Progressive Investment plan – Overview

Investment is the term given to purchase a good/ an asset to generate an income not for today’s consumption but for tomorrow’s asset creation. Good investment planning paves a way to turn your dreams and aspirations into reality.

Progressive Investment Plan

Progressive Investment Plan is a 2-in-1 investment program that gives you the opportunity to find the investment that meets your financial personality and objectives. Here, funds are divided equally depending on the duration of each investment plan, where one part of the fund is invested in equity and the others remain in time deposit on a monthly basis.

Progressive investment options in Malaysia

There are a wide variety of investment options available in Malaysia. Let us take a look at it in detail.

Fixed Deposit

Fixed Deposits or Time Deposits offer a fixed and guaranteed rate of return on your investment. Almost all banks in Malaysia offer these types of accounts. Fixed deposits offer significantly higher interest rates than savings accounts while minimizing the risk associated with other high-risk investment products.

Unit Trust

Unit Trust is a form of collective investment that allows investors with similar objectives to pool their funds for investment. These provide small investors a chance to invest in stocks, shares, bonds and other capital-market instruments. Their professional management, high liquidity and small entry requirements make them attractive to investors. Unit trusts enable investors with limited time and knowledge to take advantage of the higher returns from the capital markets.

Gold Investment

Gold forms another great investment avenue. It has been an asset since the beginning of mankind’s evolution and across cultures. So, it is not surprising that gold is a favoured asset here in Malaysia as well. Gold investment can be made either in physical form or by means of “paper gold”. Physical Gold investments can be made by buying gold jewellery, gold coins, gold wafers and gold bars from jewellers. Investing in paper form is via Gold Investment Accounts of some banks.

An important point that investors should be aware of is that there will always be a difference between the selling and buying price of gold. This difference represents the profit for the Gold Trading organization. So, if you wish to ensure a profit make sure that the price at which you are selling is higher than the price at which you bought the gold.

No one can predict when the market rate will rise or fall and it depends on the market conditions. So invest a fixed sum of money regularly over a fixed period regardless of market conditions. These investment plans helps you to Invest progressively to manage market volatility.

Make An Investment Plan For Your Post-Retirement

Make an Investment Plan for your post-retirement

Make an Investment Plan for your post-retirement

A well-planned retirement is key to an active, happy life during the post-retirement years. However, various studies and surveys have a disturbing message: many Malaysians are not planning / saving enough to fund their post-retirement life. Compounding this, many Malaysians believe that either the government or their children will take care of them.

But with the government rolling back competition-constricting subsidies and the rising cost of living making it difficult for even the most filial of children to look after their parents in comfort, retirement planning has assumed increased importance. Let’s take a look at a few pointers that could help you plan for your retirement:

How much would you need?

Financial experts use a rule-of-thumb figure of 80% to compute the income required post-retirement. 80% represents the percentage of current income you may require. This could vary upwards or even downwards (but don’t bet on it!).

Factor in inflation

One crucial mistake that many people make is that they fail to figure in inflation. Rising inflation can make major inroads into your post-retirement income; you could very easily find yourself without sufficient income to meet all your needs after your retirement. It is also important for you to factor in the increased life expectancy of Malaysians and a possible increase in care costs for the elderly.

How long do you have?

Deduct your current age from the age when you expect to retire. This is the time period you have to build up your retirement corpus.

Calculate your retirement requirement

Use the formula M = P (1+I)n to calculate your annual expenditure after retirement. Here P stands for 80% (going by the rule-of-thumb figure discussed above) of your current annual income, I for the inflation rate and n stands for the time period in years discissed above.

Building up your corpus

Now that you’ve determined the amount that you would need after retirement it is time to plan and build a corpus that will generate the computed income for you. Here is how you could go about it:

Start early – One of the best ways of building up a good retirement corpus is by starting to save early, preferably when you are in your early 20s and have started working. An early start will enable you to save more, to harness the power of compounding and to take a few well-calculated risks with higher return possibilities to help you build a bigger corpus.

