Mutual Funds Via Bangkok Bank

[Firefan]

Was a bit tired of the measly 0.75% on my BKK Bank savings account - so decided to apply for some of the open end funds at BKK Bank.

They have an income funds (short bonds only - fairly safe) with no entry/exit fees earning about 2-3%/year. One can buy/sell via ATM. So instead of leaving (much) cash at 0.75% I simply sell units from the income fund whenever I need more cash - and it goes straight into the savings account. I have yet to try a sell - but lady said it would take max one day.

First time one has to do the buy at the bank. I also picked a fund with a bit more equity exposure (higher risk but potentially also higher return) - but note that there is a fee for withdrawal on those.

On a side note; applied for internet banking - they wanted work permit, but my yellow housebook (tabien bahn)+non-em b visa convinced them that work permit was not needed.

Cheers!

[expatinasia]

I use Schwab in the US. Everything can be handled via the 'net, or collect phone call. Too, I have an ATM card with no charges for international usage. Large transfers are done via emails + SWIFT, settled in 10 hours. I'm not familiar with Thai-based mutual funds, and prefer to stick with the ones based in the US.

[samran]

If you are earning income in thailand (and paying tax on it) then I’d look at investing in a long term equity fund which the banks offer, as they have pretty good tax advantages. Any amount you invest (up to 15% of your salary or 300,000 baht – whichever is lower) can be used as a legitimate tax deduction for that year your invest. If you view the extra after tax income you would get every month as a result of this investment as part of the overall return, you’ll see that the return can be pretty good.

Do the calculations yourself, but to use nice round figure, I worked out that if someone who earns 1.2 million per year (100K per month) invested 100,000 into a LTF they’d be looking at an extra 30,000 baht per year as a result of a lower marginal tax rate. That’s a 30% return on your investment. The LTF’s require that you invest for five calendar years, but in reality this is only 3 and a bit years, as if you invest on the 31st of Dec, the next day (1st of Jan) is counted as a second year.

Most banks offer the funds, and they in themselves have a 8 to 10% return.

[Khun ?]

Good article on mutual funds.

My opinion of offshore accounts they take it to another level than this.

Hidden fees and all. Nothing but a money market account for the broker

who will be laughing all the way to the bank how much commission and kickbacks they get from the funds. Why do you think these offshore people that work unregulated markets such as Thailand are overseas instead of back home getting 6 figure bonuses for doing customers a good job. Cheaper many times to pay the taxes on profits than commisions on the full amount of your investment.

http://finance.yahoo.com/columnist/article/richricher/1465

From 1945 to 1974, the Western World -- including America -- was more socialistic than capitalistic, more pro-labor than pro-business. While that may sound surprising, when taken in context it makes perfect sense.

World War II had just been won and the Great Depression was still fresh in most Americans' minds. Having lived through these challenging times, Americans wanted a more benevolent, worker-friendly government. And they weren't alone. In England, Winston Churchill lost the 1945 election -- even though he was a war hero -- primarily because the English people wanted a pro-labor government, not a pro-capitalist government. Back in the U.S., President Franklin Delano Roosevelt's pro-worker policies were already in place, including the New Deal and Social Security.

This trend began to shift in 1974 with the passage of the Employee Retirement Income Security Act (ERISA). Under ERISA, companies were allowed to switch from defined benefit plans to defined contribution plans. Simply put, the primary responsibility -- as well as the expense and long-term consequences of retirement -- passed from the employer to the employee. As a result, pension plans gave way to self-managed plans like the 401(k) and Roth IRA.

Retirement Investor, Meet Wall Street

One might think that employers were the biggest beneficiaries of the changes ERISA put in motion over three decades ago, but I'd argue that biggest beneficiary was actually Wall Street.

Let me explain.

When I buy a piece of real estate, I may pay a 6 percent commission once. Even though I make money every month for years from my investment, I still only pay my real estate broker once. If I sell, I may or may not have to pay a commission. The choice is mine.

Yet when I invest in mutual funds (the vehicle of choice for most retirement plans), I very often pay a commission, or "management fee," every month -- even if I lose money.

Now I'm not against paying fees or commissions -- as long as I'm making money. But I do have a problem paying commissions or fees every month for bad advice. And most mutual fund advice has been bad, especially since March of 2000.

The Feeling Isn't Mutual

In his book "Unconventional Success," Yale University Chief Investment Officer David Swensen writes, "Sales charges from buying funds and tax burdens from churning funds combine to reduce already poor investor returns. Owners of actively managed mutual funds almost invariably lose." He goes on to say, "Other factors -- unethical kickbacks and indefensible distribution practices -- remain generally hidden from view."

Swensen also quotes a 20-year study which examined mutual fund returns over two decades ending in 1998. The study shows that over two decades mutual funds had miserable returns, an average shortfall of -2.1 percent when compared to the Vanguard 500 Index. And, the study ended in 1998 near the highs of the market!

