Buying Mutual Funds in Taiwan

Business Money
1

Hi All,

I am a rookie investor who doesn’t know much about stocks, etc. I want to invest a small amount, maybe 3000 USD (100,000 NT) or so. I am willing to take medium risk, but don’t have much time to research or deal with this investment everyday. I just want to put it somewhere for like half a year or a year, forget about it, and come back and hopefully it’ll make some money for me.

So now the questions are:

  1. Are mutual funds the best choice in this scenario? If not, what do you suggest?

  2. What are the chances of losing money with a fund?

  3. I realize that there are many types of funds. Which type is suitable for me? I don’t want to be super conservative, I am willing to take some risk. But of course I don’t want to lose money. Is there a fund that generates over 30% in one year, that’s got acceptable risk levels? I understand you can never know…but what about your past experiences? What’s the most you’ve made or lost in a 1 year period with funds?

  4. How do I purchase funds in Taiwan? From banks or direct from fund companies? Which banks are the best for this purpose? Which fund companies are the best (Fidelity, Prudential, etc)? I prefer to go into an office and see an advisor rather than buying online or something.

  5. What are your experiences of buying funds in Taiwan? (Through local channels and not like etrade or some such)

  6. Do they offer most international funds in Taiwan? Are there good funds overseas that you cannot buy in Taiwan? (For example, China funds)

Thanks for the advice!

2

First question: what’s your nationality?

3

For one year or less I would not recommend a fund, they are meant as a long term investment (>3 or >5 years even I would say).
You may be lucky and the fund performs, but then again even “good” funds may drop a few percent-points over shorter periods of time, but over many years they still yield.

That depends on the type of fund, from low (but still possible) to high.

You can’t exclude the possibility of loosing money with a fund, up to a total loss. In any case I recommend you not to invest all your savings into one type of investment / into one fund. Instead you should diversify your portfolio, say 50% in a fixed deposit or similar, 35% in a bond fund and 15% in an equity fund.
Don’t want to sound snobbish, but with USD3000 only it might actually not be worth splitting it and a single, no-risk investment might be better suited to you (though of course the yield will be low).
However perhaps it’s possible for you to join a savings plan for a fund - if your income situation permits.

There are funds that have generated that much in the past, but no-one can predict the future as you said.
As well you need to be a bit clearer on what ‘acceptable’ means to you, though most likely funds that have a high yield won’t fit the bill - higher yield typically means higher risk.

Anyhow, be realistic and get away from the idea that you can make 30% in a year or less at low risk with funds, around 5-10% p.a. is IMHO more reasonable (seen over a prolonged period of time, not in one single year).

I buy my funds in my home country as investments are well regulated there. My accounts are via online-brokers, which means low fees and I can manage them virtually from any place in the world. Since I buy via “fund discounters” I don’t even pay any load (issue surcharge), which typically is somewhere between 3-6%.

I wouldn’t want to invest here in Taiwan, if something goes wrong you will be bound to the local laws and regulations, as well not being fluent in the language may be a problem (may not apply to you).

4

I tend to agree with Rascall… I wouldn’t invest here in the local market unless you really know what you are doing. In general it seems that the market swings much more here possibly due to market manipulation but probably the market here is also very dependent on other markets (lack of internal consumption… its an manufacturing / export based economy).

If I were you, I’d invest it back home. JD, if he’s using $USD its probably safe to say he’s a US citizen.

You say that you have a medium appetite for risk but unless you have a range of other assets invested in low risk investments, I would stay away from medium risk (actually I wouldn’t but then I am learning investing but I am recommending you to.)

5

Aceman, you will probably get better advice if you tell us what your goals are. For how long are you thinking of putting money aside? How much money would you be ready to add to it every year?

$3,000 is probably the minimum you would need to start putting together an investment portfolio. With that amount of money, you would do well to look at index funds. The costs are low and if you are prepared to put your money in and leave it for at least five years, you can do alright. Managed funds would not be the way to go starting out. I also agree with what posters have said above about investing in markets that are more familiar to you and in whatever currency you are likely to be using in the future.

6

Hi All.

Thanks for the advice. I am a Taiwan/EU duel citizen by the way. However I am staying here for the long term so I wish to buy funds in Taiwan, not EU. This does not necessarily mean Taiwanese funds, but buying US, Japan, APAC, funds, etc thru banks and companies in Taiwan. I believe Prudential and Fidelity and other companies offer all kinds of international funds in Taiwan.

I don’t think you can purchase mutual funds thru etrade unless you are an american citizen right? I would prefer to see a financial advisor in person anyway.

I was thinking of choosing between a generic APAC fund or a Japan fund. Is a small medium companies fund better, or large companies fund? Or should I just go with the index fund?

