Trading: Public Bond & Public Islamic Bond

Last week, I have finally made a big change in my investment allocation, I moved a big portion of my liquid cash to 2 bond funds. I have invested RM25,000 each in Public Bond and Public Islamic Bond, with price at RM0.9327 and RM0.9989 respectively. This made my current bond to equity ratio around 38:62. In the next 6 months, I plan to increase this ratio to about 90:10. However, I still have no idea whether to convert all the remaining equity to bond fund, or keep it as cash in fixed deposit. This will depend on the overall economic scene then. Also, I have put off my initial plan to invest in gold, which I will detailed out my rationale later.

I selected Public Bond (PBOND) based on its consistant performance and proven track record. It may not be the best performer at all the time, but over a longer term and/or during the recession, it did outshine many other funds. Base on Lipper fund ranking found in Personal Money magazine, PBOND is not even in the top ten ranking of 1-year performance chart (in fact, it only gains 2.89% in past 1-year). However, in longer term, it ranks 4th for the 3-years performance while crowning the top in 10-years performance chart. Furthermore, during the economy slowdown period of 1997-1998 and 2000-2001, it managed to chunk out an impressive 18.97% and 22.70% respectively in the tough 2-years period ! Thus, I believe this fund will be a very good hedging for sailing through any possible recession.

Thanks to recommendation of Emily in one of my blog comment, I took a deeper look into Public Islamic Bond (PIBOND) and later decided to split half of my investment into it. PIBOND is a newer fund than PBOND but it managed to outperform the latter in both 1-year and 3-years return. From the latest quarterly fund report of Public Mutual, I reckon that PIBOND is a slightly more volatile (thus more aggressive?) fund than PBOND as it has significantly larger exposure to money market of 33.91% compare to only 4.64% of the latter. However, this could also means that PIBOND has not fully invested into bond market and is in the process to find the suitable Islamic bond. Nonetheless, its shinning past few years performance caught my heart and in case I was wrong on the prediction of major slowdown ahead, I will still get reasonable 3-4% annual return in bond, after averaging it between PBOND and PIBOND.

I did a last minute pull out from gold mainly because after reading an article regarding gold investment and rethink of my short term investment goal and strategy. It was a really good article but unfortunately I couldn't remember now where I read it from. All in all, the article made me to think why invest in gold, what is the hedging provided by gold, what support the rise in gold price and more. In the past, I always think that gold is a good hedging for inflation, rising crude oil price and falling currency. But looking into details, historical gold price has no strong or firm correlation to any of these elements. Besides, gold has never been "recession-proof". No doubt that inflation and rising crude oil price can leads to recession, but it is also not all due to just these few factors. We have had recession in the period of low inflation, low crude oil price. It suddenly becomes unclear to me why I want to invest in gold and looking at the current high gold price, it is definitely too risky to dip in. I may not be right on what I view in gold but that are at least some of my concerns. Previously, my focus was more on how to invest in gold, rather than looking at the very basic of the rationale in investing gold. For all other gold investors / guru out there, your comment or correction of my view on this topic is most welcomed !