Starting your first job can be exciting but also overwhelming. While finding a job is the main goal of fresh graduates, making the right financial decisions at this stage of your life is just as important.

Besides making the right financial choices with your first job and salary, you will need to start planning ahead for the next step in your career too.

Getting your first job

Landing your first job is mostly about having your resume noticed by the hiring manager or your future employer and of course, acing that interview! You need to:

• Prepare your resume: Use templates to help you get started, take the time to list down all relevant experience and don’t forget to write a cover letter as well.
• Practice for your interview: Do proper background research, prepare the right questions and answers plus rehearse beforehand.
• Leverage on internships: Sometimes getting your foot into the door of your dream career is tough especially without experience. You can create that experience in your resume through internships.
• Grow your network: Networking helps to improve our careers and job prospects. You need to put yourself in the right place to make connections and create opportunities for yourself.

How to negotiate your salary in your first job

An obvious reason to negotiate your salary in an interview is that you may secure a higher starting pay. But there’s also a long term benefit – a higher starting pay in your career could lead to   So how do you make sure you’re fairly paid in your first job?

• Look at salary guides. Companies like JobStreet or PERSOLKELLY publish annual salary guides. Use these guides to find out how much a fresh graduate in your role and industry typically earns. You can use this information to negotiate a fair salary in your interview.
• Wait for the right time to ask. Don’t bring up the topic of salary right away when interviewing with a potential employer – you may seem only interested in the salary, rather than the role itself. Instead, wait for the employer to bring it up and negotiate it from there.
• Let them know about your other salary offers. If you’ve been interviewing with other companies, you could let the hiring manager know (tactfully) about the other salary offers you’ve received. The hiring manager may offer to match or beat these offers. Of course, it can also backfire against you if they decide that it’s out of their pay range!

Budgeting the first salary you earn

It’s not easy to balance your living expenses, student loans and yes, even the temptation to immediately start splurging! Here’s how you can stay on top of your finances:

• Put aside some for emergencies. Build an emergency fund that covers around three to six months’ of expenses. This helps you pay for unexpected costs like a broken mobile phone or an unforeseen medical bill – without you having to take out a loan or rely on your parents.
• Track your expenses. Consider tracking your expenses with a mobile app or a spreadsheet. This helps you figure out where your money is going, and if you’re spending too much on certain categories.
• Create a budget. An easy way to start budgeting is through the 50/30/20 budget. This means that 50% of your income should go to necessities (like rent, loans and groceries), 30% to wants (like entertainment or dining out) and 20% to savings.
• Automate your finances. This makes it easier to stay on top of your bills and savings goals. For instance, you could set up auto-debits for your PTPTN loan instead of making manual payments. You could also set up automatic transfers to a savings account after you get your salary.

Making your first investment

Once you’ve built a sufficient emergency fund, consider growing your wealth through investing. But why bother investing when you’re young?

The answer is simple: compounding. With compounding, your investment returns produce their own returns, leading to exponential growth over time. The earlier you start, the less you’ll need to invest to reach your financial goals.

• Your investment style. If you prefer a “set it and forget it” approach to investing, you might prefer passive investing. If you like spending lots of time researching and analysing each individual investment, you might prefer active investing. Of course, you can also use both approaches.
• Your risk tolerance. How much investing risk can you take on? Risk tolerance typically depends on how comfortable you are with risk, and how young you are (younger investors can usually take on more risk because they have more time to recover from losses). Generally, higher risk investments tend to produce better returns, but they can also produce greater losses.
• Your portfolio allocation. This refers to how your portfolio (i.e. the total sum of your investments) is allocated among different asset classes (like stocks, properties and bonds). Having a mix of low-risk and high-risk investments is important because it helps you spread out your investment risk. Investors typically use their risk tolerance to figure out what kind of portfolio allocation they need.
• What should you invest in? This depends on your investment style, risk tolerance and portfolio allocation. For instance, if you want a passive, beginner-friendly investment, consider unit trusts or exchange traded funds (ETFs), which let you invest in many assets at once. You can also try a robo advisor, which helps you create a portfolio allocation based on your risk tolerance and financial goals. On the other hand, if you prefer an active approach, consider investing in individual stocks (after doing your homework!).

Finally, first job do’s and don’ts

Here are common first job challenges you should know:

• Making mistakes. Learn from them and avoid similar situations in the future.
• Dealing with people. Learning to work with others is a skill that takes time.
• Feeling overwhelmed. Creating a schedule and to-do lists by priority and tools like Google Calendar or Trello could help you plan out your work more efficiently.
• Balancing work and personal life. Try setting work boundaries and review how you’re spending your time.

It is important to focus on your career goals even after you have landed your first job. Always ask yourself if you are still learning or how meaningful do you find your job and be on the lookout for opportunities to advance in your job.

This article has been updated on October 7, 2024.

The post Fresh Graduate’s Guide To First Job Do’s And Don’ts appeared first on iMoney Malaysia.

September 16 is a date that bears a great significance to all Malaysians. While we remember  the long road and obstacles that we overcame as a nation to achieve this unity, what better way to celebrate it than by making your first move to financial independence.

Prudent financial spending may save you a few ringgit here and there, but having multiple streams of income is the more realistic approach to hit those big-ticket financial goals – like being financially independent. 

If you can establish multiple income streams you’ll have various cash flow sources coming in. You will be in a much better position to fulfill any financial endeavors even if one of your sources of income fails. 

Here are 8 types of income streams if you want to go down the road to being financially independent, while having just more than one type of income will get you started down the right path already.

1. Earned Income

The most basic form of income stream – it’s the income that we get in exchange for our time and effort like the salary from our jobs. It doesn’t matter if you’re doing it full time, part-time, or as a second job, as long as you’re pouring your time for money, it falls under this category. 

iMoney recommendation

Freelancing is a form of earned income. Nowadays, there are abundant freelancing jobs available on the internet, which you can do as a second job to supplement your income. If you don’t know where to begin, we have listed down some of the most common home-based jobs to propel yourself into the world of freelancing and remote work! Read it here!

2. Profit

An income that you can get by selling something for more than it cost you – a business basically. This is the second most common source of income and unlike earned income, the amount of money you’ll earn won’t heavily depend on your time and effort. 

iMoney recommendation

Running a business can indeed be financially promising and rewarding, but it also comes with a certain amount of financial risks. Before deciding on a business, make sure you’ve done your research and calculated the risks that come with it. Find out the real costs of starting a business before you dive in.

3. Interest Income

Interest income is the money that you earn by lending your money and charging interest or it could be from a savings account or time deposit.  This is a great source of passive income, and there’s a minimal risk especially for the savings and time deposit. 

This is a great source of passive income where your active involvement is not needed once the investment is done. Many doubt the seriousness of wealth ‘Interest Income’ can generate, but when combined with the power of compounding, and the fact that this is a true passive income with the least amount of risk, this can beat any of the first 2 sources of income generation hands down.

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You don’t need to invest hundreds of thousands up front to see a healthy return.  If you haven’t started investing, it is never too late to start by investing your first RM1,000.If you are just starting out on your investment journey, check out our online investment options here.

4. Dividend Income

Another source of passive income, it’s much like the interest income but better. You become a shareholder of a company and at the same time earn from the amount you’ve invested in them. The simplest way you can engage in this is through the local stock exchange.

What are the dividends?

Dividends are money you earn from publicly listed companies for buying a share of their company. It’s basically an interest you get for investing in a company via a broker.

iMoney recommendation

Bursa Malaysia is an easy-to-use trading platform for investors to buy and sell shares in the local stock exchange. Here’s our quick guide on how you can sign up and start earning dividend income! Don’t forget to factor in the fees and costs that come with investments.

5. Rental Income

From the word itself – rental. You earn by renting out an asset or property. It’s pretty self-explanatory. This income is clear cut and probably among the most dependable but the drawback is that you have to have a property or an asset that is rentable. You may need to shell out a good amount of money to obtain such valuable assets. 

Despite the investment that you need to have this kind of income, it’s worth noting that owning a property is already a good investment opportunity itself. You can choose to sell it if rental income doesn’t serve your purpose anymore.

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For starters, you need a property to have a rental income. If you don’t have a property yet but are in the market for one, read our property investment guide to learn more about how to find a property that’s a bang for your buck.

6. Capital gains

It’s the money that you earn for buying then selling an appreciating property or asset. It’s almost like a business, the difference is, you’re flipping a valuable asset (like properties, cars, or even a website) instead of low-cost products. 

This term is usually common in the investment market, but it isn’t just limited to mutual funds and the stock exchange. Apparently, it’s an act of investing in something for a lower price with the intent of selling it for a higher price. 

It can be anything – from stocks, vehicles, stamps, antiques, or even action figures, as long as it’s about generating more money from buying and selling. 

7. Royalty income

It’s about making money from using a concept, idea, or product that you own. You don’t need to do the heavy lifting for the business to earn money, you just lend them your intellectual property and you get paid for it. 

One good example of this are the famous fast-food chains like McDonald’s, or the convenience store 7-Eleven. The owners of these brands are paid by their franchisee for using their processes, their logo, and marketing, as well as their business name to earn money. 

Real talk

Royalty income is not for everyone. Having a business that’s worth franchising will really require extraordinary skills to pull off. This is not to say that it’s impossible to create a business model that is unique and repeatable, but it’s definitely not something that most people are capable of doing. 

Other than businesses, royalties also apply to the following media:

• An original music
• An original product
• Videos
• Images
• Books

If you’re a photography enthusiast or professional, you can earn royalties from your photos or videos through stock photo sites like Shutterstock. 

8. Residual income

This type of income is a form of passive income where a product you’ve created continues to generate money for you. With the advent of digital media today, residual income generating platforms are now more common than you think! They just need tremendous effort for you to get started. 

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Results don’t happen overnight or may never take off. However,here are some of the easiest ways to create opportunities to earn residual income:

• Selling a book 
• Selling a course
• Being an affiliate
• Starting a Youtube channel
• Launching a podcast

Realistically, most people can only manage to generate income in two to three ways.  That is still win as two or three is still more than just one income stream! You can find out more about the Three Types Of Income You Should Know.

This article was first published on iMoney.ph.

The post The 8 Types Of Income You Should Know To Achieve Financial Freedom appeared first on iMoney Malaysia.

Each national day, Malaysians would rejoice and celebrate our country’s independence from colonisation (for the 67^th time this year).

However, as the last firework sizzles and the last cheer of “Merdeka!” fades, each of us would go back to our lives, facing the same financial problems – be it clearing our credit card debt, or struggling to buy our first home.

But it doesn’t have to be this way every year. Here are some lessons that will help you celebrate the next Independence Day, truly independent.

1. Earn more

Most people have the habit of living from one paycheck to the next. It is not only bad for your finances, but also makes peace of mind an elusive goal.

As most fail to draw a budget or cut back on their expenses, living beyond one’s means becomes a habit that is very tough to break. Tough but not impossible.

First, find out if you are earning enough. Compare your monthly expenses with your monthly net salary. If the calculations reflect a deficit, then be proactive about it. Find ways to raise your salary or find ways to earn additional side income.

Having passive income is sometimes a necessity in order for us to achieve financial stability.

2. Manage your debt

The two most dreaded words for us when it comes to personal finances would most probably be debt management. These two words that sound so simple, can be hard to achieve.

Sometimes debts can just get the better of you, no matter how hard you strive to be organised and avoid defaulting or being late in your payments. After all, it is very hard to realise your other financial goals with huge debts hanging over your shoulders.

To get your debts back on track, go back to basics. List down your debts, and choose to either clear your debts using the avalanche (highest interest rate first), snowball (lowest amount first), or snowflake (pay whatever you can) methods. There are different ways to help you manage different debts. For high interest debts like credit card, don’t leave the debts to snowball into a monster.  You can consolidate your debts before it overwhelms you.

3. Have financial goals and work towards them

Everyone has financial goals – be it buying your dream car, or early retirement. However, there are some general financial goals that everyone should work towards.

Most people don’t think about retirement while they are young and climbing up the corporate ladder. It seems too far away, and does not require immediate attention. Later, they regret their ignorance and wish they planned for their retirement at their prime age.

In order for us to save adequately for a comfortable retirement (two-third of our last income), we need to save one-third of our current income, as early as possible. The earlier we start, the less we need to put away for retirement each month and the more we can accumulate.

Don’t let these excuses stop you from starting your retirement planning.

4. Grow your wealth

Being financially stable means having enough financial buffer to weather most financial disasters. If you are at the risk of depleting your saving when your car breaks down, you are far from being stable.

It will be tough to depend on your monthly salary to grow your funds, but there are various investments we can take advantage of to give our money a boost and also to protect it from the rising inflation.

Start small (with just RM1,000) or invest a big sum – both ways work if you want to invest.

Choose investments that can help you weather financial crisis and invest wisely, according to your investment personality.

5. Get insured

Insurance is typically a “just-in-case” product. You won’t use it unless something unfortunate happens. It protects your income and your family from unnecessary financial burden in the event something happens to you.

However, the question is not just about having insurance coverage, but we must ensure we have adequate coverage based on our financial needs. If you are earning RM8,000 a month, your sum insured should reflect that in order to protect you and your family from any sudden loss of income.

You also need to be aware of the difference between life and medical insurance to ensure you have the right coverage for your needs.

With Merdeka Day around the corner, every Malaysian should strive to achieve financial independence. By this time next year, hopefully, you will be well on your way to achieving your own financial independence.

Selamat Hari Merdeka!

This article has been updated on August 22, 2024.

The post Make This Merdeka Your First Day Towards Financial Independence appeared first on iMoney Malaysia.

Whether you are a young couple who want to save for the education of your newly arrived bundle of joy, a middle aged couple planning for retirement, or the main breadwinner for your family, you still need wealth management.

Wealth management is basically a combination of investment management and financial planning.

Investment management is about the art and science of making proportional investments into equities or bonds which includes asset mix selection, security selection and monitoring. On the other end, financial planning often involves structuring personal financial affairs such as managing income and expenses, tax planning, will and estate planning, credit and lending, and insurance.  Both have a common goal of achieving our personal or financial objectives.

Wealth management can loosely be divided into seven categories of financial commitments that all of us are, in some way, committed to.

With the aim to accumulate and preserve, wealth managers put into place a strategic financial roadmap according to an individual’s needs. Therefore, it is only natural to include all the elements of your financial status and needs in order to create an efficient money management system.

When done effectively, one can potentially reduce investment risks, taxes and unnecessary expenses while improving financial returns and increasing assets. It works for providing both efficient consumption of assets during one’s lifetime and efficient transfer of assets in death.

Why is wealth management not just for the rich?

Managing your money helps to determine how best to invest and save in order to meet your various financial objectives – which could help you in accumulating, managing or preserving the wealth. An ordinary individual would require wealth accumulation more than their rich counterpart as they would have more pressing money needs compared to the latter which would be focusing more on wealth preservation.

A. Having a sustainable retirement

Everybody needs to plan for their retirement, regardless if they are public sector employees who are funded by their pension scheme, private sector employees who have their Employees Provident Fund (EPF) savings, or self-employed, who basically has to acquire their own personal savings.

According to a recent survey by the Department of Statistics Malaysia (DOSM), almost three quarters of Malaysian employees said that their savings can only last for two months while those who have worked for over 30 years had sufficient savings for only four months. Considering that the average lifespan of a Malaysian individual is 75 years, we must be able to generate enough income to support ourselves for at least 15 years after retirement based on the official retirement age currently set at 60 years old.

Meanwhile, EPF statistics show that 65% of retirees can only afford to spend RM208 per month. This amount is not practical as they would need to cater for their general expenses, healthcare, ongoing debt repayments, etc.

To truly enjoy retirement, you must have enough savings to cover your expenses or produce streams of passive income such as dividends from investments or work out a retirement plan.

A wealth manager will be able to advise the best way for you to save up for your retirement – from the right investment vehicle to the total amount you will need by the time you reach retirement. If you are not already contributing to EPF, you can start saving for your retirement using the private retirement scheme (PRS) or on EPF’s i-Saraan if you are self-employed.

B. Saving for a child’s education

There can never be a greater gift than leaving your kids with the best education you can afford. Cost of obtaining an education can be intimidating especially at private colleges (above RM60,000) and overseas universities (above RM200,000), with education costs escalating at a fast rate. Without an education savings, they will have to opt to study loans such as PTPTN or work their way to a scholarship.

To save and generate enough funds to pay for tertiary education in 18 years’ time, parents need to look into different investments that will fit their needs and risk tolerance. A wealth manager will be able to advise on the best course of action. Some of the options are government bonds, unit trusts, capital financing, and real estate.

For those who have bigger risk appetite, they can invest in commodities, gold or FOREX. These investment have higher risks but may provide the investors with substantial investment returns in the long run.

C. Making sure your family is financially secure

Insurance is an integral part of any financial planning. It is necessary to have adequate insurance coverage to ensure that you and your family are protected financially against unforeseen circumstances. Based on your needs, you can invest in a life insurance, medical insurance, home protection and many other options to choose from.

The key is not just to get insurance coverage but to get adequate coverage. With proper wealth management, an individual will know the sum insured that is considered adequate, based on the family commitments and affordability.

D. Ensuring your wealth gets passed on smoothly

Wealth management, done correctly, can potentially grow your money and assets over time. Therefore, it is important for you to ensure you assets are properly assigned to the right beneficiaries if anything unfortunate were to happen to you.

