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Post by Fletchsmile on Nov 15, 2015 20:24:23 GMT 7
People ask from time to time about starting longer term investments in Thailand using unit trusts or mutual funds. I've been doing this for the best part of two decades in Thailand (as well as longer elsewhere). In that time the choice of funds has increased enormously, and while it may sometimes be cheaper or more efficient to build wealth offshore, there's some good arguments for doing so in Thailand for at least part of your money.
I get people contact me recently about doing this, so thought I'd start a thread.
Assuming you decide to do that, first thing to do is make before investing is to make sure you have set aside enough cash for emergencies. Life's uncertain and last thing you want to have to do is sell long term investments at the wrong time because you need cash. 3-6 months outgoings would be a start.
After that you have a few main choices where to purchase your investments:
1) From your bank - this will often be convenient but for local banks the range may be limited as they often offer only their sister company funds. Bangkok Bank and Bualuang is an example. Once set up can be done online, and can also be done upcountry not just Bangkok
2) Direct from a fund management house - Aberdeen and UOB are to of the best in Thailand and offer ranges which cover most a reasonable spread. For Aberdeen they are Bangkok based so you'd end up with a visit to Sathorn. Bangkok is not always convenient for everyone. Once set up can be done online
3) Thru a bank which offers a range of funds: - Stan Chart is an example here. They don't have their own funds. They have one of the widest range of funds available. The disadvantage is they are mainly BKK based and you can't do online. In my case I get them to send a messenger to our home with forms to sign - TMB have a slightly more limited range but their open architecture means it can be done online, and in addition to TMB funds they also let you purchase Aberdeen, UOB etc The main advantage of this approach is you're not tied to one fund management house and can pick in choose, as no fund management has the best funds in every sector - Kasikorn also has a reasonable range and feeder funds into offshore funds
4) Thru a stock broker, e.g. KGI.
All have their advantages / disadvantages and different ones will suit different people.
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Post by rgs2001uk on Nov 15, 2015 20:33:45 GMT 7
People ask from time to time about starting longer term investments in Thailand using unit trusts or mutual funds. I've been doing this for the best part of two decades in Thailand (as well as longer elsewhere). In that time the choice of funds has increased enormously, and while it may sometimes be cheaper or more efficient to build wealth offshore, there's some good arguments for doing so in Thailand for at least part of your money. Assuming you decide to do that, first thing to do is make before investing is to make sure you have set aside enough cash for emergencies. Life's uncertain and last thing you want to have to do is sell long term investments at the wrong time because you need cash. 3-6 months outgoings would be a start. After that you have a few main choices where to purchase your investments: 1) From your bank - this will often be convenient but for local banks the range may be limited as they often offer only their sister company funds. Bangkok Bank and Bualuang is an example. Once set up can be done online, and can also be done upcountry not just Bangkok 2) Direct from a fund management house - Aberdeen and UOB are to of the best in Thailand and offer ranges which cover most a reasonable spread. For Aberdeen they are Bangkok based so you'd end up with a visit to Sathorn. Bangkok is not always convenient for everyone. Once set up can be done online 3) Thru a bank which offers a range of funds: - Stan Chart is an example here. They don't have their own funds. They have one of the widest range of funds available. The disadvantage is they are mainly BKK based and you can't do online. In my case I get them to send a messenger to our home with forms to sign- TMB have a slightly more limited range but their open architecture means it can be done online, and in addition to TMB funds they also let you purchase Aberdeen, UOB etc The main advantage of this approach is you're not tied to one fund management house and can pick in choose, as no fund management has the best funds in every sector - Kasikorn also has a reasonable range and feeder funds into offshore funds 4) Thru a stock broker, e.g. KGI. All have their advantages / disadvantages and different ones will suit different people. , aint that the truth, been there done that, try getting that sort of service back home.