Use a diversified portfolio – Build a well-diversified investment portfolio that includes not just fixed deposits but also bonds, REITs, Unit Trusts, equities, ETFs, gold-related investments, annuities, property etc.

Such a portfolio will keep your investments growing at a reasonable rate while also mitigating risks of one asset class falling due to a crash in it’s market. Also, make sure that you understand the tax implications of your various asset holdings. You should also be sufficiently covered through life, health, vehicle, property and other insurance.

Make use of savings schemes – Both the EPF (Employees’ Provident Fund) and the newer, voluntary PRS (Private Retirement Scheme) are great for helping you build a retirement corpus in a disciplined manner while offering tax advantages.

Consult a financial advisor – Understanding the various asset classes while putting together a structured investment plan in tune with your needs is not an easy task. An experienced, well-qualified financial advisor can help you put together a good investment plan given your current life and financial realities.

Just make sure that your advisor is a Registered Financial Planner (RFP) as conferred by the Malaysian Financial Planning Council (MFPC) and that the advisory organization he is with is appropriately licensed under the Insurance Act and the Insurance Regulations as per the 2005 amendment.

Market Linked Investments

Savings Accounts and Fixed Deposits offer investors a safe and secure means of parking their surplus funds while also providing a small quantum of growth. However, the main criticism of such investments is their small growth factor which mostly does not keep pace with inflation.

Market Linked Investments

Market Linked Investments

Market Linked Investments provide investors with the potential for enhanced returns and have proved attractive to a growing base of customers who are willing to accept the risks associated with them. Here, we will try and list the main types of market linked investments available in Malaysia:

Unit Trusts

These provide investors, especially small investors and those that do not have sufficient time to properly study the markets a chance to invest in stocks, shares, bonds and other capital-market instruments. Their professional management, high liquidity and small entry requirements (starting from as low as RM100) make them attractive to investors. There are hundreds of Unit Trust Funds with a variety of investment themes: predominantly equity, predominantly fixed income, balanced between equity and bonds, Asian markets etc.

REITs

Real estate investments, done wisely have the potential of providing exceptional returns through appreciation. However, even entry-level investment is prohibitively high keeping them out of reach of most investors.

Such investors can look to invest in REITs or Real Estate Investment Trusts, a collective investment vehicle which pools money from investors and uses the pooled money to buy, manage and sell real-estate assets like commercial and residential buildings or lots or land and other real-estate related assets like shares in real-estate companies.

Their shares are traded on the stock exchange making them highly liquid and governmental incentives like not having to pay stamp duty on property purchases and RPGT (Real Property Gains Tax) on selling property have added to their attractiveness as an investment option.

Capital Markets

Investors with a Central Depository System account and a trading account with any stockbroker in Malaysia can invest directly in Capital Markets instruments like shares, bonds and derivatives. Before doing so, it would be prudent on the investor’s part to gain a through knowledge of such instruments as investing in such potentially high-return instruments is associated with higher risk.

ETFs

Exchange Traded Funds consist of stocks, bonds or commodities based on an index. Generally there are three types of ETFs: equity ETFs, fixed income ETFs and commodity ETFs. They are open-ended investment funds that are listed and traded on the Bursa Malaysia. They offer investors exposure to a geographical region, market, industry or sector, commodity such as gold or oil or even a specific investment style such as growth or value. ETFs have the advantages of diversified exposure, cost effectiveness, simplicity and transparency.

Islamic Investments

Malaysia also offers a raft of Islamic investment options. The Islamic equivalents of Unit Trusts, REITs, ETFs and Capital Market instruments like Sukuk bonds and Islamic shares listed on Bursa Malaysia and the Bursa Suq Al-Sila’, an Internet-powered Islamic commodity trading platform provide one of the world’s widest range of Shariah-compliant investment options.

5 Tips for Investing in Gold

Gold has been a sought-after asset since the beginning of mankind’s evolution and across cultures. So, it is not surprising that gold is a favoured asset here in Malaysia as well.