Identify your investment beneficiaries to ensure your hard earned investments are passed on to your loved ones with minimum legal formalities. It will be a moment of grief and it would not be fair to put them through another hassle of sorting out the financials.

E. Managing your short term goals

You could very well have shorter term financial goals such as buying a car, saving up the down payment for a new house, furnishing your new home, or even, travelling. For these goals, you may want to consider investing in share financing, money market or fixed deposits as they provide you with high liquidity and has lower risk considering the short time line.

A balanced wealth management portfolio should consider the long term and short term goals before coming up with an effective strategy to meet all the goals based on the current abilities.

Everyone needs wealth management

In other words, money management plays an important role in realising our personal and financial dreams by taking a multi-disciplinary approach which enables us to plan for a broader set of opportunities and risks. Wealth management may be the key to peace of mind and financial security for all.

The nature of this management doesn’t mandate that only the wealthy can benefit. In fact, everyone, regardless if you are making RM30 million, RM30,000 or RM3,000 monthly, needs a robust financial plan.

No matter how much you earn or own in wealth right now, you still need to make a plan to protect, grow and ensure the wealth you accumulate can continue to increase over time.

This article has been updated on June 21, 2024.

The post Wealth Management Isn’t Just For The Rich appeared first on iMoney Malaysia.

Although the ringgit has rebounded in May, it has a long way to go to regain lost ground.

In fact. the ringgit hit an all time low in February this year at 4.8053 against the US dollar.  This is the weakest since the 1998 currency crisis. While the ringgit slide this time around is largely due to the continuing Middle East turmoil, it still hits close to home.

How does this affect us                                                   

The weakening ringgit has caused our purchasing power to shrink. For those of us who are looking forward to year-end holiday vacations overseas, this means that it will cost more to convert into foreign currency (except for Japan!). You may have to give that shopping trip in Milan a skip with the current currency situation.

With the implementation of fuel subsidy rationalisation just around the corner, our cost of living may increase. This will leave many of us struggling even harder to grow our wealth — and for some to survive in this economic climate.

Fixed deposits are not making the cut

The current fixed deposit (FD) rates offered by banks may be relatively higher compared to historical trends. That said, putting all your money into fixed deposits as a primary vehicle of investment is barely enough to protect your money against inflation.

Furthermore, with the rising cost of living, it is pretty much impossible to attain financial freedom just through investing in FD.  At best, fixed deposits are considered as saving for your emergency fund rather than an investment.

The need to start investing

If you want to have a shot at achieving financial security and to keep up with the ever escalating cost of living, it is high time to start putting your money somewhere you can grow and provide you with higher returns compared to conventional savings and FD accounts. Here are a few suggestions you could look into:

1. ETF’s

Exchange traded funds (ETFs) not only provide diversification as index funds have a composite of firms in different industries, they also offer lower fees compared to unit trusts and mutual funds.

As an ETF follows an index, it can be passively managed (you don’t have to look at the market everyday) which appeals to passive investors. ETFs also provide healthy dividends and market capitalization growth over time.

Note that ETFs can be broken into two types: one is the standard or physical ETF’s where you hold the underlying assets like a firm’s share. Another is known as synthetic ETF’s where they have a mixture holding of the underlying assets and complex derivatives.

Investors of synthetic ETF are exposed to counter-party risk as these funds use swap contracts. This means that there’s a possibility that the fund can be defaulted, and investors might face unrecoverable loss of their investment.

2. Bonds

This is another safe instrument to invest in compared to equities. It also provides a steady stream of income in the form of coupons. Bonds are normally issued over-the-counter by private firms, government and quasi-government institutions, such as Khazanah, and can be traded like regular stocks on the market. They come in a few types: commercial paper, medium term notes and long-term bonds.

One advantage of buying Malaysian bonds is that our bonds such as Malaysian Government Securities (MGS) and Malaysian Treasury Bills (MTB) are exempted from interest income tax and capital appreciation tax by our Government.

Buying bonds can be quite affordable and accessible for those who don’t have a lot of money. Only a minimum initial investment of RM1,000 and RM100 of subsequent investment is needed to get a piece of the action. A bond fund is a collected pool of money by fund managers from retail investors like us. The accumulated capital pool is then used to buy physical bonds as mentioned above.

3. Equities

Equities are direct holding of a firm’s share, meaning that you have a stake on the firm’s performance. Although compared to other investments, equities can be more expensive and risky.

However, this avenue could potentially provide higher returns. For example, the manufacturing industry are poised to gain from cheaper ringgit currency which makes exports more attractive.

4. Foreign exchange

Contrary to popular belief, foreign exchange (forex for short) trading is actually legal and available from authorized dealers under the Money Service Business Act 2011 set by BNM. If you are up for it, forex trading can be an avenue to make lucrative returns in a short period.

However, the forex market by nature is very volatile and risky. It requires you to have a good degree of knowledge in technical analysis and also strong financial discipline to stomach the volatile currency price movement.

Investing in forex differs quite a lot from other trading based investments like equities as long-term projections are extremely difficult to make as there are significantly more factors involved.

Find new avenues to grow our wealth

The weakening ringgit on top of the escalating cost of living have caused worries for Malaysians. Add to this the global economic uncertainties.

This is why upping our game on managing personal finance and not be solely dependent of our pay cheque is crucial. We have to find new avenues to sustain and grow our wealth. These are just some ways we can do that if we want to achieve financial freedom and to be prepared for any adversities.

This article has been updated on May 28, 2024.

The post How To Protect Yourself From The Weakening Ringgit? appeared first on iMoney Malaysia.

If you’re looking for a new investment opportunity, perhaps you’ve heard of Funding Societies SME Debt Investment. This is an investment offered under peer-to-peer (P2P) financing.

Investing in a P2P investment product like SME Debt Investment means you are putting your money into a pool of individual lenders. The P2P fund manager will then allow businesses to borrow from that pool.

In case you are wondering, this form of financing that connects entrepreneurs and small businesses is licensed and regulated by the Securities Commission of Malaysia (SC).

Among the P2P investment products in the market, SME Debt Investment is a popular choice when it comes to business term financing.

So in this article, we’re going to discuss all about this investment product, so you can make an informed decision if P2P investing is right for you.

Let’s get to it.

What is Funding Societies SME Debt Investment?

But before we get into the details of this investment opportunity, the first question we need to answer is what exactly is SME Debt Investment?

According to Funding Societies FAQs, SME Debt Investment is an alternative investment opportunity for investors. It can also potentially offer returns comparable to most traditional instruments.

This means your investment goes towards helping SMEs secure financing for growth while at the same time offers you, the investor, the opportunity to get investment returns.

Key features of SME Debt Investment

According to SME Debt Investment’s page, the return of investment that you can get from this investment  is up to 14% p.a., which makes it a very attractive investment option for people who are looking for an investment opportunity with the potential of higher returns.

Potential returns

In general, returns on investment with P2P lending can range from 10% to 18% based on the data from registered providers in Malaysia.

A potential return of investment up to 14% comes in on the higher side of the range.  Of course, a potential for double-digit investment returns is especially high if you compare it to other more traditional forms of investment.

Although this does come with the caveat that your returns are dependent on the SMEs in question staying in business. If they fail to repay their debt to Funding Societies, then you stand the chance of losing money on the investment.

Note: P2P investments are high-risk as businesses who apply to lend money on P2P platforms are likely to be startups and may not be well-established with lower credit rating. This leads to a higher risk of the borrower  defaulting on their loan.

Investment period

Any investor worth their salt will say that typically, investing is a long term game. As the popular saying goes, ‘it’s a marathon, not a sprint’.

However, when it comes to P2P financing, the shorter investment term is a key feature. They typically offer short lock-in periods to allow for higher frequency and greater liquidity. You’ll generally start receiving monthly repayments a month or two after your initial investment, which is great if you like consistent returns on a monthly basis.

SME Debt Investment currently offers an investment period of up to 24 months. Although this model with the short investing period might not be attractive to long term investors, it will be suitable for those with a shorter investment horizon and can stomach the higher risk involved.

Low barrier to entry

Another reason why the SME Debt Investment is a good option for investors who are looking for alternative investment opportunities is the fact that SME Debt Investment is a very accessible option for first time investors, as the minimum investment amount is just RM100.

On the other end of the scale, the SC recommends individual investors to limit their investment exposure in a P2P platform to RM50,000 at any one time to manage their risk exposure.

Other features

Auto investment bot – If you prefer to have your investment automated, Funding Societies has you covered with their Auto invest bot, which will help you automatically make your investment for you.

All you have to do is set your investment preferences, and the bot will do the hard work for you. The bot also comes with a technology called Max Issuer exposure, meaning that the bot will help diversify your investment as you can limit the amount of exposure you give to one single issuer.

Quality of life features – SME Debt Investment also comes with a myriad of features to make the investment process seamless for the investors, such as the ability to e-sign your contract and a mobile app where you can make and monitor your investment.

What we like

High potential returns – With SME Debt investment, you can potentially enjoy a return of 14% p.a.

Auto invest bot – Easy investing process as you can set your preferences on this bot and it will do all the investing for you.

Low barrier to entry – With a minimum investment amount of RM100, SME Debt Investment is a perfect alternative investment for those who are looking to get into the P2P investment area without having to come up with a big sum of money to get started.

Things to consider

Short investment period – An investment period of only 1-24 months can have a place in your investment portfolio but it should not form the main bulk of your investments. If you are looking for  long term investments,  this investment opportunity might not be for you.

Limited portfolio choices – As discussed earlier, SME Debt Investment only allows you to invest in SMEs that are applying for funding from Funding Societies, which means that your options are fairly limited.

High risk investments –  P2P financing connects mainly entrepreneurs and small or less established businesses with a pool of individual lenders, which can lead to higher risk. As mentioned above, your returns on SME Debt Investment comes from the interest paid by these lenders as they make monthly payments on their funding. This also means that if the SME you choose to invest in defaults on their payments, you won’t be making any returns as well. So some prudent research might be needed before you choose to invest in any SMEs.

Conclusion

With a high potential of returns and a seamless investor experience, the SME Debt Investment can be a good place to get started in P2P investment. If you are looking for a form of alternative investments, P2P might help you gain a new source of passive income.

However, new investors will need to be aware of the higher risks that come with P2P investments. As mentioned, lenders are businesses which may not be well-established and may already have a lower credit rating or unable to qualify for regular bank financing. You also need to be prepared to manage the shorter investing period and limited choices of portfolio.

If you want to try out SME Debt Investment, you can apply right here.

Read more: What You Need To Know About P2P Lending In Malaysia

This article has been updated on May 2, 2024.

The post An Unbiased Review : Funding Societies SME Debt Investment appeared first on iMoney Malaysia.

In this Merdeka month, while we focus on celebrating our independence, how about sparing a moment for your financial independence?

Most of us can’t even imagine being financially stable enough to live our life without worrying about money. Let alone trying to imagine being financially stable enough to retire.

But what if you can retire at the ripe old of…45.

Sounds far-fetched? For those in the Financial Independence, Retire Early (FIRE) movement, it isn’t.

FIRE fans typically aim to retire (or at least reach financial independence) as early as their 30s and 40s. For many of them, the aim isn’t necessarily to stop working, but to gain financial freedom and the flexibility to work on what they love.

There are lots of resources online about reaching FIRE, though they’re typically written for those in developed countries. But what’s it like to FIRE in Malaysia – is it even possible? We spoke to a few Malaysians to find out.

Leigh, investor and founder of Dividend Magic

Age: 31
Estimated retirement age: 45
Portfolio value: RM679,125 as of 2020
Minimum portfolio value needed to FIRE: RM1 million

Leigh is the founder of Dividend Magic, where he has been writing about investing and FIRE since 2015. However, he shared that he’s a bigger fan of the FI half of the FIRE philosophy. “So, financial independence for me. As for retiring early, as of now, I have no plans to retire at all and enjoy my work,” he said.

As with other FIRE-seekers, Leigh saves and invests aggressively. He generally saves over 50% of his income, but these days – with the pandemic and being able to work from home – he’s saving over 80%.

He attributes his high savings rate to being frugal. “I’ve only ever purchased second-hand cars. I’ve lived with my parents for the first five years after I got my first job. And yes, I’m fortunate to be doing well with my income. Also, the little things like being frugal with my meals, electricity, and petrol do add up,” he said.

Leigh also makes space for other expenses. “I love watches and cars. Apart from my FIRE goals, I’ve set myself targets as well as a budget for these.”

To grow his portfolio, he practises long-term growth investing. “I am heavy on equities,” he said. His Malaysian portfolio focuses on dividend-generating stocks. The biggest advantage of investing in Malaysia, he said, is that there is no capital gains tax (i.e. tax incurred when you make a profit from selling your investments). On the other hand, his US portfolio focuses on high growth and capital gains.

Once he reaches FIRE, he plans to ease up on his allocation to growth stocks, and move into more defensive stocks like REITs. Leigh shares more details of his portfolios on his site.

While he enjoys being frugal, he adds that there’s “nothing wrong with not being okay with frugality.” He also thinks that FIRE is not for everyone.

For those who do want to achieve FIRE, he points out that everyone’s FIRE number – that is, how much one would need to reach financial independence – is different. “I suggest first knowing yourself as a person and if you’re able to live frugally. If you can’t, you’ll have to earn a higher income. It is all just a math equation.”

Gracie, IT Professional and founder of Ringgit Freedom

Age: 29
Estimated retirement age: 37 – 53
Portfolio value: approximately RM160,000
Portfolio value needed to FIRE: RM1.5 million to USD2 million

Gracie is the founder of Ringgit Freedom, where she writes about investing and other personal finance topics. “I’ve always wanted to have a ‘place’ where I can openly share my thoughts, questions, or learnings on various topics of personal finance,” she said. “But it is difficult to do so in real life as it may invite unnecessary noise or negative sentiments; and in most cases, people tend to shy away from discussions surrounding these topics.”

She recalled how she was motivated by other personal finance bloggers who shared their money journey and learnings. “Hopefully, by sharing my journey, it will help to inspire and motivate more Malaysians to join the FI movement as we step into the future, growing together!”

Gracie has a few possible FI targets, categorising them in terms of lean FIRE (reaching FI on a very lean lifestyle) or fat FIRE (reaching FI, but being able to spend more than average).

But she didn’t start her journey with FIRE in mind. “I restarted my financial journey after getting my life back in shape towards the end of 2019 (after putting it off for almost three years due to depression, surgery and home renovations), with the whole intention to prevent myself from sinking into further debts due to irresponsible spending,” she said.

“The FI motivation only came later when I got frustrated with working long hours – but had no other choices as I needed the income. Given that I am now in better shape than before, the focus has shifted back to growing my active income whilst maintaining/reducing my expenses.”

“The bigger driver to me is actually the part about ‘FI’, having the power to quit my day job whenever I want to pursue my side interests or hobbies, without worrying about my finances,” she added.

Gracie’s savings rate varies month-to-month, but she aims to save at least 20-25% of her income before spending it. When she has extra income (for example, in the form of windfalls or bonuses), she aims to save them all, treating them as if they have never appeared. Last year, she had an average savings rate of 42% based on her net income. These savings were either invested or parked aside as emergency funds. She admits that this is an improvement from previous years, where she had spent most, if not all, of her income.

How does she achieve her high savings rate? “I’m a huge fan of zero-based budgeting and that persistent act of tracking my finances,” she said.

“By ensuring that all my normal incomes received are first self-taxed, for savings or investment purposes at the rate of 20 – 25%, before spending the rest away, it kept me in check to always spend below my means.”

The FIRE movement is sometimes associated with people who have high incomes, typically in the tech industry in rich countries like the US. So, we asked Gracie about what the hardest thing about trying to FIRE in Malaysia was, and whether it is possible to do so with a lower income.

“On one hand, I think it’s got to do with the financial literacy amongst the population, as well as being able to express more on the personal finance side of ourselves so that we can freely talk, learn, and share with one another to grow together as a community.” she said. “On the other hand, our weak currency does not help us either, especially when we are trying to diversify into international investment. That’s when we realise that the cost to invest internationally can quickly add up over a short period of time.”

“Thankfully with fintechs disrupting the scene, we are getting more options as a consumer – some of which charges us bare-minimum exchange fees,” she added.

On reaching FIRE with a lower income, she believes it depends on the individual themselves, and also the lifestyle trade-offs they are willing to make. “It is not an easy journey with a lower income but definitely do-able with time and persistence – with lifestyle sacrifices.”

“Even with a high income, it doesn’t necessarily guarantee an easier FIRE journey,” she said. “If we do not manage our personal finances properly and are constantly spending way above our means just to ‘fit into’ societal expectations on the kind of lifestyle we should have, we will always live at the mercy of our income.”

To those wanting to achieve FIRE, Gracie suggests starting as early as possible to take advantage of compound interest. “It might be much more time-effective for most people during the early stage to aggressively increase their active income sources whilst ramping up their savings rate to accelerate the growth of capital,” she said. This would allow compound interest to work its magic quicker.

“Read and learn – books, podcasts, blogs, videos,” she added. “Whichever fits your learning style. Just avoid herd mentality and always practice critical thinking for yourself. You can also look at others’ journey to inspire yourself – but never go down the path of comparing for the sake of comparing. Remember that we’re all unique and may have different circumstances and priorities!”