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Post by Fletchsmile on Nov 15, 2015 20:37:51 GMT 7
For how to invest a couple of things I like doing:
1) Use baht cost averaging/ dollar cost averaging. Effectively by the same amount each month on a regular disciplined basis. The main benefit in addition to discipline and making it happen is reducing risk due to timing. You won't get the best time doing this, but won't get the worst either. Investing a one off lump sum means you need to think more about timing as you could invest right before a crash. Whereas if you invest say 30k a month each month around the same date you remove this risk
2) Pay yourself first. That's to say. Work out how much you can invest each month. Then after you receive your salary stick it away each month straight away. Direct debit can be useful. So the order should be get paid>invest>spend>save the remainder. Many people get paid>spend and then invest what's left. Unfortunately this is less disciplined and overspending risks getting to the end of the month and having not much left so you don't do it thru lack of discipline
Both of these link in with the idea that it is "time in the market" (the earlier you start the better) rather than "timing the market" that will deliver you the best returns.
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Post by Fletchsmile on Nov 15, 2015 20:57:43 GMT 7
So having touched on who/where and how another key step is time horizon. If you're looking at unit trusts mutual funds, remember your time horizon should be at least 3 years, and preferably 5 or more, 10 years plus etc. The product will rise in fall in value, sometimes below what you invested so you need to ensure enough time. If you can only lock away more for a short period or you think there's a good chance you will need the cash before that time frame you're probably better off in cash. What to invest in will depend on a variety of factors, in addition to your time horizon, your own attitude to risk, what you're comfortable with, purpose etc. It makes sense to diversify and spread your money around across different asset classes, eg global and Thai equities, bonds, property, perhaps gold. One of the nice things about Thailand is minimum amounts can start as low as THB 1,000, eg TMB have some low cost index trackers. More commonly though the minimum is around THB 10,000. So if you're investing monthly Thailand really can cater to the basics for a wide variety of people from a low starting amount. Another factor to look at is tax. We have some threads already on Long Term Equity Funds and Retirement Mutual Funds, which will allow you to deduct amounts invested when calculating tax. The tax allowances can be as high as your marginal rate of tax, so up to 35%. Meaning a THB 10,000 investment can effectively cost as little as THB 6,500 Generally for Thai unit trust/ mutual funds there is no Thai capital gains tax. There is witholding tax on dividends and you can choose either a flat rate of 10% or your marginal rate of tax (which you might do if you pay little or no income tax). I've chosen both the flat 10% or marginal rate in different years. I'll also add a few specific funds I like when I get more time Cheers Fletch
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Post by rgs2001uk on Nov 15, 2015 21:06:27 GMT 7
Fletch, carrying on from your customer service comment. I was in a certain building on Rama 4 that overlooks Lumpini Park, after business dealing had been completed, the girl said to me, car keys, why asked I. She said she would send the goffer/serf to get my car from the underground car park and have it waiting for me outside the building, . I told her no need, I will get the bus home. She did a double take of the paperwork and looked at me as if I was stupid, why would anyone with this sort of money be travelling on public transport with the peasants, was probably going through her mind, thankfully being a farang, I dont worry about face or status.
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AyG
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Post by AyG on Nov 19, 2015 15:47:49 GMT 7
- TMB have a slightly more limited range but their open architecture means it can be done online, and in addition to TMB funds they also let you purchase Aberdeen, UOB etc Could you clarify how this works, please? When I look at the list of funds available on TMBAM's FundLink Online I only see TMBAM funds. When I queried this with them by email they replied they only support their own funds. And the TMBAM website doesn't appear to mention any other fund manager's funds.
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AyG
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Post by AyG on Nov 19, 2015 15:57:04 GMT 7
1) Use baht cost averaging/ dollar cost averaging. Effectively by the same amount each month on a regular disciplined basis. The main benefit in addition to discipline and making it happen is reducing risk due to timing. You won't get the best time doing this, but won't get the worst either. Investing a one off lump sum means you need to think more about timing as you could invest right before a crash. Whereas if you invest say 30k a month each month around the same date you remove this risk The benefits of dollar cost averaging for a lump sum are a myth. Research by Vanguard has conclusively shown that if you have a lump sum to invest the best thing to do is invest it straight away. There's a write-up of the research at: business.time.com/2012/11/15/is-dollar-cost-averaging-dumb/In short, most of the time markets go up, so the sooner you invest (and the longer you're invested) the more of the upside you can capture. I guess the only sort of person it's of benefit to is the sort who's inclined to pull all their investments if the markets go down significantly, so crystallising a loss.