Investing in Gold

5 Tips for Investing in Gold in Malaysia

Here we will try listing out a few tips on how best to approach gold investments:

  1. Gold investment can be made either in physical form or by means of “paper gold”, i.e, gold-investment related instruments.

Physical Gold

2. You can invest in physical gold by buying gold jewellery, gold coins, gold wafers and gold bars from jewellers. But be aware that buying gold in the form of jewellery incurs workmanship charges. You should also be aware that when you are buying gold in the form of jewellery or coins / bars / wafers the composition / purity can vary from jeweller to jeweller. Investing in physical gold also carries with it storage costs and the risk of loss due to theft, robbery etc.

3. Physical investment in gold can also be by means of the Kijang Emas or the Kelantan Gold Dinar. Kijang Emas are the Malaysian Gold Bullion coins issued by the Bank Negara Malaysia. Kelantan Gold Dinars are being issued by the Kelantan State Government since 2006. One Dinar refers to a gold coin of 4.54 grams and has a composition of 22 carat gold (916 purity). The Dinars are available in 1, 1/2 and 1/4 Dinars.

The advantage of investing in these gold bullion coins is that you are assured of the purity and composition of the gold that you are holding.

Paper Gold

4. Gold/Silver Investment Accounts

Malaysians can also invest in gold (and silver) through Gold (/Silver) Investment Accounts. A few banks in Malaysia allow anyone to open such an account; the account balance is measured in grams of gold rather than in terms of a currency. This allows an investor to make deposits when prices are favourable and withdraw funds at a profit, when prices rise. The investor can even opt to receive physical gold instead of cash when they withdraw funds.

Islamic Gold Investment Accounts are also available. These accounts are Shariah-compliant and are based on the principles of Bai’ As-Sarf & Qardh.

5.One more point that investors should be aware of is that there will always be a difference between the selling and buying price of gold. This difference represents the profit for the Gold Trading organization. So, if you wish to ensure a profit make sure that the price at which you are selling is higher than the price at which you bought the gold.

Benefits of Investing in Unit Trusts

Unit Trust Investment in Malaysia

Today there are about 42 Unit Trust management companies, both conventional and Islamic ones, that offer Unit trust investment services in Malaysia and about 370 billion units in circulation. These numbers are clearly indicative of the popularity of the investment mode; Unit Trust investments have enjoyed this popular reputation not just in Malaysia but also in other parts of the world,  where investors seek gains   with some risk mitigation assurance.

 How does a Unit Trust work?

A sum of money collected from people interested in investing, is broken down into units. The investing members are then assigned units, commensurate with their invested amount. This collected sum, is then invested by an investment manager for returns, that are shared with the unit holder. The more the units, the more an investor stands to gain from the returns. The trustee in the arrangement is responsible for monitoring the manager’s performance and in seeing that the trust is run as per the guidelines laid by the Securities Commissions and the Capital Markets & Services Act 2007.( “CMSA”)

The fact that a Trust is formed by a group of people offers a certain amount of safety in numbers, that investing in the market privately doesn’t, and that perhaps is a definitive character of a Unit Trust arrangement.

Benefits of Investing in Unit Trusts

Unit Trusts investments are usually profitable over longer terms but are not without their ups and downs. Like any other market product their value at a given time will reflect the market condition prevailing.  Still the benefits of a Unit Trust investment make them quite a product in the market. Here is a list of why you should consider a Unit Trust, if at all you are planning for an investment-

  • Ease of Liquidation- Unlike many other instruments Unit trusts enjoy a certain degree  of greater liquidity, that makes them easy to convert into cash at a short notice. They can sold ( wholly or in parts) at whatever the unit buying price is at that time. Also a unit trust manager has to buy back units from a unit holder on request.
  • The collective advantage- With a substantial amount pooled in collectively the Unit Trust investor is able to access areas and sectors that otherwise would disqualify smaller amounts. This gives the investor a piece of the action in the market, which for him or her would otherwise be ‘offlimits’, given his funds and his expertise.
  • The Professional angle- For someone starting for the first time, investment can be quite confusing; in most cases it leads to considerable losses before they begin to make profits. But as a part of a Trust, the investor has the advantage of professional expertise, professional research and market watch, that comes to him or her,by virtue of just being a unit holder. The investor doesn’t have to do anything if he or she chooses to, to invest. Typically units cost lesser than other investment and for that lesser price, a first time investor can get a whole bouquet of professional help.
  • The strict regulations-In Malaysia Unit Trusts are strictly regulated, so you can rest assured that there will be absolute transparency and honest dealing. Something that makes a big difference, especially in a situation when you are starting off without knowing head from tail of investment.