Sharudin Jamal, business coach

Age: 57
Reached FI at age: 45
Portfolio value at FI: RM2 million

“It started in 1999 during the Asian financial crisis,” said Sharudin Jamal. “I was one of those caught with his pants down.”

The financial crisis was a “wake-up call” for Sharudin, who was then running a training and consulting company. Thanks to the crisis, he had to relook at his business model. He also shared with The Star in a recent interview that his savings had quickly depleted, and he had to dip into reserves to repay his loans.

“I learned my lesson very early in life. I was 33 then,” he said.

Since then, he has become a firm believer that cash is king. “I learned that no matter what, don’t borrow unnecessarily,” he said. “No matter how conservative your borrowing, you still have to service the loan even when your income is depleted.” Based on his experience with the crisis, he adds that the sure way to ride a recession is to save relentlessly.

Following the crisis, he started saving two thirds of what he earned for ten years. By the time he was 45, he was able to reach financial independence, with a portfolio value of RM2 million.

“Once I reached financial independence, I make a point to spend with cash,” he said. “I don’t believe in borrowing. Everything is cash.” He adds that post-retirement, he makes a more conscious effort to spend on value-for-money items. “In other words, I don’t splurge.”

While he’s currently working as a business coach, he isn’t dependent on this income to sustain his lifestyle. “I can afford to do pro bono work, like providing my service to NGOs,” he said.

Sharudin is also a parent of two. “Having kids was something I planned for: how many, the age gap, etc.,” he said. He had started preparing for this children’s education from the time they were born.

When it comes to investing, he considers himself very conservative. “Looking back at my personal experience, I say the fastest way to lose money is to invest in things you have very little knowledge of, albeit[sic] stock or property,” he said. “Since I am not well versed in investment, I make money the old fashion way – I earn it. Then whatever surplus, I put in ASN and EPF.”

His advice to FIRE aspirants? “I think most people have the impression that when a person reaches FIRE, he is in the lap of luxury. If that’s the attitude, then you will forever be chasing rainbows and never get to your pot of gold. FIRE is a lifestyle,” he said. “You can continue to be a part of the rat race or you carve a niche for yourself amidst the mayhem.”

This article was first published in March 2021 and has been updated for freshness, accuracy and comprehensiveness

The post Can You Achieve Financial Independence (And Retire Early)? appeared first on iMoney Malaysia.

A million ringgit is definitely a lot of money. In the past, it was always considered “the benchmark” in terms of a person’s wealth. After all, having RM1 million officially makes you a millionaire.

However, is RM1 million enough to support you in retirement?

With the average life expectancy of a Malaysian at 74 years old, and retirement age at 60 year old, your retirement fund should be able to last at least 14 years. If you spread RM1 million over a 14-year retirement, it only comes up to about RM71,428 a year or RM5,952 a month.

That’s not too small a sum if you are planning to retire in a small town, with no other financial obligations. However, if you want to maintain the same standard of living, with various financial obligations, that’s hardly enough.

You want to make sure your golden years are truly golden, and not a struggle for existence instead.

What is the retirement you envision?

There is no ultimate figure for retirement. Everyone has different needs and wants, and their retirement fund should reflect accordingly.

Here is a list of questions that you should be asking yourself to determine how much you need for your retirement:

• Are you a lavish spender, or a thrifty bargain hunter?
• Will you have passive income post-employment?
• Does your health require a lot of monthly medical expenses?
• Do you have enough medical insurance coverage?
• When do you plan to retire?
• Do you have an emergency fund?
• Will you still have other financial obligations after retirement (child’s education, mortgage, etc.)?
• What is the average inflation rate?
• How many years more to your retirement?

If you have a pending mortgage, future healthcare expenses, and ongoing child education, RM5,952 a month is not going to cut it now.

Whether a million will be enough really depends on what you anticipate your post-employment life to be. If you decide to downsize your lifestyle, it might be enough to sustain your retirement years. However, if you plan to go travelling and see the world, you may want to double that amount!

What number works for you?

So, how much is enough? You should base it on your income and your financial commitments, such as spending habits, expected healthcare costs, child support, and other pending loans.

1. The general rule of thumb

Your target retirement fund is closely related to your last drawn salary prior to retirement. The general rule of thumb is a target replacement rate of 70%. This is assuming that mortgage costs amount to one third of income and that they are generally paid off just before retiring.

If you are earning RM8,000 by the time you retire, your retirement fund or income should allow you about RM5,600 a month.

To achieve that, you will need to save one-third (33%) of your income, from as early as 25 years old.

For example:

With the Employees Provident Fund (EPF) savings, we will need to save an additional 10% of our income in an investment instrument that will be able to give us higher return. At the same time, it will protect those savings from rising inflation.

2. Needs and wants

Another way to estimate how much you need for retirement is by determining your monthly expenses and loan installments (if any) – and increase this by 5% annually to factor for inflation.

This sum is then multiplied by 16, based on a retirement age is at 60 and the average life expectancy of 74.

Inflation can erode your ability to purchase goods and services over time, it is important to factor inflation into your retirement planning goals. The higher the rate of inflation, the less purchasing power you will have over time. Remember, the rate of inflation varies from year to year.

If you are calculating your retirement fund using this method, don’t forget expenses like family vacations or a grandchild’s wedding gift. These can sometimes be as important as dental surgery or car repairs.

The inflationary threat

Someone who retired in 2014 with RM1 million at age 60 can safely withdraw RM66,667 a year. However, due to inflation, a 25-year-old  today will need over RM3 million to have that same lifestyle when they retire. (Note: for this calculation, we assume an average inflation rate of 4% for the next 30 years).

Read More: Sustainable Retirement: The 4% Rule

It’s not just important to save up the required amount of the retirement fund. It is equally important to ensure that you are protecting your fund. You can do this with an instrument that offers a higher return than the average inflation rate.

Do bear in mind that inflation rates differ year by year.  Be on the safe side, always assume a higher rate to ensure you have enough by the time you need the money.

When saving for retirement, start early. The later you start saving, the more you have to put aside every month in order to achieve your retirement goals, or worse, not being able to meet these goals at all.

Nothing can be worse than having to forgo the retirement that you deserve, and having to continue working through your golden years, while your other retired mates are blowing their retirement days at some beach in Bahamas!

This article was first published in March 2015 and has been updated for freshness, accuracy and comprehensiveness.

The post Can I Retire With Just RM1 Million? appeared first on iMoney Malaysia.

Have you ever experienced this feeling? As you get older you will likely begin to wonder if all the money you have saved up in the bank and investments is really enough to carry you through retirement.

Rest assured, you are not the only one. This is a question all of us will struggle with, no matter the amount of wealth we have. Ultimately, the best way to ensure that you can live out your golden years completely stress-free is to obtain financial independence as soon as possible.

What is financial independence?

Traditionally, financial independence means having enough passive income to pay all of your living expenses. For the most part, those seeking this sort of lifestyle do not want to rely on income from being employed or being dependent on others. As such, passive income is necessary to fund their lifestyle. Generating that income stream thus becomes a priority.

While this might have defined the term early on, the meaning has changed over the years and can mean various things. The truth is that there is no solid definition of financial independence today. Instead try to look at it as a term that encompasses one or more of the following goals:

• No longer having to depend on others  for meet your financial needs
• Living debt free
• Having the financial buffer that allows you to afford a certain lifestyle
• Working because you want to, not because you have to
• Relying on savings, investments, and other forms of passive income to pay the bills
• Being able to retire early through the FIRE movement (Financial Independence Retire Early)

Read More:  The FIRE Movement

How to be financially independent ASAP

1. Define your goals

Every plan starts with identifying what your end goal is. The same goes for financial independence. You have to have a clear idea of where you want to go and what you want to achieve.

Once you know what your goals are, you can start working on a plan to achieve them. If you’re not sure where to start, there are plenty of resources out there to help you. You can easily find books to advise you, or look up websites, and even courses that can teach you how to get started on the path to financial independence.

The key is to stay focused on your goals and not get side-tracked by shortcuts or get-rich-quick schemes. The road to financial independence is long and difficult, but it will most certainly be worth it in the end.

2. Plan out your spending

You have probably heard this before, but it cannot be stressed enough how important planning and budgeting is for your financial success. Without a plan, it is very difficult to save money and make progress towards your financial goals. Having a clear cut budget gives you a visual indicator of your spending and expenses.

This in turn can help to motivate you to save more and cut unnecessary spending. You may not be able to plan out your expenses from now, all the way to retirement, but having a budget plan for the next few months or year can greatly improve your spending habits.

3. Live below your means

Of course, the most efficient way to ensure that your wealth grows is to spend less than you earn. It is tempting to spend most of your income, especially for those who are just starting out in their careers. However, it is generally a good idea to put aside a portion of your income into savings and investments. After that, you should pay off any outstanding bills and loans. The remainder is yours to spend. 

Even then, holding off from just using up all your leftover cash may help you reach your financial goals faster. It may require making some changes to your lifestyle, but it can be worth it in the long run.

4. Invest in yourself

It is a no-brainer to put some cash into savings and investments every month that will help you earn income over time. However, you can also get some extra mileage for investing in yourself. This means taking the time to learn about personal finance and investing so that you can make the most of your money. 

If you are not sure where to begin, you can start by taking the time to learn about personal finance and investing. There are many resources available online that can help you to understand the basics of these topics. With this, you will gain a better understanding of how money works, allowing you to make better and more informed decisions about how you use it.

5. Invest wisely

There are thousands of investment options available to you today. The key to financial independence is to invest your money wisely into the best option for you. This means taking the time to learn about different investment options and then choosing the ones that best fit your goals and risk tolerance.

There are many different types of investments such as stocks, bonds, mutual funds, robo advisors, property, and more. Each of them have their pros and cons, so adequate research is required for you to determine what is best for you.

Once you’ve decided what types of investments you want to make, then it is time to start investing. The sooner you start, the more time your money has to mature and grow. If you’re not sure where to start, maybe you could try having a look at robo advisors. They are a relatively low-cost and beginner friendly investment that helps to automate your portfolio, offering a more hands-off approach to investing.

6. Give your money time to grow

Investing is a marathon, not a sprint. The same can be said of financial independence. There are no real shortcuts to achieving this goal. It takes time to save up enough money to live off of, and it takes even longer to build up a decent stockpile of funds that can support you through retirement. 

If you are just starting out in your career, start by saving some extra cash every week. Once you start earning more, you can start budgeting whilst increasing the amount you save. Over time, the money you are putting away will start to add up, and you might find yourself being able to set aside some cash for investments.

There is no magic number as to the amount you should save or invest each month. What is important is that the amount aligns with your financial goals, your lifestyle, and other factors. Start small and work your way up over time.

The post How To Reach Financial Independence ASAP appeared first on iMoney Malaysia.

Not everyone is interested in joining the rat race to become insanely wealthy. For most, it’s enough to make a living and join the ranks of the “average” Malaysians. This has seen a rise of people who are rejecting the hustle culture, practicing ‘quiet quitting’. 

These people reject monetary gain as a priority, instead wanting to focus on their happiness, which leads to the goal of living a simple, average life.

What is an average life? 

Before we can talk about the cost of living an average life, first we need to understand what is an ‘average life’ for Malaysians.

There are five factors that we will look at and find out what the average is, in order to find what the average life for a Malaysian is.

So from this collection of medians for Malaysians, we now know that the average Malaysian family brings home an average of almost RM6000 per month, lives in a RM300,000 house, has a small family of 4, and owns 2 cars.

So now, how much will this cost you?

Just how much does an average life cost?

In the previous section, we’ve determined what an average life for a Malaysian would look like. Now, let’s look at how much it costs.

We’ll start with the first factor, housing.

Housing

As per stated above, the median cost of housing in Malaysia is RM300,000.

However, this depends on the location too. In the Klang Valley, you’d be hard pressed to find a house that is suitable to raise a family in for RM300,000. If you choose a location that is a bit secluded and located in the outskirts of the city, you might be able to get a house with three rooms and two bathrooms at this price.

And of course, the state you choose to settle down in helps too. If you’re looking to settle down in a state like Kelantan or Terengganu, the housing there will be a lot cheaper than in Kuala Lumpur.

As per our loan calculator, this translates to at least RM1533/month, if the loan is for 30 years.

Number of children

How about the number of children? The median household size right now according to this census is 3.8, which equals to around two children per family.

So what’s the cost of raising two children? According to this report from 2018, it can cost anywhere from RM400,000 to RM1.1 million. 

Felix Neoh, director of Wealth Vantage Advisory Sdn Bhd, estimates that parents spend around RM800 to RM1000 on child care every month before they enter preschool. This cost can increase to RM2000 per month nowadays.

As the child grows older, the cost grows exponentially as well, which takes up to around RM3000 per month on average per child.

With two children, that brings it up to RM6000 per month on childcare.

Transportation

In Malaysia, the top two cars in Malaysia are the Perodua Myvi and the Perodua Bezza.

So how much will this cost?

A Perodua Myvi can cost you around RM642.03 per month, and a Perodua Bezza will cost you around RM535.70.

However, a majority of Malaysians only get their second car once they’ve finished the payments on their first car.

So for the cost of transportation, let’s take the average of these two cars, which comes up to RM588.87/month.

Retirement

And finally, you will also need to save for your retirement. The Employee’s Provident Fund (EPF) says that you need to have a minimum of RM240,000 in your account when you retire. However, this number rises to RM600,000 for this in the Klang Valley.

To reach this number, financial experts recommend saving 30% of your monthly income. If you meet the median household income amount, that would be RM1,957 per month.

This might sound a lot, but there is one thing to keep in mind. You are already saving about 20% of your income through the EPF. Your monthly deduction amounts to 11% of your base salary, while your employer also contributes an additional 9%.

Therefore, you only really need to be saving 10% of your salary after deductions. So realistically, your household will be putting away about RM587.30 each month for retirement.

It’s also important that you do not withdraw from your EPF if possible, or else you will have to save even more later in life to make up the difference.

Total cost of an average lifestyle

So how much does an average lifestyle really cost?

Let’s put it all on a table.

Sadly, it’s plain to see that meeting the median household income is not enough to lead an average life with minimal luxuries. Our calculation doesn’t include monthly expenses and is still 30% more than what most Malaysians earn.

So what can you do?

For a growing number of Malaysians, the solution is to cut down on the biggest household expense: children. The Department of Statistics Malaysia (DOSM) reports that the national total fertility rate has fallen to just 1.7 babies from 4.1 in 1970.

While this could have severe consequences for the country in the long run, it is the present economic reality that families cannot afford to have children.

The other alternative would be to live in an urban area, where the median income is much higher. According to DOSM numbers, the highest median income is in Kuala Lumpur with RM10,549 followed by Putrajaya (RM9,983), Selangor (RM8,210), Labuan (RM6,726), Johor (RM6,427), Pulau Pinang (RM6,169) and Melaka (RM6,054).

However, if you do this, you will have to contend with much higher housing prices. The median house price in KL was at RM498,000 in 2021, while Selangor was relatively more affordable at RM395,000. This is assuming that you aren’t too picky about location.

With this in mind, this is how what an average life in Selangor would look like:

While it’s not too bad compared to the median income of RM8,210; there’s really not much room for much else.

But this does not mean that you have no choice but to embrace the hustle culture. You can live a simple life, and still afford enough to attain that dream ‘average lifestyle’ you wanted.

How do you do this?

The first thing you can do is look at passive investment. If you follow this guide, it will help you build an investment portfolio that is diversified enough for you to treat it as a form of passive income. With a diversified portfolio, you won’t have to worry about your investments, as it will help itself grow and branch out your money.

It might not be as lucrative as active investing, but it’s much safer.

Other ways you can consider include having enough savings for emergencies, getting proper coverage from insurance, and living within your means.

If you do all this, your ‘average life’ is that much more attainable.

The post What’s The True Cost Of Living An Average Life? appeared first on iMoney Malaysia.

As we get older, there is one question that will undoubtedly cross your mind. That question is: “How much money can I afford to spend during my retirement?”. 

This is a completely reasonable question. After all, you’ve worked so hard to save up for your retirement; it is only natural that you would want to spend it all in your golden years. Unfortunately,  if you spend too much, you risk running out of funds. If you spend too little, you may not be able to live out the dream retirement you were hoping for.

Finding out how much you can really afford to spend in retirement is absolutely vital. To that end, the 4% rule might be able to help you manage your money well enough to ensure you have a stress-free retirement.

The 4% rule

So what is the 4% rule? The method was a suggestion by a financial advisor called William Bengen in a 1994 article. In his paper titled “Determining Withdrawal Rates Using Historical Data”, Bergen analysed half a century’s worth of market data. He concluded that essentially any potential economic scenario, even the most devastating ones, would allow for a 4% withdrawal during the year they retire and then would adjust for inflation each subsequent year for 30 years.

By following this formula, you should, in theory, have a very high probability of not outliving your money during a 30-year retirement.

For example, let us assume that your portfolio at retirement totals RM1,000,000. You would withdraw RM40,000 in your first year of retirement. If the cost of living rises 3% that year, you would give yourself a 3% raise the following year, withdrawing RM40,600, and so on for the next 30 years.

