Solving doubts from the port repair shop (Part 1)

From the author who has made the program "U Som Port" which is a program of the Treasureist Securities group that helps give advice to investors on managing problematic mutual fund portfolios and has a Q&A section which is a section for viewers to send in questions about investment. The questions that we have picked up to answer, the author sees that they are useful for investors and interested people in general. Therefore, we take this opportunity to collect them for the benefit of readers of the Bank Finance Journal as well.

You can watch the video clip of EP.1 of questions from this QR code or follow the Port Repair Shop program at https://www.youtube.com/@treasurist.

Questions about starting and planning your investments

          Question 1 “I got number 3 on the risk assessment, but I think I can take more risk. What advice do you have?”

          answer : There are two approaches to self-risk assessment. The first standard is to do a risk assessment or Suitability Test. The other is to assess risk by age or Life Stage.

(Figure 2: Life Stage Risk Grading)

The principle is to look at what age range you are in, what life stage, and what level of risk you are in. If you are still young, such as in your late 20s or early 30s, you can take full risk and invest in assets with higher risk without having to worry about the results of the Suitability Test. However, if your age matches the Suitability Test, it may be a bit difficult.

In the risk assessment, there are 2 dimensions. The first dimension is asking about facts such as age, education, and how much money you need. We should not deceive ourselves in answering these questions. The second dimension asks us how much risk we can accept. If you haven't answered that question yet, try adjusting it to see if it will help increase your score. But if you have really reached your limit, you have to understand yourself and know who you really are. You shouldn't force yourself too much.

However, Treasurist also has information from Treasurist Fund Traffic Control, which has a variety of asset classes and has green and red signals to inform you when to buy or sell according to our green and red rhythms. This can increase the risk level and the opportunity to receive returns from the overall portfolio as well. If you see any funds that are really interesting and you really want to buy, you can buy them.

(Figure 3: Treasurist Fund Traffic Control table sent to clients by Treasurist on the first business day of the week)

However, investors should know themselves and study the information of the fund well enough. If there is someone to help look after and have a plan to buy and sell the fund, it can be done. Even if the portfolio is cleared and 100% stock funds are held, we probably can't stop it, but we have to look closely.

          Question 2 “Are profits from investing in mutual funds that invest abroad subject to tax?”

          answer : If it is a profit from the difference in the unit price (Capital Gain), it is not subject to tax because it is a product established by a Thai asset management company. Even if you invest money abroad, mutual funds will only be subject to tax. If there is a dividend, a 10% withholding tax will be deducted at the source. However, if you calculate the total tax for the whole year and think that you can get a refund, you can still get a refund.

There may be another part that may be related but it is a Fund Level, meaning it is not deducted from Investor Level. For example, if it is a debt instrument fund, it was originally not deducted withholding tax, but the new criteria will deduct withholding tax of 15%, which will be reflected in the NAV.

In summary, mutual funds that invest abroad do not pay taxes if they do not receive dividends. However, if they make profits from the difference in unit prices, they do not pay taxes because they are products established by Thai asset management companies. Even if the money is invested abroad, if there is a profit and it is sold, no taxes are paid.

Direct investment in foreign stocks or investment in private funds will be taxed on the profits that occur if the money is sold and brought back, which will be included in the personal income tax for that year. Those who earn a lot of income and have a good profit in a year may be taxed at a rate as high as 35%, which is also a burden for investors.

Questions about portfolio management and diversification

          Question 3 “If small economies are performing better, should we increase our investment in them?”

          answer : According to the Treasurist principle, we want it to be based on the size of the economy because smaller countries are more likely to experience economic volatility. The allocation of the proportion will support both opportunities and risks fairly well. Another thing is that if a small country creates outstanding returns, the proportion will grow on its own without us having to buy more.

But it is also a problem that, let's say we have invested in a proportion of 5% and it has grown a lot to 15%, knowing that the market is riskier than the large market, and we do not cut it down or adjust it back to the proportion that it should be, if there is a reversal, it will hurt, or what we have gained may be returned to the market. Re-balancing is important.

Therefore, we should not increase the proportion ourselves, but should start with a proportion that is consistent with the size of the economy first. Then, if along the way, the price increases and we gain more profit, at some point, we are invited to Re-Balance and reduce the proportion to be in an appropriate range. This will allow us to control the risk level of the portfolio.

When the world is beautiful, we want to add more money. We want to increase the proportion anyway. But we know that the world is both beautiful and not beautiful. We are in the middle path with the opportunity to receive good returns from organizing the portfolio according to the format we recommend. We do not increase until we cannot accept the risk. And when the market turns and we get hurt, we have to evaluate both opportunities and risks.

          Question 4 “Diversification is good, so should I buy multiple funds?”

          answer : There are two ways to answer this: both good and bad. It is good if it is in terms of organizing a portfolio of various asset classes, i.e., there are debt instruments, commodities, equities, and real estate funds in a good proportion. Therefore, they will not be in the same fund anyway. But in the same category, if there is too much repetition, it is not very beneficial and difficult to manage. But if the principle of our portfolio organization is that even though there are many equities funds, we distribute them to tech stocks around the world, India, China, Vietnam, Thailand, which are not concentrated in any one place.

In addition, many funds may invest in duplicate investments. For example, if they are the same type of funds in the same assets, there should not be many funds. For example, an investor has 5 Thai stock funds and when looking inside, there are many companies that are repeated, such as PTT, CP, and various banks. There are many overlaps. Instead of diversifying the investment, it is actually concentrated and difficult to manage. Therefore, having many types and many funds to cover assets should be available. However, if it is a sub-type, it must be considered to be diversified, such as having equity instruments around the world in an appropriate proportion. Do not overlap in the same place too much.

(Image 4: Standard port framework recommended by Treasureist)

Questions about investing in gold

          Question 5 : “If a gold fund invests in gold bars, will the price of the fund change only according to the price of gold bars?”

          answer : It depends on whether it is a Hedged or Unhedged gold fund. If it is a Hedged gold fund, meaning it has eliminated the exchange rate factor, it will follow the world gold price in USD/Oz quite directly. But if it is an Unhedged fund, the exchange rate factor will be included.

The main thing is the Thai baht against the US dollar. Sometimes the price of gold in dollars moves up, but the baht against the dollar is strong. When multiplied together, it doesn't go anywhere. This makes the return on unhedged gold funds different from world market prices as well. So, if we answer according to the material, it is in line with the price of gold bars. But for Thai investors who buy funds with Thai asset management companies, what will have an effect is the exchange rate. The amount received will depend on what the baht exchange rate is at that time.

Now that we know that there are 2 types of gold funds: Hedged and Unhedged, the key factor is that we need to know when to invest in which type, mainly by looking at the exchange rate trend. For the up and down trend, we have Treasurist Fund Traffic Control to help us with the direction, and we can switch the type of fund according to the situation.

These questions are believed to be useful not only for new investors, but also to review and emphasize the importance of investment principles for experienced investors.