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Post by Fletchsmile on Nov 19, 2015 16:40:40 GMT 7
1) Use baht cost averaging/ dollar cost averaging. Effectively by the same amount each month on a regular disciplined basis. The main benefit in addition to discipline and making it happen is reducing risk due to timing. You won't get the best time doing this, but won't get the worst either. Investing a one off lump sum means you need to think more about timing as you could invest right before a crash. Whereas if you invest say 30k a month each month around the same date you remove this risk The benefits of dollar cost averaging for a lump sum are a myth. Research by Vanguard has conclusively shown that if you have a lump sum to invest the best thing to do is invest it straight away. There's a write-up of the research at: business.time.com/2012/11/15/is-dollar-cost-averaging-dumb/In short, most of the time markets go up, so the sooner you invest (and the longer you're invested) the more of the upside you can capture. I guess the only sort of person it's of benefit to is the sort who's inclined to pull all their investments if the markets go down significantly, so crystallising a loss. That's only part of the picture though AyG. It looks mainly at return. Even their conclusion though has caveats in it. Both methods have their place. It's true that if you are only interested in the highest expected value return statistically then the answer is on average the longer you are in the market the more money you will make on average statistically. The advantages of dollar cost averaging I mentioned though were not return based, they were 1) discipline to invest regularly (where you don't have a lump sum) and more importantly 2) risk reduction. The problems of expected return in isolation without considering risk is that the outcomes vary enormously so that probability or expected value has much wider variances. As examples: I've yet to find a single 5 year period for the SET where if you invested 1000 baht every month for 5 years (=60 payments) you would make a loss. I've looked at this statistically many times. The probability for 10 years is even less likely. If you can find one let me know On the other hand it's relatively easy to pick a 5 year period where a lump sum of 60,000 would have made a loss. Ball park it's been around 10% of the time, where someone is unlucky and gets the timing wrong We also know that in the 2000's the US markets were a lost decade for some people. Dow, S&P, Nasdaq all ended 31 Dec 2009 lower than they were 10 years earlier on 31 Dec 1999. So again someone putting 120,000 baht in on 31 December (=120 payments) into US equity indices would have lost money. On the other hand the guy who stuck in 1,000 a month for 10 years and did his 120k that way would likely have been better off and made a profit. The key though is they wouldn't have lost a decade and would have avoided potentially painful losses. Nikkei is another example. It hit its all time high in 1989 - around 26 years ago. The guy who invested a lump sum 26 years ago is still sat on a loss. Ouch! the guy who split his money monthly over that time would be better off and reduced his risk. Those are the real benefits of dollar cost averaging in my view. You won't get the best possible return but you guarantee you won't get the worst possible return either. It's a risk / reward trade off - lower expected returns based on probability but in turn removing risk of losses More times than not a lump sum up front would likely pay more, and on average it will pay more. That's true. But in return the risk is that you get the timing wrong and make a bad loss. For some people that level of risk is unacceptable. Much harder to make a bad loss with DCA/BCA. So you sacrifice some expected return for lower risk and avoiding the nightmare scenarios of picking the worst moment.
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Post by Fletchsmile on Nov 19, 2015 16:51:02 GMT 7
Actually even the article itself acknowledges some of the points above. Yes purely on expected return lump sum is better. But it isn't all about expected return and life doesn't always turn out as expected nor do probabilities This quote I also agree with is an interesting one. Also interesting to think which sort of market we are likely to be in for the next 5 - 10 years, as there are certain periods where Vanguard's research is stronger than others in its conclusion.
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Post by Fletchsmile on Nov 19, 2015 17:02:33 GMT 7
I guess the only sort of person it's of benefit to is the sort who's inclined to pull all their investments if the markets go down significantly, so crystallising a loss. That's also a very interesting point you make, and relevant to someone starting a portfolio. Someone starting a simple portfolio is likely to be less experienced and hence more likely to crystallise a loss thru emotional reactions and inexperience. That will probably result in the worst of outcomes. On the other hand as experienced investors we'd be more likely to hold and ride out. Other factors are age and risk tolerance. As a young guy I'd be more comfortable taking higher risk.