How the 4% rule helps

The one biggest advantage that the 4% rule provides is that it is simple. Budgeting can get very messy. Factors such as inflation, risk tolerance, income, savings, etc, can all go into determining how much you can afford to spend in retirement.

Having a guideline from retirement spending that’s this clean and simple makes planning much easier. If you are having trouble making your own retirement budget, the 4% rule is a good place to start. That being said…

The drawbacks

The 4% rule is not exactly foolproof. While it serves as a quick and simple guideline on how much to spend in retirement, there are a number of considerations that the 4% rule cannot take into account.

While it is a reasonable place to start it doesn’t fit every situation. A few things to take note of include:

You need sufficient savings

In order for the 4% rule to work, you will need enough savings so that withdrawing 4% of it per year will be enough to cover your cost of living and leisure. According to the Employees Provident Fund (EPF), the recommended amount of savings a Malaysian should have by age 55 is around RM240,000.

If we apply the 4% rule to this amount, you will be withdrawing about RM9600 per year (RM800 per month), which is not exactly much. You will likely have to rely on other sources of income such as passive income or investments to help supplement your retirement spending.

Does not account for big changes 

The 4% rule assumes you increase your spending every year by the rate of inflation. It does not really take into account how your portfolio performs. It also operates under the assumption that your spending habits do not change all that much year-by-year, and that you never spend more or less than the inflation increase.

This is not likely how most people spend their retirement. Expenses may or may not change year after year, and the amount you spend may also change throughout retirement.

Unforeseen expenses

Building on the last point, any unforeseen expenses can throw a wrench into the 4% rule. One such example is medical expenses. Most of us will have some form of medical issue throughout our lives that require a trip to the hospital.

The chances of this happening more frequently increases with age. Certain medicines or medical procedures can be exponentially more costly than others. Needless to say that a longer life expectancy also means that you will likely end up spending more on medical bills.

Unpredictable markets

Market fluctuations happen all the time. As such, the economy is unlikely to stay perfectly consistent throughout your retirement years. While the 4% rule does account for yearly inflation, during a booming economic environment, withdrawing more than 4% annually might be perfectly fine.

Under poorer conditions, you might need to cut back on spending, even after accounting for inflation. The only real way to counteract this is to simply keep an eye on your money and act accordingly at any given time.

It assumes a 30-year retirement

30 years is not necessarily a bad assumption for your retirement, but it may not be needed or likely. The average life expectancy of Malaysians in 2022 is at 73.1 years only, according to the Department of Statistics Malaysia (DOSM). Even then, people aged 65 and above have an average life expectancy of around 15.3 years.

It is always encouraged to plan for a long retirement as people can live long past the average life expectancy. However, underspending can also lead to a potentially unsatisfying retirement. Once again, there are many factors to consider that are hard to predict unless you are living in the moment.

Should you use the 4% rule?

With all the number of unknowable factors affecting your finances in retirement, does that make the 4% rule useless? The answer is not at all. It simply needs to be adapted for personal use in order to be effective.

As with most financial rules of thumb, the 4% rule is less of a set-in-stone mandate on what to do and more of a well-informed starting place, from which your own personal retirement savings and spending roadmap can be drafted. While it does not solve all the financial problems you will face in retirement, the 4% rule can serve as a useful starting point.

That being said, if you have a healthy portfolio of diversified investments, it is entirely possible for you to withdraw more than what the rule states. iMoney can help connect you with a number of potential investment opportunities via its website. Investments such as unit trusts are particularly friendly towards first time investors.

The post Sustainable Retirement: The 4% Rule appeared first on iMoney Malaysia.

Income. Everyone’s favourite word! The first thing most people might think of is a paycheque. However, this is not the only way to gain income. 

Today, there are many different and unique ways to build your finances. Understanding how each income stream works is the key to diversifying your wealth and can help you to pick the best ways to supplement your main source of revenue.

What is income

So what is income exactly? Again, most people might just say that it is the money that they earn from work. And they would be exactly right…, kind of. Income is basically the money that a person or business receives in exchange for their labour, product, or investment.

It goes without saying that your paycheck may be the first source of income that comes to mind. However as mentioned previously, there are many different types and sources of income out there. Some examples include:

• Getting paid to do a commission
• Selling goods and services for profit
• Earning money through investments
• Withdrawing your pension after retirement
• Even winning prizes and receiving gifts can be considered income

Most forms of income are likely to be subjected to taxation, which can decrease the actual amount of money that you can keep and use. So it is a good idea to always keep track of how much of your income is taxable. If you are not sure how to proceed, checkout iMoney’s personal income tax guide.

Why knowing types of income is important

Understanding the types of income can help you make informed decisions, have a better idea of what investment opportunities are best suited to your needs, and plan for a financially stable future.

If you are looking for alternative means to reaching your financial goals, understanding the different types of income can help you chart your road map.

Types of income

While there are many different types of income, they generally fall into three broad categories. These categories are: earned income, investment income, and passive income.

Earned income

Earned income is as simple as it sounds. It is the money you earn by working either for yourself or someone else, or through a business you own. Sometimes it is also called “active income” because you actively work for it. Some examples of earned income include working for a company, working side gigs, and freelance work.

Earned income could also include bonuses and extra pay. For example, those who work in sales can earn commissions from each sale, which also counts as income.

Gigs and side hustles can be another option for earning income. These side hustles are often temporary or short-term jobs performing a single task on demand. You can easily find many examples of gig work online on freelance websites. There you can obtain many services ranging from musicians, programmers, freelance writers, babysitters, food delivery drivers, and many more.

Passive income

Unlike earned income, passive income is money that you receive from things that you own, but do not sell. 

A good example of this would be silent investors. This is when you invest in a business without participating in its operation or development. Despite having no hand in how the company performs, you still gain some money passively.

Passive income streams typically require an upfront investment and time to grow and maintain profit. Investments such as these can provide you with a regular source of income in the future with little or no input on your part. Other examples of passive income can include renting property or equipment, becoming a part owner of a business, or even receiving dividends from stocks.

Investment income

At first glance, investment income and passive income might look the same, but it is actually quite different. Passive income is money that you gain from something that you own, but not sell. Investment income is money that you gain for selling something that you own for a higher price than you got it for.

This usually applies to things such as stocks and real estate. However, it can also apply to collectibles such as old paper currency, collectible cards, or even some valuable antiques that you happen to find in your storage. In addition to this, the sale of a business typically counts as investment income as well, as long as you made a profit on the sale.

While income certainly is taxable in Malaysia, according to the Malaysian Income Tax Act 1967, the government does not impose a tax on any profits or gains deriving from any price increase when you sell a stock. So keep that in mind when you are thinking of selling.

Income for different stages of life

Different types of income have very different characteristics. Be that as it may, each type of income is well suited to different stages of life. Though it may vary from person to person, earned income is where most will start off, before expanding into investment and passive income later in life once enough savings have been earned.

A good understanding of these sources of income is important to increase one’s wealth over their lifetime and ensuring that they have enough to meet their financial goals.

Read More:
How Malaysians Can Make Side Income Online
Looking For Safe Investments? Here Are 5 Low-Risk Options

The post The Three Types Of Income You Should Know appeared first on iMoney Malaysia.

Investments are a great way to develop your wealth and future-proof your finances. However, do note that investing is a marathon, not a sprint. You need patience, discipline, perseverance, planning, and a steely determination to come out on top.

Regardless, investment objectives and strategies should fit an investor’s circumstance. All too often, overeager investors end up losing much of their investments due to overstretching their means.

Why invest in the long-term?

• Lower risk

Long term investment strategies allow you to potentially ride out market uncertainties and average out your gains over time.

• Smaller time investment

Unlike day trading, you do not need to constantly monitor market conditions. While you do need to take note of what’s going on, you will spend less time on checking on your portfolio and more time on other things.

• Compound interest

Gaining interest on your returns each year is the key to building long term wealth. It is also the primary strategy for long term investing.

With that being said, here are some general guidelines that can help build a long-term investment portfolio without losing all that you put in:

Know your goals

Before taking your first step towards your long-term investment journey, you should take some  time to get things into perspective and set out your financial goals. Clear goals will make you less likely to cash out your investments early on impulse, and help you stick to your overall plan.

Goals can be divided into three broad ranges – short, medium, and long. While we use the term “short”, short-term goals are more along the lines of six months to a year. Medium-term goals generally span three to five years in order to accomplish. With long-term goals, you will be looking at a timeline that can last for up to ten years or more. 

Some short-term goal examples include buying a new car or paying for student loans. Medium-term goals can include things such as planning for your wedding or saving for your first home. Long-term goals can be something like saving for retirement or paying for your children’s education.

Once you know your goals, you can draw up a rough estimate of how much money you will need to achieve them. This will help you sort out your finances and, more importantly, keep you focused and motivated to save and invest to reach your targets. Remember, evaluate your finances, set your goals, and decide how much is needed to reach said goals.

Read More: 5 Tips To Help You Stick To Your Investment Game Plan

Form an investment plan

With your timeline and risk tolerance in mind, draft an investment plan. This provides you with an outline for building and monitoring your investment portfolio.  Things to consider in your plan include:

• Asset allocation

Asset allocation is an investment strategy that aims to balance risk and reward by distributing a portfolio’s assets according to your goals and risk tolerance. It is essentially the process of deciding where to put money to work in the market. If big losses make you nervous, concentrate on lower-risk options like bonds.

• Investment selection

Choosing different types of investments to diversify your portfolio? Here are some things to consider when choosing what to invest in:

• • Know your timeline – Commit to a period of time during which you will leave those investments untouched.
  • Compounding – A “snowball effect”. When you start earning money on the money your investments have already earned, you will see exponential growth.
  • Refer to history – If you seek higher returns and you can tolerate the higher risk, mostly stocks are the way to go. The fact is, the total return on stocks historically has been much higher than for all other asset classes. If you seek safer investments, look at assets that have historically stable gains.

• Investing strategy

Deciding to be an active or passive investor. Active investing involves buying and selling investments with the goal of earning above-average returns. A passive strategy holds investments in order to build wealth gradually.

Read More: How To Build Your Investment Portfolio (And How I Built Mine)

Start early

It goes without saying that “long-term investment” means that you will be needing a lot of discipline and patience. Therefore, it is vital to start early. Not only does an early start teach you about financial discipline, it will quickly bring about compounding results.

Compounding has a multiplier effect on wealth creation over time, slowly increasing the total money invested in your schemes. Being an early bird gives your money more time to grow and allows you to counter any unforeseen inflation. 

Read More: Here’s How Compound Interest Can Grow Your Funds Over Time

Find the right broker

Each and every broker is different. Take some time to ask around and do some research to find a broker that fits your needs. You can either opt for a discount broker which typically offers services online where investors can open accounts and place trades for an affordable fee; or you could go with a full service broker that provides advisory and portfolio management services in exchange for higher commissions.

For those who are keen on a more passive investing strategy, you may want to consider a robo advisor, which provides automated investing services, such as portfolio allocation and rebalancing, based on your preferences. If you want to make more complicated investments, you may want to consider hiring a financial advisor.

Read More: Here’s What You Need To Know Before You Start Trading On The Stock Market

Ignore market noise

While long-term investment is a slow and steady game, the investment market itself is fast and full of differing views and opinions, especially when things get a little hectic. Suddenly, you will find that everyone thinks that they are an expert and sharing opinions. For long-term investing, you must ignore noises as they end up as distractions that can impinge on your goals. 

It is actually advisable to hire a financial advisor who understands your financial plan, positioning, and goals if you are unsure on how to proceed with your investments. More often than not, constant market noise tends to put pressure on you, making you act on impulse and resulting in poor decisions. Always keep your eye on the bigger picture and set your sights on your goals.

Read More: 5 Investment Myths Busted

Diversify 

People are stronger together. The same thing goes for long-term investing. You should not depend on only a single avenue of investment if you want to succeed in the long-run.

Diversify your holdings across different asset classes such as equities, bonds, gold, and also within each asset class. For example, within equities, spread your investments across large-cap, mid-cap, and small-cap funds. Having a diverse portfolio serves to spread your risk out so that not one single disaster will wipe out all your efforts.

Read More: 3 Ways To Manage Your Investment Risk

The post Setting Up Investments For The Long-Term appeared first on iMoney Malaysia.

The variety of investment options that are available can be overwhelming, especially for people who are just starting out. For example, unit trust and exchange traded funds (ETFs) both deal with pooling investments together to trade securities; but how they work is quite different from one another.

So to clear out the confusion and help you make informed decisions, we’re going to look at the differences between the two.

What are ETFs and Unit Trust?

Before we can discuss the differences between these two investment options, there’s one important question that needs to be answered first; what are ETFs and Unit Trust?

Here’s the answer:

Exchange traded funds

ETFs are a type of pooled investment security. Typically, ETFs are created to track a particular index, sector, commodity; meaning that their performance will reflect the performance of the chosen group of investments. If the index goes up, so does the value of your ETF, but its value will also drop if the index drops.

In simpler terms, ETFs are a lot like unit trust. However, they have the added benefit of being able to be traded like stocks. Your share of an ETF can be sold at any time during the day, instead of having to wait for the end of a trading day, you can also trade ETFs on margin and short sell them if you want.

Unit Trust

Meanwhile for a unit trust, you and other investors will invest a certain amount of money in a mutual fund; a pool of money collected from a number of investors to be invested in securities like stocks, bonds and other assets, that is managed by a fund manager. This manager will try to achieve the goals of the fund, based on the guidelines set out when the fund was created.

Difference between ETFs and unit trust

Okay so now that we know what exactly is a unit trust, and what ETFs are, let’s have a look at the difference between these two types of investment options.

Management Style

Typically ETFs are passively managed, due to their nature. Typically an ETF is designed to follow the performance of a certain index, thus it’s performance will closely follow the index’s performance, meaning there will be no need for excessive micro-managing.

Due to this, the job of a fund manager for ETFs will typically be to closely follow the performance of the set benchmark index, and make decisions based on the performance of said index.

There are actively managed ETFs, such as bond ETFs and stock ETFs, but this will usually need a bigger commitment from the investors, so be sure to study these types of ETFs more if you are interested in active ETFs.

Meanwhile, unit trusts are typically actively managed, but by a fund manager. The task of the fund manager is to ensure that the performance of the unit trust closely follows the set goals of the unit trust, and to make decisions based on that criteria.

So with this, as individual unit holders, you will be asked to put your trust on the fund manager and his/her skills, as the performance of the unit trust depends on them.

Buying and selling

ETFs can be bought and sold on the stock exchange, just like normal stocks or bonds. This also means that it can be bought and sold on the exchange throughout the trading day, which might mean that you can closely follow the performance and decide to buy and sell on the same day itself, which might mean more short term profit potential.

However, unit trust is only available through agents who work for a fund management company or institutional unit trust agents such as banks, which means that you cannot buy and sell individual units of a unit trust at the exchange.

Cost to invest

One of the major differences between ETFs and unit trusts is the cost it takes to invest in them. For ETFs, you will have to pay all the typical fees needed for trading shares, which means the brokerage fee, clearing fee, and stamp duty.

You will also have to pay an annual management fee, but this amount is typically set at lower than 1% of the ETFs net asset value (NAV).

Meanwhile, unit trusts impose different fees, such as an upfront sales fee that can be anywhere between 3% – 5% of the unit trust NAV.

They usually also charge a back-end charge or exit fee when individual unit holders decide to redeem their fund

An annual management fee is also imposed, which is typically set at anywhere from 0.75% to 5% of the unit trust’s NAV.

Minimum investment amount

For ETFs, there is no minimum cost of investment set for them, as you can buy ETFs on your own, with whatever amount you feel comfortable to invest with.

However, for unit trust, there usually is a minimum amount of investment needed, which is set by the institution or fund management company that is supporting the unit trust. In Malaysia, this minimum investment amount is typically set at RM1000.

However, the subsequent minimum investment cost for unit trusts is usually a lot lower than the initial investment cost, as it can start at as low as RM100.

Which option should you choose?

Now that we’ve discussed the differences between both ETFs and unit trust, the question remains, which investment option should you invest in?

Well that depends on many factors, such as your investment goals, your investment budget, how much time are you willing to spend on your investment, and many more.

So before you make a decision, be sure to properly understand why you are investing, and what you are willing to invest, be it time or money.

Read More:
A Beginner’s Guide To Investing In ETFs In Malaysia
Guide To Build A Profitable Unit Trust Portfolio

The post How Are ETFs And Unit Trust Different? appeared first on iMoney Malaysia.

Versa is expanding their product range in Versa Invest. The platform now offers affordable wealth management to Malaysians through three different types of low to high risk investment funds — Versa Conservative, Versa Moderate and Versa Growth.

These products are offered through a pooled investment fund managed by top global fund managers such as Blackrock, PIMCO, Vanguard and HSBC.  Users are able to diversify their investments across active and passive funds, allowing them to benefit from investment instruments that were once only available to the high net worth individuals.

Versa Invest allows investors to access institutional-grade investment without the constant fear of hidden or additional costs. Investors can focus on increasing their long-term revenue with no upfront charges or being 3-5% down each time an investment is made. With zero entry and exit fees, investors can truly dedicate their efforts to earning 100% of what they invest, starting with a low minimum investment of only RM100.

Those new to investing, worry not! Versa employs an intuitive and sleek interface design that is easy to use even for novice investors. 