Or basically, I guess the question is, what’s the best way to invest 3000 USD??

I can put 3000 USD away for any number of years. I can probably add at least that much per year, maybe more.

7

Remember that if you buy mutual funds overseas, you are subject to the 5% or whatever that the Mutual fund managers charge (there is usually some kind of minimum charge regardless of profit), and then after those profits you are subject to tax in the country in which the mutual fund resides.

$3000 USD is a fairly small amount to invest in, perhaps you can investigate buying an index fund… you may avoid the risk of the local market here, avoid the costs of a mutual fund and perhaps (although not certain) you may avoid paying tax on any gains. All you need to do is pick an index fund that you think its going to grow in the next couple of years.

However if I were you, and I wanted to begin investing, I wouldn’t be asking a forum for tips. I’d take the $3000 USD, bank it for 4% interest and use the resulting interest to buy books on investing… after all the best investment is your knowledge. Then in a few years time and 20 books later, you’ll still have your initial capital and be much better prepared to invest.

8

whats the difference between mutual fund in banks and mutual fund in insurance companies?

you can buy mutual fund online? how does that work and how is the different then actually going to the institution. less fee online? any danger? so etrade.com? what else

I am thinking about 20k USD for mutual fund, med to long term with med risk…what would you guys recommend?

9

Insurance companies take a piece of the cake to cover for their administration costs (which always happen to be very high for some reason), so the money going into the fund is less. Both may charge you additional fees, besided the load (issue surcharge) that goes to the company managing the fund.

I assume you are a US citizen, so the following may not apply, but here is how it works for me: I open an account/depot via ‘fund discounters’. The accounts/depots are however with big banking institutions that also act as online brokers and the money is directly paid to those.
The discounter does not touch the money at all, so it’s entirely safe, but he ensures that I get up to 100% discount on the load that applies to most funds. Further trades are done directly with the bank / online broker but I still receive the discounts since the discounter is registered with them; they call this B2B (back-to-back).

There are cases where you can buy directly from the institution and keep the fund in a depot they provide, similar the way it’s done when you buy at your bank. The difference will be the cost (load, transaction fees, depot fees …). Online brokers are usually cheaper and you can save money by buying ETFs (exchange-traded funds) rather than funds directly from the institutions or banks.

Does this amount represent your entire savings or just a part of it? What risks are you willing to take, or what’s your expected return (% p.a.)?

10

rascal that amount is part of my entire savings, I will take med risk and expect mid to high return, I am still young can afford some risks…but if I leave it in long term like 5,10 years then maybe it’s fine? as for the expected return I guess 7-15% r ok?

11

Sounds good. Assuming the rest of your savings are somewhat conserative (no or very low risk) I would split the amount like this:
50% index fund (S&P500)
25% international shares fund
25% emerging markets fund

12

Truthfully, Tycoon’s advice is pretty good. :slight_smile:

Don’t waste your time in MFs… The expense ratios will KILL your investment over the short-term. The medium term isn’t much better due to a tendency to average performance. So, only in the longer term, there’s a chance that your MF will be okay. But remember about 80% of MF underperform the market…! Hah!

Upfront charges will likely eat into your funds, leaving you underwater almost immediately. Anyway, many MFs have minimum amounts to invest, typically $2500-5000.

#1 Why not just simply open a broker account with $7 to $10 trades, choose a few ‘safe’ ETFs (maximum three, to keep your costs under control), your expense ratio would be about 1% for purchase, and hopefully less than 1% for sale.

#2 Then do some basic research here finance.yahoo.com/etf

#3 Then purchase a couple of broader market funds, like DIA or QQQQ or Spiders, then one with the exposure you want.

Do NOT trade this account. Only add money regularly to make sure that the balance is appropriate. Ignore it otherwise.

#4 Then start reading. It is really boring, there are no guarantees, but it will limit your cost structure.

Lastly, beware the risk of currency exchange, you may not want to exchange all your money at one time, but trickle feed it into the fund, so that any improvement in the exchange rate will be reflected in your exchange at least partly!

Good luck, don’t forget the reading!

Kenneth

13

Taiwan Life is offering a tax free (up to 60 million) mutual fund investment scheme. From what I can gather it is simlar to a Roth-IRA in the US, except they put you on an investment schedule (so much per month) for ten years. With this one, however, the penalties for early withdrawl are low and often non-existent. The company invests your NTD in funds in international markets (US, Japan, china, etc.). I’d been looking for a way to invest some NTD while the exchange rate was high. My wife ran into this one at work.

It is almost too good to be true, so it sounds like the government is trying to stop the companies from selling these. Anyway, you need to be a national to invest, so if you aren’t married to a local it might be tough.