fund and
2) Long term Fixed Income Fund. Short term Fixed Income Fund invests in any debt securities with a maturity of one year or less while long term Fixed Income Fund will invest in the securities with the average aging more than 1 year in the portfolio.
Investing in the Fixed Income Fund providing lower risk than in equity fund does not mean there is no risk. Therefore, the investor should know what risks the Fixed Income Fund has
Default Risk or Credit Risk
Price Risk or Interest Rate Risk or Market Risk
1. Default Risk or Credit Risk
This type of risk is the most important the investor should be aware before making an investment. The investment in debt securities is comparable to giving loans to the issuer of the security with the promise to provide the return in terms of interest at the agreed period and repay the principal at the maturity. Therefore, the investor should consider the issuer’s ability to pay and stability to limit this type of risk.
Government debt securities such as government bond, Treasury bill or debt securities guaranteed by the government are accounted for default risk free. For corporate bond, credit rating will assist you to consider the financial stability of the bond or issuer of the bond. Currently, SEC specifies rating should be assigned for the all corporate bonds issued and sold to the public.
Default bond is the bond that the issuer cannot reimburse the interest and the principal at the specified period. The bond holder can process the litigation for the debt payment or in case of debt restructuring, the bond holder must attend the consideration section in order to make the restoration for the future debt payment.
2. Interest Rate Risk or Market Risk or Price Risk
There’s contra correlation on market price of debt securities against the market interest rate which means the value of debt securities will increase when the market interest rate falls. On the other hand, it value decrease when the interest rate is on rise. Long term debt securities are affected from the fluctuation of interest rate more than short term debt securities.
Source :- The Thai Bond Market Association or ThaiBMA
According to SEC’s rule, NAVs of Fixed Income Fund are calculated using mark to market price which reflects the intrinsic value of the securities. In case of increasing in the market interest rate, the value of debt security will fall.
In case of close-end fund, it does not mean that mutual fund and unit holder will truly loss if he holds the investment unit until the maturity, he will receive the return (interest) as specified.
In case of open-end fund, if you decide to redeem the investment unit at the low price (market price) to repay to the unit holder, the true loss will occur.
In case, the investor used to loss from investing in the Fixed Income Fund investing in the government bond, the reason is due to changes in the interest rate same as the example above.
Therefore, when investing in the Fixed Income Fund especially long-term debt security, it is necessary to evaluate the trend of interest rate. If not, the investor may face the loss.
16. Is it true that when investing in the stock /equity fund, the longer we keep, the more profit we earn?
EQUITY FUND: is a mutual fund investing equity which is usually at least 65 percent of net assets of mutual fund invested in stocks traded in the Stock Exchange of Thailand per fiscal year. Normally,
investment in the fund with a policy to invest in equities with higher risk and highly fluctuated provides more return than investing in Fixed Income Fund or Balance Fund. It is, therefore suitable for investor aiming for high return but in turn, can accept a high risk and able to invest in a long term.
Stock market’s history rate of return
| Year (AD) |
% of change in stock market index |
| 1999 |
35.11% |
| 2000 |
-46.00% |
| 2001 |
11.70% |
| 2002 |
16.81% |
| 2003 |
119.66% |
| 2004 |
-15.53% |
| 2005 |
6.83% |
| 2006 |
-6.31% |
| 2007 |
30.16% |
| 2008 |
-46.62% |
| 2009 |
53.45% |
| 2010 |
41.03% |
| Highest |
119.66% |
| Lowest |
-46.62% |
From the information above, we can notice that during 12 years the stock market provided only 4 years negative yields but 8 years of positive yields. The lowest negative return of -46.62% was in 2008 in contrast with in 2003 which provided the highest return of 119.66%. When invest in stocks, the longer we hold the securities, the lower fluctuation of average return it provides.
Below is an example if you invest 100 baht at the beginning of 1999 in the stock market. (Assume rate of return equals to SET index)
| Initial investment = 100 Baht |
| Year (AD) |
Rate of Return |
Value of investment(Baht) |
| 100.00 |
| 1999 |
35.11% |
135.11 |
| 2000 |
-46.00% |
72.96 |
| 2001 |
11.70% |
81.50 |
| 2002 |
16.81% |
95.20 |
| 2003 |
119.66% |
209.11 |
| 2004 |
-15.53% |
176.63 |
| 2005 |
6.83% |
188.70 |
| 2006 |
-6.31% |
176.79 |
| 2007 |
30.16% |
230.11 |
| 2008 |
-46.62% |
122.83 |
| 2009 |
53.45% |
188.49 |
| 2010 |
41.03% |
265.82 |
The investment value at the year ended 2010 equals to Baht 265.82.
However, the investor needs to aware of risk and ability to tolerate risk from the investment as well as manage the appropriated investment unit. All of the investment should not be put only in the Equity.
Past performance is not a guarantee of future results.
17. Investments contain risks. Investors should study before making a decision to invest.
Does invest in gold fund or oil fund equivalent to buying gold or oil?
Let us first explain the gold fund
Gold Fund is currently popular among the investor. Many Asset Managment Companies such as TMB asset management, KAssets, MFC or AYF will take the domestic investment to invest in SPDR Gold Shares in the foreign countries. SPDR Gold Trust is an Exchange Trade Fund registered and traded in 4 markets namely; New York Stock Exchange, Tokyo Stock Exchange, Singapore Stock Exchange, Hong Kong Stock Exchange.