According to Richmond Yau, Versa’s Chief Operating Officer, Versa’s key product ethos is all about simplicity. Users are able to onboard in under 7 minutes and make a deposit in just 3 clicks. Versa Invest was designed exclusively only for Versa users to level the playing field allowing for easy access to premium funds by global top fund managers.

In addition, Versa will be launching two Versa-exclusive funds, aimed to achieve broad diversification whilst minimising risks with fees that are as low as possible. Nelson Wong, Chief Technology Officer with Versa explains that this could be a great option for new investors who wish to boost their finances, but lack the knowledge or desire to continuously watch the market and pick individual funds.

The company also offers Versa Cash, a low risk money market investment fund investment which was launched last year. This allows Malaysians to save at higher than fixed deposit rates (2.4% per annum) without any lock-ins while also creating opportunities for users to learn about investing or timing their entry into investing.

To help you start your investment journey, Versa is offering new customers a sign up bonus of RM20, with the use of promo code VINVEST20 or VCASH20 and a minimum deposit of RM100 into Versa Invest or Versa Cash respectively. Please note that each user is only eligible to claim one reward. For more information, click here.

The post Start Investing With Just RM100 On Versa Invest appeared first on iMoney Malaysia.

When we think of retirement, what is the first thing that comes to mind?

For many of us, we want to live how we want; no longer tied to the demands of a job. We want to sit back, relax, and spend our hard-earned savings living the life we did not have the time for while building our careers.

While we would ideally like to enjoy our retirement in such a carefree manner, the reality is that retirement might also bring with it its own fair share of worries and anxiety. The biggest worry is the very real threat of not having enough saved up to pursue one’s aspirations for retirement.

Remember, it’s not just a few years that you need to support yourself after you retire, the actual number is at least 15 years. The average life expectancy in Malaysia is 75.6 years, so if you retire at the official retirement age of 60, that means you need to have enough money saved to maintain your retirement lifestyle for at least 15 years.

What about EPF savings?

You might already be familiar with the Employee Provident Fund (EPF). Because it is compulsory for employees and employers to contribute to this fund, many might think that this is more than enough to secure their future retirement lifestyle.

However, according to the Ministry of Finance, only about 27% of active contributors to the EPF aged 18-55 are expected to have savings in their Account 1 that exceed the basic savings quantum stipulated according to age. For reference, the amount of recommended savings that individuals should have is around RM240,000 by age 55.

The cost of living today is not the same as 20 years ago. As such, it is understandable why people would want to dip into their retirement savings to help get by, especially among those who had been adversely affected by the pandemic. As a result, their retirement fund risk being depleted, and financial plans have taken a back seat. While we navigate through these challenging times, it is important to refrain from withdrawing savings, if you don’t need to.

In fact, 48% of members now have savings in their EPF accounts after the series of special withdrawals allowed in recent years. While this may relieve some of the financial hardships that people are currently facing, they will risk facing more financial difficulties when they retire.

At present, the number of senior citizens who need government aid is expected to increase from 3.5 million in 2021 to 5.3 million by 2030. This number will further grow to 7.4 million by 2041. Government assistance for such a huge number of people will likely focus on providing the minimum basic amount and will most certainly not be enough to maintain your ideal retirement lifestyle.

What can you do to build enough retirement savings?

Today, Malaysia’s 30% income replacement ratio is lower than the world average. The recommended minimum replacement rate is 70%, which means there is a big gap between what Malaysians are saving for retirement and how much money is actually needed.

At an individual level, this means having to make up for the shortage by figuring out how much you really need. One important step to remember is to forecast the amount you need to retire comfortably. According to EPF’s Belanjawanku expenditure guide, an elderly couple living in the Klang Valley needs RM3,090 a month for a “reasonable standard of living” in 2019.

Another thing to consider is the age you plan to retire. While the official retirement age is 60, you should adjust your retirement budget forecast if you want to retire earlier or later.

Here’s an example of how to calculate a retirement budget.

Salmah is a 22-year-old graduate earning RM2,500 monthly salary now and plans to retire at 60 years old with enough savings to last 20 years. Assuming she earns a 3% annual salary increase until she retires at 60, Salmah will have approximately RM974,641 worth of savings in her EPF account, assuming no withdrawals have been made. As such, she will be short of about RM997,919 if she intends to maintain her lifestyle for 20 years in retirement.

Clearly, saving for a stress-free retirement is something that everyone should take into consideration at an early stage!

A useful guide to start saving is using the 60/20/20 rule. It is a simple budgeting strategy that helps you allocate your monthly income without breaking the bank. In this method, 60% of your monthly income goes to monthly living expenses including paying fixed bills. These can include things such as housing, utility bills, insurance, transport, food, credit card bills etc. An additional 20% of your monthly income should be dedicated to emergency savings for unexpected events such as car breakdown, rooftop leakage, sudden loss of income, medical expenses, among others.

The final 20% can be used to invest in your long-term or short-term goals such as travel, umrah, retirement or anything else that enriches your lifestyle. This budget gives you the flexibility to generate extra income while ensuring you’re making saving a priority.

Consider investing now to earn income during retirement

Apart from saving up enough for your retirement fund, another way you can help augment and enjoy your retirement years is to ensure that you have a form of income post-retirement. While some might prefer to keep active and work a part-time job after retirement, others might want to consider turning their hobbies and interests into their source of income. For example, someone who enjoys baking could probably sell made-to-order pastries and confectioneries.

If you prefer a more passive source of income, you might want to consider investments that have good potential for returns.

• Unit Trusts – A unit trust is essentially a pool of money that is collectively managed by a fund manager. Your money will be pooled with that of other investors and invested in a diversified portfolio to achieve the trusts’ investment objectives. The biggest advantages that unit trusts offer are that they are simple, do not require too much knowledge to invest in, usually require a low initial investment, possess high liquidity, and are often managed by a team of professionals who are actively managing your portfolio.

• Private Retirement Schemes (PRS) – These are voluntary long-term savings and investment schemes that are designed to assist you in saving more for retirement. In a way, it is essentially another form of EPF that can help supplement your retirement savings. These schemes are safe, flexible, and regulated, providing a hefty safety net for those seeking to complement their EPF and retirement savings.

What Principal can do to help you achieve your retirement lifestyle

The earlier you start preparing, the easier time you will have in securing sufficient funds for your eventual retirement. Rather than worrying if your retirement funds will be enough, proper preparation and execution can lead to your golden years being just as fulfilling as your pre-retirement life.

You can take your first steps to the perfect retirement here with Principal Asset Management.

Disclaimer

Investing involves risk and cost. You should understand the risks involved, compare and consider the fees, charges and costs involved, make your own risk assessment and seek professional advice, where necessary. Securities Commission Malaysia does not review advertisements produced by Principal. For full disclaimer, please visit here.

The post Do You Have Enough Saved For Retirement? There Is A Chance That You Don’t appeared first on iMoney Malaysia.

Kuala Lumpur, Malaysia, 26 April 2022 – According to a recent iMoney Malaysia Income Satisfaction Survey 2022, 46.3% of Malaysians surveyed have no plans to leave their current employers ‘in the near future’, despite 57.7% of these individuals feeling ‘underpaid’ or are uncertain if they are paid at market rate.

With a sample of over 1,000 Malaysians with a majority residing in KL and Selangor, the survey aimed to explore income satisfaction among Malaysians in light of several factors resulting from the COVID-19 pandemic:

• Higher inflation and food prices in 2021 compared to previous years
• Work-from-home culture

See Wai Hun, iMoney CEO, says, “As income plays a significant role in a person’s financial wellbeing and goals, this survey helps us better understand what Malaysians need in terms of personal finance. This will help us improve our solutions to help Malaysians make better money decisions – be it through finding the best rates for financial products, free tools, or financial education.”

Job security and financial commitments among possible reasons

Commenting on the key finding, Wai Hun adds, “Having no plans to change jobs ‘in the near future’ despite feeling underpaid can imply several reasons. Firstly, most Malaysians we surveyed may value factors apart from monetary compensation. This can include anything from the flexibility of Work-From-Home arrangements to job security.”

“Secondly, the rising cost of living and financial commitments may be a contributor to people valuing job security over higher paying job opportunities, as new opportunities come with uncertainties and hence risks. For example, taking a higher paying job does not guarantee the same work-life balance or other factors you value in your current role. This could explain why a sizable segment of our respondents chose to keep their current job despite feeling underpaid”, says Wai Hun.

The third reason, according to Wai Hun, could simply be due to respondents already having enough income to support their current lifestyle – be it solely from the job, multiple income sources, or access to extra funds like special EPF withdrawals. “Feeling underpaid” then implies more of a desire for extra income instead of a need for it to survive.

Only 28.1% of employees have a side job despite feeling ‘underpaid’

Possible reasons for this disparity include reasons such as respondents already having enough income to sustain their current lifestyle, or a lack of time or opportunities.

While most cited ‘financial backup plan’ as the key reason for working an extra job, side gigs make up less than 10% of their monthly income. As Malaysian employees work at least 40 hours per week, this finding makes sense as there is little time left for a side job which usually pays proportionately to work delivered.

More than half (59.8%) prefer working from home

For those who prefer working from home (WFH), the biggest contributing factor was the time and money saved from not having to commute to the workplace. Up to a quarter of respondents also believed that WFH offered a better work-life balance compared to working from the office.

However, 73% will not consider taking any pay cut just to WFH. This could indicate several things, including:

• Malaysians still prioritize salary over work-life balance and convenience, if compelled to choose between both
• Malaysians believe they should be compensated fairly based on work delivered, regardless mode of work

Need for more tools and education to grow passive income

Commenting on the survey, Wai Hun said, “It is reasonably evident that Malaysians have aspirations for more income but may be limited by factors like job security, time, and commitments to pursue either better job opportunities or side gigs.”

“While exploring active income opportunities are important, perhaps a better long-term plan for Malaysians to grow their income is via passive means like investments. This is why iMoney has been improving our investment vertical and content to help Malaysians make better investment decisions – be it via simple product comparison, seamless application, and quality insights”, says Wai Hun.

Read more

Is Your Income Enough To Make You Happy? [Infographic]

The post Nearly 1 in 2 Malaysians Do Not Plan To Leave Their Jobs Anytime Soon Despite Feeling ‘Underpaid’ appeared first on iMoney Malaysia.

A lot of people think they’re like Warren Buffet – greatest investor in the world. They’re going to beat the stock market, retire early, and buy a mansion beside the beach.

A lot of people think that they’re the 1% who are special. Or at least, they’re almost there; just one more “Become a Millionaire Investor” seminar and they’ll make it big!

But here’s the painful truth – you’re more likely to be in the 99% than the 1%. In fact, if you’re reading this right now, I’ll bet you’re part of the 99% like me – not a multi-millionaire stock market genius.

This isn’t to say you’ll never reach the 1% of investors. With a lot of hard work, connections, and God’s grace, maybe you will. But it’s not going to be easy. And do you even want to put all that blood, sweat and tears into reaching there?

So, if you’re okay to be in the 99%; you just want to be a good investor with good returns – without risking too many grey hairs – this one is for you. From a fellow 99%-er, here’s a strategy that will help you be a better investor: play to not lose.

Playing to win vs. playing to not lose

What does playing to not lose mean?

Let’s take sports to illustrate this point. Sports is where most people play to win. This sometimes messes with our brains, and makes us want to do spectacular, but much riskier things.

But I recently read* about how for the most of us – it isn’t how spectacular we are at playing the game that determines who wins, but it’s who makes less mistakes.

The difference between professionals and amateurs is that amateurs make mistakes; a lot of mistakes.

So if you’re an amateur sportsperson, you can use this to your advantage. If you’re playing badminton to win (and not for style), focus on playing non-risky defensive shots, instead of spectacular cross-court smashes. Instead of going for the kill, just get the shuttlecock in a safe area. This isn’t the way Chong Wei plays, but he was World No.1 for 6 years and a 3-time Olympic medallist – and you’re not.

It’s boring as hell, but statistically you’re going to win.

Now let’s extend that approach to investing…

How much can you afford to lose?

When it comes to investing, too many of us invest in things we don’t really understand. We want to get huge returns, but by not understanding – we take on too much risk.

It’s human nature to want maximum benefits, without putting in the work. We want to play to win big, because winning feels so good.

But it’s the badminton equivalent of not training at all, and then expecting to beat Chong Wei. Unfortunately for us, the market is a whole lot meaner than Chong Wei.

Investing is not a lottery ticket, which grants you instant riches if you’re lucky. That’s called gambling, and you can do that at Genting. At least there, they have published rules, and you can calculate exactly what your odds are.

On the other hand, investing in something you don’t understand could make you lose all your money.

Only take risk in proportion to knowledge

On the bright side, it’s easy to learn about personal finance and investing. There are a million websites devoted to teaching non-finance people about investing basics. Just stick to the realistic ones.

As you learn more, you can start taking more calculated risks. Just a few hours studying (and talking to the right people), and you could quite competently start investing in Amanah Saham. This should immediately double your returns from Fixed Deposits.

A few days of further studying and you’ll have unit trust basics covered. You could then put in a little money to test; and see how it works. Then you can move on to riskier items like the stock market, REITs and ETFs. For those who can stomach the higher risks and extreme volatility, they can explore the cryptocurrency and NFT scene,  which have been gaining traction in the investment arena in recent years.

If you are new to the investing game, you can get started by letting a computer algorithm manage your investments by using a robo advisor which has the advantage of low fees and wider access to many types of investments.

The key is to not invest in something you don’t understand. If you really want more returns and risk, go ahead – but please educate yourself first. How much risk you take needs to be proportionate to your skill. Just be aware – in the market, there are a lot of professionals who are playing against you.

Remember: play to not lose.

What the conservative 99% investor can do

So we agree that financial education is good. But on the other extreme, understand that some people make a living off other people’s ignorance – by promising them get-rich-quick schemes.

You can quickly tell by their Sponsored Ads on Facebook: “Guaranteed System to Beat the Stock Market. Register at…”

But ask yourself – have you ever met someone who became rich through some super strategy to beat the stock market? Or did he become rich, by claiming to beat the stock market, and then selling a book/course/seminar/MLM membership?

Be careful who you take financial advice from. People will tell you all kinds of optimistic stories to get you to give them your money. For starters, before you hand over your hard-earned money for an investment opportunity, check that the person or company you are dealing with is licensed by the Securities Commission Malaysia

If you can tolerate a little more risk, there are now a wider variety of online investments  available to Malaysians which offer lower fees and the opportunity to start earning passive income.

You might not get double-digit returns that your loud friends boast about – but you won’t live in fear of your investments turning to crap overnight either.

There’s no shame in playing to not lose, if you don’t have the skills to play like a pro. You might not be great at investing, but maybe it’s enough for you to just be good at investing. To be comfortable in the top 20%, instead of risking everything to be in the top 1%.

After all, the only thing worse than an average person with secure investments is an average person who’s broke.

*The articles were based on the writings of Simon Ramo and Charles Ellis.

This article was first published in February 2016 and has been updated for freshness, accuracy and comprehensiveness.

The post How To Be A Good Investor: Play To Not Lose appeared first on iMoney Malaysia.

For any Malaysian investor, the benefits of buying US stocks have become more apparent in recent months. A quick check of US Wall Street’s S&P 500 index shows returns in double digits in the last 10 years compared to Malaysia’s FBM KLCI which recorded a modest growth in the low single digits for the last decade.

Some investors are even willing to jump through hoops just to access these services in other countries – all in an effort to get hold of MAANG stocks – Meta (Facebook), Amazon, Apple, Netflix and Google (Alphabet).

In the past, access to US stocks meant using a Singapore-based stock exchange and the addition of extra charges for money transfers from MYR to SGD to USD before you can actually buy US stocks. The growth of online trading platforms in Malaysia now allows retail investors to easily buy US stocks at a more reasonable rate with the same enjoyable perks.

What are your options to buy US stocks in Malaysia?

Malaysians have several options for trading international shares online. This has provided many opportunities for retail trading, for just about anyone to build their wealth through passive investments.

These services allow for any amount to be traded, reducing the wealth barriers that once existed for investing on Wall Street. All from the comfort of your own phone.

However, which service to use is not always straightforward. Not all of them are registered with the Securities Commission (SC), yet they remain popular with investors for their access to certain markets.

Following are the digital investing platforms offering US Stock and ETF trading:

Many of the local banks also offer US share trading services like Alliance One Invest, CIMBiTrade, Hong Leong HLeBroking, RHBInvest and UOB Kay Hian Utrade, but may incur money transfer fees, plus higher transaction fees. Not all these platforms offer the convenience of a fully online journey.

How do you pay for your US stock purchases in Malaysia?

Funding your account depends greatly on where your preferred trading platform is located. A majority of these online trading platforms are based in Singapore, which means that you will need to convert your Malaysian Ringgit into SGD before it can be converted into USD. This translates to a higher currency conversion charge.

To do this, you will need to either perform an international bank transfer or open a Singapore bank account. If you’re an existing CIMB account holder, you can apply for a CIMB SG account completely online. Then link your CIMB SG account with the local CIMB account. Transfer from CIMB SG to Tiger Brokers is at no cost and instant. However, if you don’t have a CIMB account, you could only choose to transfer via TT or Wise.