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Post by Fletchsmile on Nov 19, 2015 20:06:17 GMT 7
- TMB have a slightly more limited range but their open architecture means it can be done online, and in addition to TMB funds they also let you purchase Aberdeen, UOB etc Could you clarify how this works, please? When I look at the list of funds available on TMBAM's FundLink Online I only see TMBAM funds. When I queried this with them by email they replied they only support their own funds. And the TMBAM website doesn't appear to mention any other fund manager's funds. Good point mate. When I was referring to TMB, I mean TMB the bank - some people also refer to it as Thai Military Bank. TMBAM is the majority owned asset management/ fund management subsidiary of TMB. If you look at TMB Bank's website you'll see various references to other fund management houses as well as TMBAM's funds, but TMBAM the fund managment subsidiary tend to list only their own funds. Some links below. Not all seem to have English versions of the web page but it gives the picture and google translate helps further. e.g. "TMB Open Architecture Fund, as well as a great brand.
TMB Bank, Thailand's first. Open to everyone, the freedom of investment purchased. With selected mutual funds from various asset quality. Leading you to invest with confidence. Conveniently in one place more than 450 branches across the country". Shows Aberdeen, Manulife, UOBAM, ManuLife, CIMB and then TMBAM www.tmbbank.com/en/landing/view/funds-landing.htmlwww.tmbbank.com/en/mutual-funds/foreign-investment-fund.htmlwww.tmbbank.com/en/segment/personalThe useful thing about TMB here is that you can click on the branch locator for TMB Bank www.tmbbank.com/en/contact/location/branchSo if you were living up in say Chiang Rai you could find your branch of TMB and contact them at the bank there about opening funds from there. I believe that's the way it works but living in BKK haven't done myself. This is what I mentioned earlier. For someone in BKK they could conveniently visit Aberdeen in Sathorn. However, someone up country could probably use their up country bank branch. I would guess the product knowledge and advice might be better in TMB Bangkok (or direct at Aberdeen Bangkok) given the head office and thousands of bank staff. Up country might be more convenient though. In addition to using Aberdeen you could buy UOB, ManuLife etc from your TMB Bank branch. Cheers Fletch
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Post by francois on Nov 20, 2015 11:56:33 GMT 7
Wonderful thread, thank you. Very helpful for someone new to this field and unfortunately lacking a passion for financial affairs So let's say someone is starting a portfolio and has about 30,000 - 40,000 to invest on a monthly basis. Unfortunately living in a remote area up North, Chiang Rai province. So there wont be much on offer here except the local TMB branch. Would it be ok to just go with TMB and stick with that every month for the full amount? Also, most of the funds they offer are TMB funds, from Abardeen i only see aberdeen small cap and aberdeen india growth. There's a couple of UOB and CPAM funds as well. Is it ok to just invest everything in for example aberdeen small cap or should one really make an effort to diversify? Is there any funds anyone can recommend? Im not willing to make any big risks and probably can leave the money for at least 10 years or so. Also, is there anything wrong with just buying the bank's own funds? Lots of questions... Thanks to everyone contributing to this thread!