In other words, most mutual fund managers cannot beat a mechanical method of investing, such as an index fund. But that doesn't stop them from regularly collecting "management fees."

In fact, says Swensen, the fees themselves are one reason many mutual fund managers don't manage to beat index funds. "A significant portion of the ... underperformance arises from the payment of management fees," he writes.

So if you're thinking about parking your retirement money in a mutual fund, be sure to ask about commissions and management fees. Or, even better, consider an index fund.

[Firefan]

Good stuff Khun - reason why I am mostly in index funds myself, except for asset classes where no index funds in place (yet).

Meanwhile for the cash I have standing in BKK Bank I just wanted to obtain a bit more interest and the short bond fund and the easy swap in/out via ATM does the trick for me.

Cheers!

[fxm88]

I'm not sure why people are suggesting non-Thai investments to you: 1) your post clearly states that you're looking for better returns on the money you have sitting in a Thai bank and 2) who imagines anyone comes to Thaivisa.com looking for non-Thai-specific investment advice?

Anyways, I see something on the Bangok Bank home page called Bualuang Thanarat 8/50 (also referred to as Bualuang Thanatavee Fixed Income Fund) and wonder if it's a better deal than the savings account. Most of the details (prospectus, etc.) are in Thai but it says *The fund has twenty to twenty one-months life span,maturing in August 2007...comparative lowest risk...debts instruments which are issued or guaranteed by the government...will auto-redeem the units at the minimum rate of 4.00% p.a. The first redemption will be after the first three months, then every six months thereafter...Registered Size : 3 billion Bt or up,but not more than 450 million Bt [sic.]...Front-end Fee: No charge...Redemption Fee: No charge...Management Fee : 0.50% per annum of the Registered Size Value of the fund."

A press release from the 10th says "n response to strong customer demand, Bangkok Bank is preparing to sell the third fixed income mutual fund in the ‘Bualuang Thanarat’ series... This fund will also serve the surplus demand for ‘Bualuang Thanarat 10/49’ and ‘Bualuang Thanarat 11/49’ which were fully subscribed by investors immediately after opening, with a total investment of Baht 9.2 billion and Baht 5.75 billion, respectively."

Is it any good? I'm don't understand the auto-redemption, or the reason for it. 4% is poor, but it's a minimum, can it go higher? In some countries government bonds are tax-free, but here I think they withold the 15% tax, so that lowers the effective rate. The management fee isn't bad, but it's based on the "registerd size", which could be more than the actual size? That's confusing. Googling Bualuang Thanarat only finds "about 11 pages".

I think tomorrow (Monday 21-Nov) is the last day to invest in it, so if anyone knows the details please post them quickly.

[Firefan]

FXM; he,he - good point but we often seem to spin into other investments on this board - I am fine with that and might actually learn something new some times.

Yes I also so the mentioned fund on the homepage and agree sounds resonable. It is however not the Bualuang Thanatavee Fixed Income Fund as I believe that is the one I am holding now.

I also find the auto-redemption a bit confusing but I guess good for people who want to count on the income even though waiting 3 months for first payment followed by 6 months for 2nd payment makes it a funny duck for sure.

I would think that the amount put in (say 1M Baht) will remain the same during the entire period but the INTEREST (which they can not call it - as it is a mutual fund and they use "auto redemption of units" instead) will be paid put after 3 months and then half-yarly after that.

If the bond fund does BETTER than the guarenteed 4%, it looks like you will get more return - I agree with that observation too.

Cheers!

[fxm88]

Yes I also so the mentioned fund on the homepage and agree sounds resonable. It is however not the Bualuang Thanatavee Fixed Income Fund as I believe that is the one I am holding now.

Are you sure about that? This page refers to it as "Bualuang Thanarat 8/50" but the box on the right with the links to the prospectus calls it "Bualuang Thanatavee Fixed Income Fund". And the on the Fund Menu "Bualuang Thanatavee Fixed Income Fund" links to the "Bualuang Thanarat 8/50" page.

Not that I would be surprised if they've got their links messed up.

Edited November 20, 2005 by fxm88

[Firefan]

Yeah I think they messed up the links as not same link as when I cliched the Thanatavee Fixed income fund before. Just checked my book (yeah you get a book per fund) and same name there. No 8/50 Etc. anywhere.

Also when clicking the fund fact sheet(monthly) to the right the window crashes!

When I clicked it before a Thai pdf with historical graphs came up. As the 8/50 is a NEW fund it can not have historical nos.

Cheers!

[Firefan]

Here are now some 11 month/12 month bond funds paying 3.6%/pa minimum (not sure whether it is guarenteed return or simply taken from the total capital every 6 months no matter what). Cheers!

http://www.bangkokbank.com/Bangkok+Bank/Pe...anarat12_49.htm

Edited December 1, 2005 by Firefan