There is an option closer to home – Rakuten Trade. Based in Malaysia, there are less proverbial hoops to jump through. You’ll still need to perform a bank transfer to fund the account, but it’ll be a more convenient (and cheaper) option. It’s like making a normal cash transfer online and is reflected in your trading account immediately.

What Rakuten Trade offers:

• trade US markets via a cash account upfront,
• completely online using web and an iSPEED.my app
• Competitive exchange rates that are better than most banks
• Low brokerage fees from USD 1.67 to USD24 (RM7-100)
• US trading ideas powered by their internal research team and Motley Fool
• RT points earned on trades to offset brokerage fees

What services are available from these digital investing platforms?

eToro and Tiger Brokers both offer a wide range of securities for investors, covering the gamut of stocks, ETFs, commodities, currencies, futures, indices, warrants, and even cryptocurrencies.

In particular, eToro offers access to 17 different exchanges and even allows fractional shares (you buy a portion of one share). However, these platforms are more suitable for experienced investors. For new investors, it could also be overwhelming due to the sheer number of options available.

It should be the default starting point for retail investors. But it isn’t. Here’s why.

Meanwhile, Rakuten Trade has recently expanded its services to allow Malaysians to trade stocks and ETFs on the New York Stock Exchange (NYSE) and NASDAQ. Retail investors now have the option of trading on both Bursa Malaysia and US markets with a single account – the Cash Upfront account.

This account works like a debit card that allows you to trade on either the local stock exchange or buy US stocks using only your available cash in the account.

List of services available on Rakuten Trade’s Cash Upfront:

• Trade both Malaysia and U.S. shares under the same account.
• Trade based on the available cash you have now.
• Trade and pay brokerage rates from as low as RM7 to a maximum of RM100.
• You will always know your actual cash/portfolio position.
• Your available cash balance will earn interest at 1.00% per annum.
• Which digital investing platform is your best pick?

Your experience and risk appetite as an investor determines what you should be doing in this case.

We cannot directly recommend any platform on the SC Investor Alert list. The lack of local regulatory oversight represents a massive risk for any investor; especially for those who may not have access to legal representation in the country of the exchange.

By default, Rakuten Trade is the only locally available online platform for trading on foreign exchanges. Based in Malaysia, it allows you easier access to your funds and it is regulated by the Securities Commission. Additionally, your trades from the Cash Upfront account are fully funded by the deposits you make into your cash upfront account while the remaining balance is placed in a Trust account held by Kenanga Investment Bank.

Currently, Rakuten Trade offers access to the US stock market which is generally what most investors want – especially for tech companies. There are plans to expand the service to the Hong Kong stock market, offer fractional share trading and USD currency wallet in the near future, with further expansions on the horizon.

The post Buying US Stocks? Here’s 5 Platforms That Have Made It Easier For Malaysians To Trade US Markets appeared first on iMoney Malaysia.

You should start investing.

This is something you already know, but the thought of it scares you. But you have no idea how to pick the right investments, you don’t trust yourself with large financial transactions and you suspect that investing involves a certain proficiency in math that you don’t have.

If this sounds familiar, then a robo advisor could be what you need.

What is a robo advisor?

A robo advisor is a digital platform that uses algorithms to automate your investment portfolio. It automatically creates a portfolio for you based on your investing goals and risk tolerance, and periodically rebalance your portfolio.

Typically, a robo advisor uses your money to invest in exchange-traded funds (ETFs), which are groups of stocks, bonds or other investments.

But each robo advisor implements a different investing methodology – the underlying investments and allocation of your portfolio will differ based on the robo advisor platform you invest in.

What are the advantages of investing with a robo advisor?

• Passive investing. If you’re not comfortable making investment decisions on your own, or you don’t want to (or can’t) spend a lot of time researching, monitoring and rebalancing your portfolio, then robo advisors could be a good alternative.
• Diversification. Being diversified (i.e. having many types of investments versus just one type) helps you spread your risk. This means that if a particular investment in your portfolio performs badly, you won’t be greatly affected as you have other types of investments.
• Avoid emotion-based investing. Some investors panic and withdraw their money in a downturn or pump in more cash when the market is rising. But timing the market is incredibly hard and can lead to smaller returns in the long run. With a robo advisor, you can take a ringgit cost averaging approach by investing a fixed amount every month, avoiding emotion-driven impulses to buy and sell based on market sentiment.
• Low fees. Robo advisors charge low management fees that are typically below 1% a year.. By contrast, if you invest in unit trust funds you may need to fork out 0.5% to 2.5% per annum. Some unit trust funds also charge up to 5% upfront in sales charge, and another 5% when you redeem your investment value.

What are the drawbacks of investing with a robo advisor?

• Limited customisation. Robo advisors allow you to set certain things like your risk profile or investing goals, but that’s about it. You generally can’t tinker with the investment methodology, choose (or exclude) individual investments in your portfolio or adjust your exposure towards certain geographical regions.
• Non-transparent investing methodology. If you’re a savvy investor, you may be interested in the specific criteria a robo advisor uses to select ETFs, or how a robo advisor chooses to rebalance your portfolio. However, this information is not always made available.
• Dividend withholding tax. Some robo advisors invest heavily in securities listed in the US. However, as a foreign person buying US stocks, your dividends will be subject to a 30% withholding tax, although your robo advisor platform may be able to seek partial reimbursement of these taxes for you.

What robo advisor platforms are there in Malaysia?

While they’ve been around since 2008, the first robo advisor launched in Malaysia only three years ago. Singapore-based StashAway launched in 2018, while MyTHEO and Wahed Invest entered the market a year later. In addition, we now have other players: homegrown robo advisor Akru, Bank Islam Malaysia’s BEST Invest, Kenanga Investment Bank’s KDI Invest and Raiz.

Here’s how these robo advisors compare against each other at a glance:

Platform	Launched	Methodology	Min initial investment	Annual fees
Akru	2020	Invest in an intelligent portfolio of diversified global low-cost ETFs	RM0	0.2% to 0.7%
BEST Invest	2020	Applies robo-intelligence and big data technology to suggest a portfolio of diversified Shariah-compliant unit trust investments	RM10	0.5% to 1.8%
KDI Invest	2022	It allows for AI-assisted investment in a range of selected ETFs listed in the US which aligns with user preferences	RM0	0.3%-0.7% for investments above RM3000
MyTHEO	2019	Uses proprietary algorithms to create functional portfolios that incorporate risk-based investing and “smart beta”	RM100	0.5% - 1%
Raiz	2020	Uses algorithms to determine your risk profile to construct a portfolio of Amanah Saham Nasional Berhad (ASNB)’s unit trust funds	RM5	RM1.5 a month (under RM6,000) or 0.3% (RM6,000+)
StashAway	2018	Uses proprietary investment strategy that reacts to economic fundamentals	RM0	0.2% - 0.8%
Wahed Invest	2019	Optimises the investor's portfolio with Shariah-compliant investments using modern portfolio theory	RM100	0.39% - 0.79%

Comparison of robo advisor fees

Robo advisor	Annual fees	Annual fund expense	Currency conversion fee
Akru	0.2% to 0.7%	ETFs: 0.03% - 0.13% Unit trust: 0.3% - 0.5%	-
BEST Invest	-	0.5% to 1.8%	-
KDI Invest	0.3%-0.7% for investments above RM3000	ETFs: 0.2% to 0.4%	0.2%
MyTHEO	0.5% - 1%	0.04% to 0.80%	0%
Raiz	RM1.50 a month (under RM6,000) or 0.3% (RM6,000+)	1%	-
StashAway	0.2% - 0.8%	0.04% to 0.80%	0.08%
Wahed Invest	0.39% - 0.79%	0.50% - 0.92%	-

Most of these robo advisors charge fees according to your portfolio size – the larger your portfolio, the less fees you pay. BEST Invest is an exception – its fees are included in the annual management fees of its unit trust fund investments, which do not decrease with your portfolio size.

Besides the fees of the robo advisor itself, there are also fees associated with the underlying investments that make up your portfolio. Robo advisors that invest in unit trust funds incur higher fees, while those that invest in ETFs incur lower fees.

Although fees can make a huge difference to your portfolio over time, you shouldn’t pick a platform solely on who charges the least. You should also consider how the platform chooses assets to invest in, how it rebalances your portfolio and whether it provides any other services that could improve your returns.

Portfolio allocation

Here are examples of the most aggressive portfolios of each platform:

Akru (Portfolio 10)

Type	Name	Allocation
Equity	iShares Core MSCI Emerging Markets ETF	10.45%
Equity	Vanguard 500 Index Fund ETF	54.15%
Equity	iShares Core MSCI EAFE ETF	30.40%
Bond	Vanguard Total Bond Market Index Fund ETF	1.80%
Bond	Vanguard Total International Bond Index Fund ETF	2.20%
Cash	-	1.00%

Akru offers ten portfolios, ranging from Portfolio 1 (lowest-risk) to Portfolio 10 (highest-risk). It’s highest-risk portfolio allocates 95% to equities, 4% to bonds and 1% to cash. A major portion (54%) of that is invested in US equities, while 41% is invested in international stocks.

According to backtested estimates, Portfolio 10 would have delivered a compound annual growth rate (CAGR) of 10.32% from January 2014 to June 2021. However, this isn’t an indicator of future performance.

BEST Invest (“Aggressive Growth-Oriented Investor” portfolio)

Type	Name	Allocation
Equity	BIMB-Arabesque Asia Pacific Shariah-ESG Equity Fund	30%
Equity	BIMB-Arabesque I Global Dividend Fund 1	60%
Sukuk	BIMB ESG Sukuk Fund Class A	10%

BEST Invest invests in five types of unit trust funds – three equity funds, a sukuk fund and a money market fund. All its investments are Shariah-compliant.

In 2020, we used Morningstar to estimate its geographical allocation:

Region	Allocation
Greater Europe	9.41%
United Kingdom	0.79%
Western Europe - Euro	4.34%
Western Europe - Non-Euro	3.54%
Middle East / Africa	0.74%
Americas	39.99%
United States	37.09%
Canada	2.06%
Central & Latin America	0.84%
Greater Asia	50.6%
Japan	26.8%
Australasia	5.96%
Emerging 4 Tigers	8.67%
Emerging Asia - Ex 4 Tigers	9.18%

Over a third of BEST Invest’s aggressive portfolio is invested in the United States, while a quarter is invested in Japan. If you’ve been investing mostly in local securities, this portfolio could help you spread your risk globally.

However, it’s worth noting that both the BIMB-Arabesque Asia Pacific Shariah-ESG Equity Fund and BIMB-Arabesque I Global Dividend Fund 1 have underperformed benchmarks since their inception. As of June 2021, they had a three-year cumulative performance of -1.09% and 11.96% respectively.

KDI Invest (US Exchange Traded Funds – US ETFs)

KDI’s investment platform is AI driven, needing little to no human involvement in its management. Most robo-advisors in Malaysia right now utilise a mix of AI and input from a fund manager, making KDI’s offering a rather unique one.

The KDI Invest portfolio invests in ETFs listed on the stock exchanges in the USA. This is mainly because the USA stock exchanges offer the most liquid, deepest and widest range of ETFs covering asset classes across the world, compared to ETFs listed in other countries. This allows investments to get access to global investment trends.

KDI goes the extra mile to ensure currency conversion costs are as low as possible. Saxo Capital Markets, KDI’s appointed broker, has committed to fixing the cost of currency conversion at 20 basis points (about 0.2% rate) linked the current foreign exchange rate.

KDI is also completely free for investments below RM3000. For investments above RM3000, clients are charged with a management fee between 0.3%-0.7%. As such, this makes KDI a very accessible option for Malaysians.

MyTHEO (“Growth” portfolio)

ETF	Allocation
iShares MSCI Germany ETF (EWG)	3.34%
iShares MSCI Hong Kong ETF (EWH)	6.57%
iShares MSCI Japan ETF (EWJ)	14.76%
iShares MSCI Singapore ETF (EWS)	3.84%
iShares MSCI Taiwan ETF (EWT)	3.81%
iShares MSCI United Kingdom (EWU)	8.27%
iShares MSCI Frontier (FM)	4.21%
Invesco QQQ Trust (QQQ)	20.96%
iShares MSCI USA ESG Select ETF (SUSA)	5.15%
Vanguard FTSE Pacific ETF (VPL)	9.10%
Vanguard Value ETF (VTV)	19.84%
Cash	0.15%

MyTHEO’s most aggressive portfolio setting is almost entirely made up of equities. Slightly less than half of that (45%) goes to US stocks, while 54% goes to international stocks. Big portions of that are made up of specific regions, such as a 14.76% allocation to Japanese equities and 6.57% to Hong Kong equities.

According to backtested results, this portfolio has a CAGR of 12.32% from January 2013 to June 2021. However, this doesn’t necessarily reflect the returns you would have gotten with MyTHEO, as the robo advisor may change its selection or allocation of its underlying investments.

Raiz (Aggressive portfolio)

Type	Name	Allocation
Malaysian equities	ASN Equity 3 Fund	80%
Malaysian mixed assets (conservative)	ASN Sara 1 Fund	20%

Raiz’s highest-risk portfolio is only made up of two unit trust funds from Amanah Saham Nasional Berhad (ASNB) that invest locally. These funds are not considered Shariah-compliant by the Securities Commission of Malaysia, as they invest in Maybank, which is considered a non-Shariah-compliant stock. However, Malaysian Islamic councils consider these funds ‘harus’ or permissible.

As of July 2021, ASN Equity 3 has a 10-year annualised return of 3.00%, while ASN Sara 1 has an annualised return of 5.17% in the same period.

Raiz is the only robo advisor that allows you to automatically invest spare change from everyday purchases. Here’s how it works: you link a spending account with Raiz, which will be monitored for transactions. If you make a transaction – say, RM40.20 for petrol – Raiz will round up the transaction and invest the RM0.80 difference.

At the time of writing, Raiz only allows you to connect your Maybank account to invest your spare change, but you can use other bank accounts to fund regular investments.

StashAway (Highest-risk growth portfolio – 36% Risk Index)

Type	Name	Allocation
International equities	iShares MSCI Australia ETF (EWA)	10%
International equities	KraneShares CSI China Internet ETF (KWEB)	20%
Equity sectors (US)	iShares Core S&P Small Cap ETF (IJR)	10%
Equity sectors (US)	Energy Select Sector SPDR Fund (XLE)	10%
Equity sectors (US)	Consumer Stapes Select Sector SPDR Fund (XLP)	16%
Corporate Bonds	iShares Core U.S. Aggregate Bond ETF (AGG)	8.5%
Real Estate	Vanguard REIT ETF (VNQ)	7.7%
Real Estate	Vanguard Global ex-U.S. Real Estate Index Fund ETF (VNQI)	12.3%
Commodities	SPDR Gold Trust (GLD)	4.5%
Cash	-	1%

StashAway’s highest-risk portfolio is largely allocated in the US (45.7%), China (20.4%) and Australia (10.8%). Notably, 20% of its portfolio is invested in KraneShares CSI China Internet ETF, which recently plunged amid China’s regulatory crackdown on tech companies.

According to backtested results, this portfolio has a compound annual growth rate (CAGR) of 8.27% from January 2014 to June 2021. However, this won’t reflect the returns you would have gotten with StashAway, as the robo advisor adjusts the selection or allocation of its underlying investments in response to economic conditions.

StashAway

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Wahed Invest (“Very aggressive” portfolio)

Type	Name	Allocation
Malaysian stocks	MyETF MSCI Malaysia Islamic Dividend	20%
US stocks	Wahed FTSE USA Shariah ETF	65%
Sukuk	RHB Islamic Bond Fund	12.5%
Cash	-	2.5%

Wahed Invest’s most aggressive portfolio invests in three securities, all of which are Shariah-compliant.

Of all the robo advisors listed, Wahed currently has the largest exposure (65%) to the US stock market. According to its own statistics, if you had invested RM11,148 on April 30, 2011 in this portfolio, it would have grown to RM31,694 by April 28, 2021. That’s an annualised return of around 11%.

On the other end of the risk scale, Wahed’s “very conservative” portfolio invests 90% in RHB Islamic Bond Fund and leaves another 10% in cash. We’re not sure if it’s worthwhile signing up for Wahed if you plan to use the “very conservative” portfolio. It seems slightly more cost-effective to invest in the unit trust fund directly through a platform like Fundsupermart, as you won’t have to pay Wahed’s platform fees.

Which robo advisor should you pick?

The best robo advisor for you could boil down to these investing preferences:

• BEST Invest: if you want to invest in Shariah-compliant unit trust funds
• StashAway, Akru and MyTHEO: if you want a globally diversified portfolio that invests in low-cost ETFs
• KDI Invest: if you want to focus your investments on US ETFs
• Raiz: if you want to invest locally in ASN funds, or if you want to automatically invest your spare change
• Wahed Invest: if you want to invest in Shariah-compliant securities that diversify locally and in the US

If none of these platforms appeal to you, you could even go the DIY route. This means that you’ll have to sign up for one of these platforms, look at their portfolio allocations and replicate them yourself by buying individual ETFs or unit trust funds.

A robo advisor removes a lot of this friction – you can construct a complete portfolio with much less money, without having to manually calculate how much of each security you need to buy or rebalance your portfolio yourself. It also uses algorithms to respond to market conditions.