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AyG
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Post by AyG on Nov 20, 2015 12:27:11 GMT 7
There's a lot to be said on this subject, but I've made a few initial comments below. Wonderful thread, thank you. Very helpful for someone new to this field and unfortunately lacking a passion for financial affairs So let's say someone is starting a portfolio and has about 30,000 - 40,000 to invest on a monthly basis. Unfortunately living in a remote area up North, Chiang Rai province. So there wont be much on offer here except the local TMB branch. Would it be ok to just go with TMB and stick with that every month for the full amount? Probably not OK. You need to invest in a range of different funds. That reduces risk. No point in putting all your money in a fund which subsequently performs poorly - or even loses you money. As the saying goes "don't put all your eggs in one basket". I don't believe TMB alone can provide what you need.Also, most of the funds they offer are TMB funds, from Abardeen i only see aberdeen small cap and aberdeen india growth. There's a couple of UOB and CPAM funds as well. Is it ok to just invest everything in for example aberdeen small cap That would be extremely high risk. Definitely not recommended as a first investment, and should only ever be a small percentage of your portfolio or should one really make an effort to diversify? Is there any funds anyone can recommend? Im not willing to make any big risks and probably can leave the money for at least 10 years or so. Would need more information about your circumstances before anyone could make any sensible recommendation.Also, is there anything wrong with just buying the bank's own funds? Yes. Lack of choice of investment classes. Lack of choice of investment style. (A lot of Thai funds are basically tracker funds, at high cost.) Broadly speaking, if you have income in Thailand it's best to take the tax breaks from LTF (and RMF, but that may not be appropriate to your circumstances). After that I'd personally recommend investing offshore.Lots of questions... Thanks to everyone contributing to this thread!
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Post by Fletchsmile on Nov 20, 2015 15:03:39 GMT 7
I agree with AYG that 30-40k in a single fund probably wouldn't be the right answer. You'd need to spread across several funds. In terms of getting the right diversification/spread coverage Stan Chart has probably the widest range of funds in Thailand. I use them to build a portfolio for the kids in future. For the sums involved it's a decent solution and they have a reasonable range. They have about 200 funds ball park covering the main asset classes, from a dozen or so fund management houses. Not as wide a range obviously as offshore but convenient for small/moderate monthly sums. We're BKK based though. Their disadvantage are no-online purchase platform/ weaker systems and not so convenient if up country. The thread below gives a flavour of a small number, available thru StanChart, including funnily enough some TMBAM funds. Bear in mind these listed are all dividend paying so less suitable for growth over 10 years. Better to pick non-dividend paying from a tax perspective for many people bigmango.boards.net/thread/2807/simple-income-yielding-portfolio-thailandTMB Bank On the other hand can be done I believe from up country, although the disadvantage is the range is more limited. The platform and systems are better though. Going direct to Aberdeen has about 20 funds to choose from. A reasonable start, and some good funds but some obvious gaps in choice. Some of their funds have been consistently good performers, but some like the North American fund have been consistently poor over the years and should be avoided. I'd add that it needn't be an either or fund choice between offshore/onshore. My first investments were in the UK where I came from then later Thailand and offshore where I lived. With a Thai wife and kids I see some onshore investments as important but also keep offshore stuff as well. If starting out you could also build onshore and switch to offshore later once you've built a sizeable amount. i.e sell in Thailand and move the money offshore later. This will cost a bit but the key is starting building wealth and building choices. For the amounts involved for the kids although StanChart's onshore range is more limited, it was easier to set up, and I don't incur bank charges/ FX charges / have to do international transfers / tax forms etc etc. Bid-offer spreads on exchange rates and transfer fees need to be built in if you're investing say THB 10k a month or THb 30-40k a month as that's a sizeable chunk / additional cost when you weigh it up, not to mention the admin hassle
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Post by Fletchsmile on Nov 20, 2015 15:11:53 GMT 7
There's a lot to be said on this subject, but I've made a few initial comments below. Also, is there anything wrong with just buying the bank's own funds? Yes. Lack of choice of investment classes. Lack of choice of investment style. (A lot of Thai funds are basically tracker funds, at high cost.) Broadly speaking, if you have income in Thailand it's best to take the tax breaks from LTF (and RMF, but that may not be appropriate to your circumstances). After that I'd personally recommend investing offshore.AYG. You've already built and created your wealth and investments, plus have years of experience, so offshore becomes a stronger argument, and fits your situation well, since you've also know the investments well some over many years. Would you change that though if you were investments say THB 30k a month from scratch, based in Thailand, and starting out? Would you still go offshore? If so how would you go about it in practice for someone wanting to invest a monthly amount out of salary from Thailand? I haven't found that so convenient - although happen to be catching up with some people from Singapore next week in related fields and will see what they say. I'm not keen on most offshore financial advisors (IFAs).
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