Interesting take on Mutual Funds (Unit Trust funds in Malaysia)

John Chow talks in depth of his view on why the mutual fund industry is a scam. According to John, who has a penchant for fast cars and electronic gadgets, the whole mutual fund industry is set up to scam investors of their money. He does have a point, given the exorbitant entry fees for unit trusts 5 to 6% of initial capital invested, and 1% per annum management fee. He says basically you are giving them money to keep the workers in that industry employed. So, food for thought?

But John does say that if you want to invest in mutual funds, invest in a low cost index fund. Is there such a thing on Bursamalaysia? You betcha. Few weeks ago, Bursamalaysia launched its first index ETF (Exchange Traded Fund), the FBM30ETF, which is benchmarked against the FTSE Bursamalaysia Large 30 index. This means the fund invests in index weight the 30 component stocks of the FBM30 index. Cost to pay? Brokerage and stamp duty for in and out transactions, but there is a small management fee. And for those who have visions to 'invest abroad', as the unit trust companies are pushing here, ETFs are available on most stock exchanges. For example if you want exposure to the tech sector in the USA, you can achieve this by investing in the QQQQ, the Nasdaq 100 index tracking ETF. You only need a broker.