If you’ve been putting off investing because you find it scary, and if you value convenience over everything else, then a robo advisor could be what you need.

This article was first published in February 2020 and has been updated for freshness, accuracy and comprehensiveness.

The post Which Robo Advisor Should You Use In Malaysia? appeared first on iMoney Malaysia.

As we start the Year of the Tiger, fortune and prosperity abound as festive season promotions are back.

Festive seasons are always the best time to stumble upon attractive deposit, saving and financing rates offered in various bank promotions. Local banks offer everything from gold to cash prizes are up for grabs.

Maybank Privilege is not just giving out prizes but going further to provide you with the knowledge and skills to grow your wealth through programmes like the Financial Planning Series and the Financial Empowerment Series.

If you are looking for ways to make your money work harder to increase your wealth, this is the best time to get started.

4 simple ways to manage your net worth

1. Check your liabilities

Personal wealth does not only take your assets into account, but also your liabilities. The greater the liabilities, the worse off your portfolio will be. As such, you should not forget to clear debts when you can. This helps you be in a better position to take advantage of opportunities that may arise in the future.

Focus on paying off your debts with the highest interest rates or consider refinancing high interest loans. For example, you can refinance high interest credit card debts with a 0% balance transfer or consolidate several debts into one loan at a lower interest rate.

Tune in to the Maybank Privilege Financial Empowerment Series to get more information about handling your liabilities in a way that helps you grow your wealth, and increase your net worth.

2. Review your assets

While economies around the world are still reopening, things are still massively uncertain. Inflation in the US is at a 40-year high; which could have a knock-on effect on many of its trading partners.

As such, 2022 is a good time to do a full review of your assets. Besides investment assets, don’t forget to review other assets you may already own such as your savings, deposits, insurance and even your property. If you have rental property or home mortgages, reviewing them helps you figure out how much home equity you actually own which can boost your net worth as well.

If you’re the type that has a portfolio but doesn’t know how to rebalance it, your best bet is to talk to a financial advisor who can guide you through the process of assessing your risk profile and what you should do to preserve your wealth.

In the meantime, you can also catch the Maybank Financial Planning Series videos to further educate yourself on financial matters.

3. Reign in expenses

Lifestyle creep is something that tends to happen with increased income, most of the time without you realising it. As your income rises, so too do the limits you put on your own spending. It could be as small as eating out one extra day a week, or even taking an extra helping of chicken at the nasi kandar stall.

These small things stack up over time, and you don’t realise it as you normalise paying the bigger bill because “you can afford it now”. Even if you have enough money to comfortably see you through your monthly expenses, tracking your expenses and keeping to a budget can add up to a lot of money throughout the year which you can use to grow your net worth even more.

So keep an eye on how much you’re actually spending each month. It might be a lot higher than you thought you would be.

4. Explore new income sources

If you aren’t able to reduce expenditure, then perhaps it’s time to explore more income sources.

The easiest is to expand your passive income sources and diversify your portfolio. This could be digging into new speculative investments like cryptocurrency, or it could be more traditional sources like gold or commodities. You could even look into investing in startups for more long term plans.

Exploring new income streams is daunting. Having a financial advisor to help navigate the process not only reduces the amount of work you have to do, but also helps you avoid common pitfalls that less experienced investors might make.

Basically, it’s knowing where to store your money where it can grow at a rate that beats inflation. Income investing is a great way to increase your net worth and Maybank Privilege can help you get started.

Grow your net worth with Maybank Privilege

In this low interest rate environment, we must be smart investors to manage our wealth, assets and liabilities by tapping into ongoing promotions to capture better rates. For example, these could be to get better returns on fixed deposits, or to get better deals on loans.

Do not be afraid to tap on the expertise of others for your own personal gain. Especially if that expertise comes from a trusted banking institution that offers services to help people just like you.

Sign up as a Maybank Privilege customer through the MAE App today and stand to win RM163,790 worth of prizes. Build your portfolio with Maybank financial products to gain more entries to increase your chances of winning a Mazda 3 with RM140,000!

^{*Campaign ends 31 March 2022.}

The post What Can You Do To Increase Your Net Worth In 2022? appeared first on iMoney Malaysia.

There are many obvious similarities between strategies used in winning in sports and winning in investments. Those who understand the need to properly devise strategies, stand a better chance of winning in both areas.

In both areas, you need a good game plan to succeed. And no one game plan fits everyone. In sports, you need to know your individual or team’s strength and weaknesses to come up with the best plan.

The same goes for your investments. You must know how much risk you can take and how long you can commit to the plan as well as being able to stay focused and not get distracted by gimmicks.

If you want to give yourself a fighting chance of success at investing, you need strategies that are simple, robust, sustainable and insightful. Here are five ways that will help you stick to your investment strategies so you’ll stay on track all the way to the finishing line:

1. Think of your strategies as a process

If you can’t describe your strategies as a process, there is a higher tendency of your winging it. To avoid that from happening, you need to have your strategies down pat.

It is recommended that you write down your investment strategies in a flow chart process, indicating what you will do or react in different market conditions or investment situations.

Writing it down will help you articulate and visualise it, as well as guide you through difficult market times in what to do, instead of making emotional investment decisions.

From time to time, you need to vet through it to make sure it is in line with your long term financial objectives. Though your strategies are drawn out, they are not set on stone, hence, always be flexible according to situation. If you notice flaws after a certain market experience or your financial objectives change, then you need to tweak them accordingly.

2. Should you hold or sell?

Your process should be able to help you decide whether to sell or hold a stock objectively. To carefully monitor the performance of your assets so you can react in a timely fashion, you will need to create two sets of objective for each investment type:

1. A targeted return (e.g. I want to make 10% a year by buying blue chip stocks.)
2. An acceptable risk margin or range of how much loss you are willing to absorb (this is your stop-loss target e.g. if you bought a stock at RM8.00, you are willing to wait till it drops to RM6.50 to choose to exit.)

These objectives will avoid the problem of inactions that many investors have the tendency to fall victim to.

Before entering any investment, you must have a clear idea of what you want to achieve. Without a proper plan straightened out, it will difficult to make wise decisions when you are in heated battle of waiting or exiting.

3. Measure the effectiveness of your investment strategies

How do you know if your investment strategy is working or not. Do you have a way to measure the effectiveness of your strategy? Only when you can measure it, you can fully understand how well it works and improvise if you need to.

You can use both relative and absolute benchmarks to measure the effectiveness of your strategies. The benchmark you choose must match your financial objective, which should then match your investment strategies.

Relative benchmark refers to passive market index like FBMKLCI, while absolute benchmark refers to a targeted investment returns, such as 7% annually. It can be tedious and time consuming, but it is important for you to gauge the amount of risk you are taking relative to the benchmark you have set. Record the volatility of your own portfolio’s returns and compare it with the volatility of your benchmark’s returns.

By having these benchmarks, you will avoid making investment decisions based on emotions and rumours.

4. Set up a safety net for your investments

A common portfolio would have a mixture of stock market, real estate and exchange traded funds. However, if you fear taking on too much risks, then bonds can be used as a safety shield against the volatile market conditions.

The higher the quality of the bond, the better hedge it is against stock market-related investment losses.

Government bonds are more conservative, and hence typically yield lower returns, compared to corporate bonds. For investment safety purposes, you can also opt to invest in unit trust funds and exchange traded funds.

5. Identify your investing amount

Identifying your investment amount or also known as position sizing will help you draw up a realistic plan to achieve your financial objectives. Position sizing means knowing how much stock to buy in an individual trade or how much to invest if it is a bulk investment that will be put away.

Unfortunately, most investors fail to put a great deal of thought into this, which can make or break one’s investment performance.

You need to first set your financial goals and determine how much you need, and work backwards from there to understand how much you need to invest and how you need to invest.

For example, if your ultimate retirement fund is RM1 million, and you have 30 years to invest, you will need to contribute RM600 every month, and your portfolio will have to consistently yield 7.5% per annum, assuming your initial investment is RM20,000. In order to achieve the average returns of 7.5%, you must be able to identify how much to put into which investment product.

When it comes to investing, each investor will own a unique set of financial goals, which requires a unique set of strategies. Therefore, it it’s definitely not advisable to adopt or copy your relative, friends, or even an investment guru’s investment strategies. You can learn from them, but you will need come up with your own strategy that fits your needs and goals.

Saving for a house requires short-term win, which means you need to be a tad more conservative, whereas long term goals such as  retirement goal, will have time to digest the ups and downs of the market, allowing you to be more aggressive.

The three main determinants of any strategy is risk appetite, duration and asset allocation. The success of your investment will depend on how you match these changing determinants according to the market performance.

This article was first published in 2016 and has been updated for freshness, accuracy, and comprehensiveness.

The post 5 Tips To Help You Stick To Your Investment Game Plan appeared first on iMoney Malaysia.

Financial Independence Retire Early, better known as the FIRE movement, is an ambitious movement aimed at achieving financial freedom in the shortest amount of time possible.

While the most common interpretation of this movement is to retire early, many FIRE practitioners aim to have enough passive income to do whatever they want without worrying about money.

How does FIRE work?

People who want to achieve FIRE strive to save enough to cover their annual cost of living for many years. They don’t just wing it along the way; they follow a technique based on two popular retirement strategies: the 25x Rule and the 4% Rule, both of which assist people in determining “safe” withdrawal rates from their retirement assets.

25x rule

This rule follows that in order for a person to retire, he or she must save at least 25 times his or her annual salary. Say for example your salary is RM5,000 a month, equating to RM60,000 a year. In order for you to meet the 25x rule, you must have at least RM1,500,000 in your bank account.

4% rule

This rule states that in your first year of retirement, you should be able to live comfortably on 4% of your money in investments, then adjust that amount to account for inflation each year. According to historical data, living on just 4% of your income for 30 years will allow you to use your retirement portfolio to cover costs.

These two rules govern the overall direction of a person’s journey towards FIRE. Think of it as a standard template on how you can achieve the ultimate financial freedom. However, this is an evolving concept and people from different walks of life take this differently.

Two types of scenarios when FIRE is achieved

FIRE is not a one-size-fits-all aim. Some people simply aspire to be financially self-sufficient, while others are hell-bent on beating the system and retiring early. The amount of money most people are willing to save each year, as well as what they expect to do and how they want to live in “retirement,” all influence how people define FIRE.

Continue working

One of the most common misconceptions about the FIRE movement is that participants desire to retire. Instead, some see it as a means to do the work that they really want to do. They might use their free time to volunteer, work part-time, or even establish a business, thereby assisting others in achieving their FIRE goals. FIRE is more about being able to take on initiatives and activities that they’ve always wanted to accomplish for this group than it is about disappearing out of society.

Do whatever you want in life

For others, living a FIRE lifestyle means having complete control over their lives. They may desire to travel, but rather than taking a two-week vacation, they may look for a place to stay for months. This group may elect to work on a personal project when the time is right or choose to sleep in for the next six months.

How to achieve the 25x and 4% rule?

Achieving FIRE is no easy feat, but there are proven methods to make it less difficult to follow.

1. Make a list

To find out how much money you’ll need to retire, first estimate how much money you’ll spend each year. As a starting point, think about the costs listed below:

• Rent or mortgage
• Health care and long-term care costs
• Annual cost of groceries
• Annual cost of medication
• Transportation costs (whether that’s car payments and maintenance or public transportation expenses)
• Amount you plan to spend on travel each year
• Pet expenses

The list above isn’t a very exhaustive list, and it can be different for you and for everyone else depending on the type of lifestyle you lead or want to pursue when you retire. However, the bottom line is, you start it off by making an exhaustive list of everything you need to be paying for when you reach that retirement period.

2. Add miscellaneous spending

Unexpected things just happen in life, and most of the time we end up spending on them whether we like it or not. So, after adding up all your potential cost for a year, make sure you make room for some discretionary spending. Think of it as your yearly emergency fund.

3. Get an insurance policy

To shave off all the expenses you don’t necessarily need to make when you retire, it’s worth getting insurance – a health care plan, life insurance, and even a retirement plan.

4. Start investing and diversifying

Investments pay off in the long run, the more you accumulate these investment assets early, the bigger pay off you will get in the future. You don’t need to follow traditional investment routes such as stocks, bonds, or index funds, there other rewarding options available today like cryptocurrency and DeFi, although they are riskier. And of course, don’t put all your investments in a single portfolio, you should mix and match different investments to diversify.

5. Hustle hard

Since the goal is to retire as early as possible, you should be hustling harder than everyone else. Get a side job or start a business. Do whatever it takes to increase your cash flow and income so that you can set aside as much money as you can to achieve financial independence.

Misconceptions about FIRE

• Early retirement is not doing nothing for the rest of your life. While FIRE members are retiring early, it is not for the purpose of sitting about all day. Instead, FIRE’s “retire early” component emphasizes the freedom to leave a 9-to-5 corporate job and pursue employment that is more meaningful to them.

• You don’t need to forego your necessities to achieve FIRE. Passive income is important to FIRE members in order to achieve financial success. For example, you can live off the money you make from passive income streams like a property you put up for rent, your business, or other sources of income where you don’t need to put in a lot of effort. That’s why it’s important to establish a passive income stream before you go living a life of FIRE fully.

• You don’t need a six-figure income to be financially independent. The amount of money a person earns has no influence on their ability to achieve FIRE. Many people whose income improves over time become victims of inflation, which increases their quality of living beyond their financial means. Someone might upgrade their car or go on a shopping spree because they believe they “deserve” it.

Read more:
7 Things I Learned From The FIRE Movement
Malaysians Share Their FIRE Journey

Should you pursue FIRE?

If your goal is to hustle hard to enjoy a life of freedom in the earliest time possible, FIRE is probably one of the best templates you can follow. You don’t have to, but if you’re looking for a collective sentiment that fits your goal, this movement should be able to give you enough resources, support, and motivation to keep that FIRE burning within you.

Otherwise, if you’re the kind of person who is happy with the simple life – taking things slow and still find meaning and fulfilment pursuing the typical 9-to-5 life, no one should tell you to stop otherwise. At the end of the day, it’s all about pursuing what will make you truly happy.

The post A Collective Sentiment On Early Retirement: The FIRE Movement appeared first on iMoney Malaysia.

Retirement should be a celebration, the moment where your life’s work delivers just rewards.

However, for a lot of people, retirement also brings about a heavy dose of anxiety, all because of one simple reason – they do not have enough money to support their livelihood once they’ve retired.

So how can you change your coming retirement from a ball of anxiety back to a feeling of celebration? Simple, by planning ahead.

As the saying goes, ‘failing to plan is planning to fail’. Planning for retirement should be on everyone’s to-do list but if you are near to retirement, you will need to take certain concrete steps in the near future so you can enjoy a more comfortable life post-retirement.

Here’s a guide on how to draw up your to-do checklist when you are near to retirement.

Early steps you can take near retirement

Planning for your retirement might sound like a daunting task, but if you take it step by step and cross off each item on your list, it makes the task simpler and more manageable.

The minimum retirement age in Malaysia is 60 years old, and if you do plan to retire by that age, the early preparation stage should ideally be several years ahead. 

This is to allow you enough time to take care of personal responsibilities that you should be prepared to manage differently when you retire, like:

• Paying down debt

The first step we need to take in preparing for our retirement is to have a plan in clearing our debts. Ideally, you should start by clearing high-interest debt or avoid taking on new high-interest debt as you near retirement. This is to ensure you don’t use up your retirement savings to clear debt when you stop earning a regular income.

• Update your estate beneficiaries

This includes naming your estate beneficiaries by writing your will, planning property ownership transfer, updating your EPF beneficiaries, and arranging for your family to have access to your bank account and any other important legal documents in the future. Sorting this out ensures your family’s well-being even if  you are not there anymore.

• Arrange for your medical needs

Identifying and going over your medical and long-term care plan is important to avoid draining your retirement fund as your healthcare needs will likely increase with aging.  With   medical inflation in Malaysia at 14%, healthcare costs could increase faster than your income, especially in retirement. 

If you have medical insurance, you’d do well to ensure the policy has coverage post-retirement as many insurance products only cover you until 70 years old or arrange for long-term care coverage separately.

• Plan your post-retirement lifestyle

You should start planning now what you want to do post-retirement, and how much it will cost you to ensure you don’t run out of money trying to fulfil your bucket list for retirement. If your post-retirement plans include traveling the world or other hobbies that will require a sizeable financial commitment, then you should start setting aside funds now to afford them.

Checklist to get financially ready for retirement

What most people worry the most about retirement is the funds needed to retire comfortably. So, let’s get to the steps you need to take to be financially ready for this life stage.

• Review your retirement savings

For many Malaysians, their only retirement savings may be their Employees Provident Fund (EPF). According to EPF,  the minimum amount that you should have in your EPF account when you reach retirement age is RM240,000. Divided over 20 years of post-retirement living, that means that you only have RM1000 per month. 

In order to supplement your EPF funds to ensure a financial buffer beyond your EPF savings, you can also: 

• contribute more than the statutory rate (currently 9%)
• top up your savings with self-contribution to your existing EPF savings
• make your EPF savings work harder with EPF i-Invest
• diversify your savings through Private Retirement Schemes (PRS)

Other things you may need to consider when reviewing your retirement savings are:

• Cost of living
• Medical expenses
• To fight inflation
• Emergencies
• Your retirement bucket list

Your retirement savings plan needs to cover all these, to make sure that you have enough money to live comfortably post-retirement.