Investment Options in Malaysia

Malaysia, a burgeoning Asian economy, is a healthy investment environment, especially in the light of the recent changes. There is a wide range of investment options available today,

Investment Options in Malaysia

Fixed Deposits

They come in three main flavours: the conventional, guaranteed-return FDs, Foreign Currency fixed deposits for the investor who is prepared to take exchange-rate risks for higher returns and the various Islamic deposit products. They offer higher returns than savings accounts.

Unit Trusts

Unit Trusts are a collective investment vehicle where many investors pool in their funds for capital market investment. They enable investors with limited time and knowledge to take advantage of the higher returns from capital markets.

These funds offer investors a bouquet of benefits including professional management, high liquidity, diversification of assets and affordability (minimum amount required to participate is as small as RM100).

Unit trusts invest predominantly in equities, predominantly in debt instruments or in a balanced combination of equities and debt. Investors can also have the choice of investing in local or global funds and in specialized funds (e.g: those that invest in particular industries etc) and in Islamic Unit Trusts that are managed in line with Shariah prinicples.

REITs

A Real Estate Investment Trust or REIT also pools money from investors and uses the pooled money to buy, manage and sell real-estate assets like commercial and residential buildings/lots/land and other real-estate related assets, including shares in real-estate companies.

REITs give small investors the opportunity to invest in real estate with the added advantage of liquidity. Although REITs are structurally similar to Unit Trusts, their shares are traded on a stock exchange giving investors a highly liquid investment.

As REITs own rental properties and as rent is a consistent source of income, investors can potentially look forward to steady and consistent returns. The government has given REITs a number of incentives. These include not having to pay stamp duty on purchasing a property and not having to pay Real Property Gains Tax (RPGT) on selling property. These have added to REITs’ attractiveness as an investment option.

Exchange Traded Funds (ETF)

An ETF is a pool of assets that is traded like a stock. The assets pool can comprise equities, bonds, fixed income instruments, commodities etc or a mixture of all these. They are open ended funds, listed and traded on stock exchange(s) thus providing investors with the easy liquidity associated with stocks.

Most ETFs track an index, i.e., they try to hold the same securities that comprise the index in the same proportion, thus reflecting the performance of the index as closely as possible. Such ETFs generally have lower management costs than Unit Trusts.

There are a number of equity, fixed income and Sharia-compliant ETFs (Malaysia introduced Asia’s first Shariah-compliant ETF) listed on Bursa Malaysia.

Capital Markets

Investors who have the confidence and the know-how can also invest directly in capital market instruments like equities, bonds and derivatives (futures and options). All that is required is a Central Depository System account and a trading account with a stockbroker for buy-sell transactions.

Bullion (Gold & Silver)

Gold and Silver form another great investment avenue. Malaysians have the option of investing in gold and silver in physical (bars, coins, gold bullion coins issued by Bank Negara etc) and paper form.

Investing in paper form is via Gold/Silver Investment Accounts of some banks. The account balance is measured in grams of gold/silver rather than in terms of a currency. This allows you to make deposits when prices are low and withdraw funds at a profit, when prices rise. You can even opt to receive physical gold/silver instead of cash when you withdraw funds.

Private Retirement Scheme (PRS)

The Private Retirement Scheme provides an additional opportunity for Malaysians to plan towards their retirement via the various pension funds under the PRS. Tax relief of up to RM3,000 is also available on an individual’s contribution towards the PRS. Employers will also be given a tax deduction on contributions to PRS made on behalf of their employees, of up to 19% of the employees’ remuneration.