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August 11, 2011

Personal analysis of Public Mutual on August 2011

It's the fact that stock market will crash every 10 years and it can be clearly seen on year 1987-1989 (failed leveraged buyout of United Airlines causes crash), 1997-1998 (Asian & Russian financial crisis), 2008 (financial crisis). Lately in early August 2011, a sudden fall of stock market happened across United States, Middle East, Europe as well as Asia. Basically, it's due to Standard & Poor's downgraded US credit rating to AA-Plus from AAA.

Regardless of stock market or unit trust, when there's a big impact of depreciation, a common question will arise, which is, should we hold, sell or buy more units? Well, since I only interested with unit trust rather than the stock market, I will only state out my point of view based on unit trust, specifically, Public Mutual.

Before begin the analysis, firstly, I would like to say the following points are just based on my point of view, some of you may be offended, but like I said, these are just my opinion. Now, let's take the oldest mutual fund in Malaysia as an example, Public Savings Fund (PSF).

Let's put aside the factors that caused the market crash. Observe the screenshot above carefully, green dots, red dots as well as the dates below it. Every time a minor/major financial crisis was experienced by the market (refer to the 3 green dots) to matter how bad it was, the market will definitely recover (refer to the 3 purple arrows). After a certain stage of recovery (approximate 2-3 years later), the market will be at the highest peak which it can reach (refer to the 3 red dots), after that another crisis may occur again repeating the same cycle!

Again, before I proceed further, I would like to repeat. The analysis above is just based on my point of view, if you're offended, I'm sorry. Alright, now we're done with the oldest fund in Malaysia, let's observe the similar pattern above on the 2nd and 3rd oldest funds in Malaysia, which are Public Growth Fund (PGF) and Public Index Fund (PIX).

Can you the similarity? The highest peaks after minor/major crisis (the red dots) are my main point here. Anyhow, to answer the previous question, should we hold, sell or buy more, it depends on yourself and your situation. Consult your agent or upline for a clearer answer.

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