SPDR Gold Trust is the largest gold trust in the world that provides the return after fee and administration expenses close to gold price.
The Trust focuses on making the return at the rate close to London Gold PM Fix Price in USD. It is more convenient for the investor as the investor does not have to keep the physical gold themselves but with the assistances of HSBC bank USA, N.A.
Gold in the trust is quoted in USD and kept in the strong room of HSBC bank London.
For oil fund
As oil is not easily to be kept because it requires a tank which is costly, as well as it has a security problem, the oil fund established by Asset Managment Companies in Thailand usually a mutual fund investing in FIF, Feeder Fund type which will invest in Powershares DB Oil fund managed by DB Commodity Services LLC (DBO). The fund invests in Futures contract in NYMEX USA which quoted based on West Texas Intermediate (WTI)’s crude oil price to create a return at the rate close to Deutsche Bank Liquid Commodity Index - Optimal Yield Oil Excess Return
Investment in future oil contract will select a contract with the maturity within 12 months by applying Optimum Yield strategy to reduce the effect from Negative Roll Yield. Therefore, regarding changes in NAV, DBO fund will change the contract when comparing to NYMEX oil’s price when the contract is close to maturity. This provides the differences between DBO and NYMEX’s NAV price.
18. Investor may be familiar with SEC but does not understand their role and responsibility? What are their functions according to the law?
The Securities and Exchange Commission, Thailand was established in 1992 and performs the functions of the capital market supervisory agency with the status of an independent state agency.
The SEC was founded under the promulgation of the Securities and Exchange Act B.E. 2535, with a mission to:
“Develop and Supervise the Thai Capital Market to Ensure Efficiency, Fairness, Transparency, and Integrity”.
The SEC’s 2010 - 2012 strategic plan focuses on four major goals:
Maintain orderly market
Ensure investor protection
Foster business innovation
Promote competition
19. Why do I lose money in the first day of trade in a money market fund which is considered to have the lowest risk?
The loss is caused by the difference between NAV (Net Asset Value) per unit and OFFER price per unit (offered to a trader by an asset management company). The difference at 0.0001 baht per unit is considered a very low trading fee. Despite the fact that you sell the unit trusts on a weekday after they are bought, there should not be potential for losing money unless other risks like a credit default event occur. It is just that you may not constantly gain profits as expected. To achieve constant profits, it should take up to 2-3 weeks of holding.
20. What is NAV, BID and OFFER?
NAV is a fund’s total assets calculated from present value of total assets using closing price of a certain market such as The Stock Exchange of Thailand, minus accrued expenses and plus accrued income. If NAV is divided by the total number of unit of that fund, you get NAV per unit.
BID is a redemption price (the price at which an investor sells an investment to an asset management company). Bid price is NAV per unit minus redemption fee. Mostly, in Thailand, redemption fee normally is not charged and that makes bid price and NAV per unit price the exact same price.
OFFER is an offer price (an investor buys an investment from an asset management company). Offer price is NAV per unit plus the front-end fee of an asset management company. The investor is responsible for this expense. Fee rates depend on many factors such as types of fund and investment strategies.
21. Through which channels can you check daily Net Asset Value?
You can check daily Net Asset Value through many channels such as business newspapers and websites provided by asset management companies. You can also go to Philip’s website which informs you on the daily Net Asset Value of 21 asset management companies Philip works as their agent. If you would like the information on the daily Net Asset Value of the funds of different asset management companies you invested in through Phillip Fund SuperMart, use your provided password which can be used for logging in. Simply choose the menu “Phillip Fund SuperMart” and “Current Holding” respectively and the daily Net Asset Value of the fund shares you buy through Phillip will be shown.
22. What is Auto Redemption?
Auto Redemption is open-end fund which is automatically redeemed and earnings are credited back to the investor from time to time, which is similar to what the dividend payout system does. In the case of dividend payout, however, you have the right to either declare the proceeds as your income to be taxed at the end of the year or pay 10 percent withholding tax so that the proceeds do not need to be declared and taxed. As for auto redemption, basically, an asset management company arranges auto redemption for their customers based on a fixed amount of proceeds, so the customers do not need to fill order by themselves. Therefore, no income tax is levied on the profits a person gains from auto redemption.
For example, if an asset management company pays you 3 percent on your investment, you have to pay 10 percent withholding tax or 0.3 percent of the proceeds. It means your exact amount of proceeds is only 2.7 percent. On the other hand, if you get auto redemption, you get 3 percent net based on the fact that no income tax is levied on the profits a person gains from auto redemption.
There is one more aspect of auto redemption you should know. When you get auto redemption, your amount of unit trusts relatively decrease. Suppose you invest 1,000 baht (100 units and 10 baht per unit) in this type of fund and you gain 100 baht profit, you will get 100 baht and income tax exemption when your agent arranges auto redemption for you. When your total investment account increases to 1,100 baht, although NAV per unit will relatively move from 10 baht to 11 baht, your amount of unit trusts decrease, calculated from 100 baht gained divided by the redemption price on the day the auto redemption is provided (11 baht per unit). It means your unit trusts decrease for 9.09 units and you have 90.91 unit trusts left. However, your investment account is the same amount as when you first invest, 1,000 baht (90.91x11 baht).
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