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Investment selector: Revolutionise your investing with our intelligent investment tool

Posted On:8th,Apr 2023

Catagory:Personal Finance

Investment selector: Revolutionise your investing with our intelligent investment tool 

So you came into some money and want to invest for the long term or just park the money for one year. You look at the investment options available in the unit trust universe and you see over 1500 funds to choose from! Just like picking a stock, it's just as difficult to pick the next winning fund manager. What if there's a tool that can simplify your decisions and give you a choice of 10 funds to choose from? Making an investment choice is tough, but it isn't anymore. 

 

How the investment selector works

The objective of the tool is to make it easier for you to navigate through the vast number of unit trusts on offer by presenting 10 funds that have demonstrated a track record of consistent returns over multiple periods, spanning at least 5 years. As a second layer of surety, the funds with PlexCrown rating provide a “stamp of approval” from a third-party source. Please note that the tool is not investment advice, so please do your research too. 

 

To view the tools explanation on Youtube, click here.

 

The tool has 4 main sections: 

Section 1: The tool starts by choosing an ASISA category in blue. If you want more information on ASISA categories please read the section below “Understanding ASISA categories” It's important to be aware of the ASISA category that you intend to invest in as all unit trust funds are categorised and invested according to a mandate. Knowing the category you are looking for is the first step to selecting a fund that aligns with your investment goal.

Section 2: Once you choose your ASISA category, the section right underneath “Profile data average” displays the average performance of funds in this sector and how many funds there are in the sector of each period. You will notice as the number of funds is always more than 1 year as there are so many new funds coming to market. 

Below is a snapshot of sections 1 and section 2:

Section 3: Just below section 2, you will see a list of fund names. The tool will, based on our weighted performance rating method, select all the funds that performed above average in the category. All the funds on the left-hand side are above-average funds and great funds to choose from. You will notice that most of them will have a plexcrown rating, in short, all funds rated 3 and above are good consistent funds. Read below “understanding PlexCrown ratings” to understand how their rating work (All funds marked with an asterisk are Regulation 28 compliant)

Section 4: On the right-hand side of the tool you will see a selection of 10 funds that performed the best out of the list on the left-hand side (section 3 above). You will also see these specific funds' annualised performance over 1, 3, and 5 years. From these funds choose any fund but we recommend a fund with a PlexCrown rating higher than 3. 

If you want to refresh the data, just click on the “refresh data” button. If your Excel does not allow the macro to run, please go to “data” and click “refresh all”

 

Understanding Plexcrown ratings

PlexCrown is a rating service that rates unit trust funds. They have certain criteria for rating funds. Their ratings give credibility to the fund managers that the fund delivered great returns given its peers' group and has done so for at least 5 years. The ratings work from 1-5 where 5 is your highest and best rating and 1 is the lowest.  

Top 10% = 5 PlexCrowns

Next 22.5% = 4 PlexCrowns

Next 35% = 3 PlexCrowns

Next 22.5% = 2 PlexCrowns

Bottom 10% = 1 PlexCrown

Read the following methodology method from PlexCrown. The most important aspects for a fund to receive a plexcrown rating are: 

- Only funds with a track record of at least 5 years qualify for a rating (different classes of a   

  fund might have different track records)

- Pure index funds that require no skill are excluded from the ratings

- Takes into account Sharpe, Alpha, Sortino, and Omega ratios

 

Defining investment terms

Defining your investment term is crucial as generally the concept of higher risk, higher reward applies. The more risk you take the longer your investment term should be. Hence by investing for a specific term you control your risk and give yourself a higher probability of achieving your investment goal. The below terms are an indication of when an investment will have to be used for a specific need. For example, in an emergency, your emergency fund investment should be available within 3 days, or if you are saving up for a vehicle in 4 years, then medium-term investing would be relevant for you. You will see these terms below next to each ASISA category as an indicator of their risk level. 

Emergency:       0 to 3 days

Short-term:        0 to 2 years 

Medium-term:    2 to 5 years 

Long-term:         5+ years 

 

Understanding ASISA categories

We will summarise the categories used in the tool. For a full analysis of all ASISA categories, please review this document. The naming convention works as follows. The first part is “Where”, this indicates the geographic exposure of the fund. The second part is followed by “what”, which indicates the main asset class the fund will be invested in. Knowing the classification of your fund tells the first part of the fund's story. 

South African - Equity - General Funds (Long-term)

These portfolios invest in selected shares across all industry groups as well as across the range of large, mid, and smaller market capitalization shares. The portfolios in this category offer medium to long-term capital growth as their primary investment objective.

South African - Multi-Asset - Flexible Funds (Long-term)

These portfolios invest in a flexible combination of investments in the equity, bond, money, and property markets. The underlying risk and return objectives of individual portfolios may vary as dictated by each portfolio’s mandate and stated investment objective and strategy.

South African - Multi-Asset - High Equity Funds (Medium and long-term)

These portfolios invest in a spectrum of investments in the equity, bond, money, or property markets. These portfolios tend to have an increased probability of short-term volatility, aim to maximise long-term capital growth, and mostly comply with Regulation 28 (look for asterisks in the tool)

South African - Multi-Asset - Income Funds (Short-term)

These portfolios can have a maximum effective equity exposure (including international equity) of up to 10% and a maximum effective property exposure (including international property) of up to 25% of the market value of the portfolio. 

South African - Multi-Asset - Low Equity Funds (Medium-term)

These portfolios can have a maximum effective equity exposure (including international equity) of up to 40% and a maximum effective property exposure (including international property) of up to 25% of the market value of the portfolio.

South African - Interest Bearing - Money Market (Emergency / Parking money)

These portfolios seek to maximise interest income, preserve the portfolio’s capital and provide immediate liquidity.

South African - Interest Bearing - Variable Term Funds (Medium and long-term)

These portfolios invest in bonds, fixed deposits, and other interest-bearing securities. These portfolios offer the potential for capital growth, together with a regular and high level of income.

South African - Real Estate - General Fund (Long-term)

The objective of these portfolios is to provide high levels of income and long-term capital appreciation. These portfolios invest at least 80% of the market value of the portfolio in shares listed in the FTSE / JSE Real Estate industry

Global - Multi-Asset - High Equity Funds (Medium and long-term)

These portfolios invest in a spectrum of investments in the equity, bond, money, or property markets. These portfolios tend to have an increased probability of short-term volatility, aim to maximise long-term capital growth, and can have a maximum effective equity exposure (including international equity) of up to 75% and a maximum effective property exposure (including international property) of up to 25% of the market value of the portfolio.

Global - Equity - General Funds (Long-term)

These portfolios invest a minimum of 80% of the market value of the portfolios in equities and generally seek maximum capital appreciation as their primary goal. They do not subscribe to a particular theme or investment style and will be invested across all market sectors, as well as across the range of large, mid, and smaller market capitalisation shares

 

Summary

There you have it, one tool to help you sift through thousands of funds and make your investment journey enjoyable and easy. Use the funds on the right-hand side of the tool that has a PlexCrown rating. Happy investing!  

 

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