• Rebalance your investment portfolios

If you have existing investments, the next step for you is to rebalance your investment portfolio.

Rebalancing your investment portfolio is even more important when you’re approaching retirement. It ensures that you have the right asset allocation (i.e., how your portfolio is divided into equity, fixed income, or other investments) that matches your risk level.

So how should we rebalance our portfolio? Generally, rebalancing your portfolio is simple. Here are two main ways  in which you can rebalance your portfolios.

1. Sell your high-performing investments and use that money to buy lower-performing ones. With this method, you won’t have to put in any additional funds into your investment portfolio.
2. Allocating new funds. This method of rebalancing your portfolio requires you to put in additional funds in a strategic manner. Here’s an example; if you see that one of your investments is overweighted, then you should invest your new deposit into other investments until your portfolio is balanced again.

When rebalancing your portfolio, you can estimate your risk level and ideal asset allocation by taking Principal’s short quiz here.
^{Source : https://www.principal.com.my/sites/default/files/2021-06/Principal%20Investor%20Quiz%20A4%20100621%20R2%20FA.pdf}

Plan your retirement income

Apart from what you have saved up for retirement, you can also look for ways to increase your retirement income. One way to continue supplementing your income after retirement is to find a hobby that you can monetise. If you like cooking, maybe you can start a simple lunchbox business. The most important part of monetising your hobbies is, keep the risks low. Remember, you’re doing this to help supplement your retirement funds. 

The second one is to maintain a passive income after retirement. This can be done in a myriad of ways, such as:

• Property ownership with potential for rental returns
• Existing investments that provide returns (EPF, PRS, unit trust)
• Part-time work that leverages on your professional experience

How Principal can help you grow your retirement savings

A lot of us fail to plan properly for our retirement, which can lead to financial pressures in the future. With proper planning and execution, your retirement can be just as fulfilling as any stage of your life. Instead of worrying about your retirement, take steps to start preparing as soon as possible. 

Investing with Principal also allows you to diversify your retirement savings with EPF i-Invest and PRS or you can get in touch with their consultants to guide you on your investment choices.

^{You are advised to read and understand the Prospectus, Information Memorandum and/or Disclosure Document including any supplemental thereof and the Product Highlight Sheet (if any) before investment. A copy of the said documents have been registered with the Securities Commission Malaysia (SC) and may be obtained at our offices, distributors or our website at [www.principal.com.my]. The registration of these documents does not amount to nor indicate that the SC has recommended or endorsed this product or service. The issuance of any units to which the said documents relates will only be made on receipt of an application referred to in and accompanying a copy of the relevant Prospectus, Information Memorandum and/or Disclosure Document. Investing involves risk and cost. You should understand the risks involved, compare and consider the fees, charges and costs involved, make your own risk assessment and seek professional advice, where necessary.}

The post How To Be Financially Prepared For Retirement appeared first on iMoney Malaysia.

Whilst many people shy away from the subject of sickness in aging, estate planning and death, yet this is an equally important areas in one’s retirement to be thought through and planned.

The World Bank forecast that Malaysia will become an aged society in 2044 reflects the growing importance of retirement planning.

Meanwhile, recent EPF data shows that over 50% of contributors below 55 years old had less than RM50,000 in savings.  Additionally, 60% of retirees used up all their savings within three years of retiring. These statistics gives you a glimpse of the future if you do not take steps today to get prepared for retirement.

Beyond the numbers and statistics, it is never too early to start taking steps to get your retirement plan in motion.

For starters, let’s consider the 6 stages starting from pre-retirement to the end of life.

Stages to retirement

• Stage 1. This is where most people have not yet focus on retirement as their time is taken up with work, family and recreation.
• Stage 2. When people pause momentary to review their financial preparedness in retirement. At this point, it is common for many to think about active aging, not going to work and having time to do the things they love.
• Stage 3. While many may look forward to it with anticipation, the worry that they are not financially prepared remains.
• Stage 4. Ideally, this is a wonderful time as you retire from work and if finances, health and mobility is good, you live out your dreams. For someone who has not planned well, it can well be an apprehension stage financially and emotionally.
• Stage 5. At this stage, more help may be required in terms of mobility. Because money has been drawn down, focus will be more on passive income, if this is not thought of earlier.
• Stage 6.  For those who are healthy, their focus will be more on family relationships with more time on their hands. For those who are stricken with health issues, they may now need assistance in their daily lives. It common for agility to decrease and at times, senility starts to creep in. Some may experience debilitating illnesses which requires a full-time care giver.
• Final stage. This is when one is dependent on palliative care. By now, estate planning should be on standby for execution and preference for last rites communicated.

Find your retirement number

When the above has been sorted out, then comes the number crunching part.  An individual needs to know how much they will need for each stage of retirement.

Then work backwards to their current situation to know how much they currently have and if it is enough to fund the whole retirement.

If yes, congratulations!  You still need to keep an eye on your retirement funds as you progress through different life stages to ensure it stays on course especially in situations such as the current pandemic.

If there is a shortage of funding, then you need to figure out what are the saving and investment strategies required to achieve these goals. Remember to also prepare for unexpected life crisis such as critical illness, a death, divorce, financial loss.

For more information to start preparing for retirement, here are some suggestions of people, instruments and procedures that you may want to consider:

If you are looking for reliable information to kick-start your retirement planning or review it, sign up for InvestSmart Fest, organised by the Securities Commission Malaysia, which is happening from 8th to 10th October 2021. There are talks and e-booths of approved investment products for you to learn more.

You can also book a 1-hour free consultation with a Licensed Financial Planner at the virtual InvestSmart Fest from the 4th until the 10th of October, 2021. Registration for this #FinPlan4U consultation will be open from 22 September 2021.  For more information, go to http://www.isf2021.my/

The post What You Should Know About The 6 Stages To Retirement appeared first on iMoney Malaysia.

Last week, during a talk by my financial advisers, I learned about the 7 stages of financial independence. It covered the journey from financial dependence (reliant on other people to feed you) to financial abundance — rich enough to be a full-time philanthropist.

That led me down a rabbit hole of reading. It turns out the stages of wealth concept has been covered by multiple writers over the years, many putting their own twist on it. My favorite ones are from Nick Maggiulli and Morgan Housel — which I’ll reference later. I guess people will always love status ladders where they can check their level and aim for progress.

Anyway, inspired by those who’ve written before, plus my personal experiences — here’s my take on the levels of wealth:

Demo level

You’re affected by the levels of wealth, though you’re not actively participating.

This is our childhood, where our parents‘ wealth determined the kind of food we ate and the toys we played with. Most of us transition out of this into a “real” level after university.

Depending on your level of privilege, you might get a longer Demo level — for example if you stay with your parents all the way to a PhD. On the other hand, some get kicked out early — think single-parent families where teenagers have to work.

Where you end up after exiting Demo level also varies. If you’re a trust fund kid who becomes a successful entrepreneur, it’s possible to jump straight to Level 3. If you’re like most of us though, you’ll probably start in Level 0 or Level 1. Don’t hate the player, hate the game.

How demo level feels like:

You’re either unaware about the levels of wealth, or starting to question lifestyle differences between yourself and others. “Why does my best friend fly to Europe for holidays, while I’m stuck at home playing computer games?”

Regardless, the beliefs about money you develop during Demo level will influence you for the rest of your life.

Level 0: Broke

In terms of assets: You owe more money than you have.

For example, someone who has RM 20,000 (RM 1 = USD 0.24) in student loans and credit card debt, but only RM 10,000 in assets like bank accounts and retirement savings. Negative net worth.

Technically, if the people you owe money to demand for immediate payment, you wouldn’t be able to do it. Not unless you enter the cheat code and borrow more money.

Obviously this is a level nobody wants to be in. The challenge for most people in Level 0 though, is they’re stuck in a cycle of poverty. Level 0 can be a nightmare loop of not making enough money, getting into more debt just to survive, then giving your kids a lousy education + upbringing. Repeat for generations.

The ones who manage to win this level are usually someone like you — educated and employable, young enough to significantly grow your income.

How level 0 feels like:

I’ve visited Level 0 before, but thankfully had enough privilege/potential to earn my way out. Knowing I was broke lit a fire under my ass — to be more disciplined and work harder.

If you’re down at the deepest, shittiest parts of Level 0 (e.g. you don’t even earn minimum wage, and instead of a degree you have a criminal record), it can feel hopeless. Depression, suicidal kinda level. Typical personal finance tips don’t work at this level of hell too.

Spare a thought for those in Level 0, and see if you can help anyone win.

Level 1: Struggle

In terms of assets: You have more than you owe. But not very much more.

For example, someone who has RM 20,000 debt, but RM 30,000 in assets. That’s a positive net worth of RM 10,000.

Level 1 is way better than the dump of Level 0. But it’s still not comfortable. Net worth is just a snapshot of your current financial situation. Think about it as a report card or a fleeting story on Instagram.

What net worth doesn’t tell you, is how you live — how you feel like on a daily basis. Which is where income level comes in.

People struggling in Level 1 earn low salaries¹. In Malaysia, I’d consider this to be people making below the “Living Wage²” benchmark:

• RM 2,700/month for a single
• RM 4,500/month for a couple without kids
• RM 6,500/month for a couple with two kids

How level 1 feels like:

Living from paycheck to paycheck. Counting down the days every month to salary day. Spending big (Pizza Hut LFG!) when it comes, only to skimp (Hello economy rice, my old friend) three weeks later before your next salary.

Can feel like a meaningless cycle, filled with existential questions. “Is this all there is to work and life?” And anger: “Eat the rich!”

Susceptible to scammy investment schemes and exploitative companies that promise you “passive income.”

One major emergency away from falling back into Level 0.

Level 2: Financially stable

Your income is securely above the Living Wage benchmark. You lead a comfortable life — with money for entertainment, friends and hobbies — and can still save/invest >20% of your monthly salary.

You may have loans, but it’s under control. Less than 50% of your gross salary goes towards paying debt.

In terms of assets: You’re on track to retire at 60.

Even if you lost your job today (or some kind of freak emergency), you have enough savings to maintain your current lifestyle for at least six months.

How level 2 feels like:

You don’t worry about day-to-day expenses. Lazy to cook today, and wanna order some McDonald’s? Sure. Want to do it for an entire week? Go ahead.

The biggest difference between Level 1 and Level 2 though is the mental peace it gives you. You don’t feel rich, yet you know you’re okay. You may not feel financially free, but at least you’re in position to think about it. You have a stable foundation to build the rest of your life on.

Level 2 is a reasonable target for most people. Get here, find work you like, raise a happy family, and that’s a pretty good life.

Level 3: Rich

I once asked my wife what’s her definition of “rich,” and she settled on “net liquid assets of >RM 10 million.” Liquid meaning assets that can be converted quickly into cash, like fixed deposits, stocks and crypto — but excluding property.

At that point, my definition was much lower: net worth of >RM 1 million. (I’m thankful despite not being rich, and the huge disparity between our expectations, she still agreed to marry me.)

It turns out common benchmarks for a High-net-worth individual (HNWI) — which is a rich person’s way of saying someone is rich — are actually:

• In Malaysia: RM 3 million net assets (personal or with spouse) excluding primary home, or:
• RM 300,000 income per year (or RM 400,000 with spouse)
• Internationally: USD 1 million in liquid assets

Riffing on the benchmarks, I’m gonna propose another measure: If you decided to stop working today, you could maintain your current lifestyle for another 10 years. At least.

People in Level 3 are comfortably in the top 10 percent of society by wealth.

How level 3 feels like:

Your standard of living is more by choice than necessity. Your measurements of wealth are more numbers on a screen than tangible improvements to your daily life.

Often, the most efficient way for you to do something is to pay other people to do it for you. You value time more than money.

Financial Independence and/or Early Retirement is possible, depending on how you control your desires.

Life is good, unless you get into the sadly common habit of comparing yourself with the 1 percent — people who have tens or hundreds of millions.

Level 4: Rich AF

You can stop whatever you’re doing today, and enough money would still roll in forever.

Assuming you have some financial skills, you never have to worry about going broke.

Even if you have no financial skills, you have enough money to hire a team of people to manage your money.

Of course, a true Rich AF-er doesn’t worry about what level they fall into, but the pleb in me found out the benchmark for an Ultra-HNWI is >USD 30 million in liquid assets.

Note: there’s big variance within this level. Someone with 30 million might always fly first class, whereas Rihanna (single-digit billionaire) flies private, while the King of Saudi Arabia owns an airline.

If you wanna geek out on the differences between these crazy levels of wealth, check out this Reddit thread:

How level 4 feels like:

Consider the “0.01% of wealth” rule — which is a good estimate of what feels like trivial spending. For a middle-class Malaysian with RM 100,000 of wealth, that’s RM 10. So as the theory goes, spending RM 10 feels like nothing.

Now imagine you have RM 100 million. 0.01% of that is “only” RM 10,000. So buying an RM 10K business-class flight from Kuala Lumpur to London feels the same to you as a middle-class Malaysian buying an economy-rice lunch.

First world problems: “Does this person genuinely love me, or do they just want something from me?” “Will my children be responsible stewards once I’m gone?”

You have more money than you or your family will ever need. Power and influence too.

The only question is, what will you do with that power?

The psychology of feeling rich

Most of the world struggles in Levels 0 and 1. You’re likely someone in Level 1 or 2.

That can be one booster to feeling rich: by realizing your place in the grander scheme of things. Not looking down on others. But being grateful for what you have.

It can feel incredibly hard to get from Level 1 to Level 2. Maybe your income is good, but you’re burdened by loans — feeling like you’ll never escape. If that’s you, understand these are just arbitrary points on a spectrum. People can spend decades moving in the space between levels.

Don’t let this discourage you — focus on progress, not status.

Beyond Level 2, the differences in quality of life start diminishing. Sure, a Level 4 billionaire can live on their own island, whereas a Level 2 normie lives in their own apartment. But both own property. Both are a world of difference from the homeless in Level 0.

That’s why I think Level 2 is good enough for most people. Beyond that, you can experience the benefit of higher levels by levelling up your mindset.

Feeling rich beyond your current level

“To me, the highest form of wealth is controlling your time.” – Morgan Housel

Consider a Level 4 billionaire who only works on whatever they want, with whoever they want, whenever they want.

Could you do that as a Level 3 millionaire? Yes, probably. A financially-independent Level 3 person could choose that too. Though a Level 3 person who’s stuck in a high-stress job due to huge loans can’t.

The “hack” to work in Levels 0-2 is finding a job you like, working with people you like. You can’t resign today because you need the money, but at least most parts of work feel enjoyable. And you have friends.

The other shortcut to wealth is mental: by not wanting very much. Focusing on just the most important things in life. For most people this isn’t a Mercedes and a mansion, but a healthy, balanced life surrounded by loved ones.

Above a certain level of wealth — by my measure somewhere between Level 2 and Level 3 — feeling rich is a choice.

_FOOTNOTES:

1. _{Technically you could be living paycheck-to-paycheck even if you earn a lot. If you let your expenses spiral out of control.}
2. _{Estimates for living wage in 2016, for people living in Malaysia’s capital: Kuala Lumpur. Study done by Malaysia’s central bank.}

The post The 5 Levels Of Wealth (How To Know You’re Rich) appeared first on iMoney Malaysia.

Looking for a robo advisor to help you start your investing journey?

StashAway is a good option if you want to start investing internationally. It automatically picks investments for you, helps you quickly set up financial goals and estimates how you can reach them. It has competitive fees, no minimum investment amount and a sleek user interface.

However, investing with StashAway can mean giving up a lot of control over your portfolio, as you can’t pick individual investments. You also can’t opt out if StashAway decides to change the allocation of investments in your portfolio.

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How does Stashaway work?

StashAway is a robo advisor that invests your money in exchange-traded funds (ETFs). Each ETF is like a collection of investments like stocks, bonds, precious metals or other assets.

Like other robo advisors, StashAway makes you complete a short assessment before investing. You’ll be assigned a risk profile based on your assessment results. This helps StashAway figure out if it should recommend lower-risk or higher-risk portfolios to you.

StashAway uses an internal measure of risk, the StashAway Risk Index (SRI). If you’re a more conservative investor, StashAway will recommend a portfolio with a lower SRI, though you can still choose a different risk level outside its recommendation. But depending on your assessment results, you may not be able to choose the highest-risk portfolios.

You can create portfolios to meet specific goals, such as retirement or buying a new home. StashAway will suggest how much you may need to invest every month to meet your goal, although you can choose to invest however much you wish. You can also create portfolios for general investing, without specifying any goals.

As you invest, StashAway may periodically re-optimise your portfolio in reaction to economic trends.

Is it safe to invest through StashAway?

StashAway is licensed under the Securities Commission Malaysia, so it’s perfectly legal.

But what if StashAway closes down? Well, when you deposit money into your StashAway portfolio, the funds are kept in a Citibank trust account. Then, the purchased assets go to a custodian account through Saxo Capital Markets. This means that StashAway doesn’t actually hold your money or investments – so if the platform shuts down, you’ll still have access to them.

What does StashAway invest in?

Here’s the full list of ETFs that StashAway invests in.

StashAway has 12 portfolios based on different risk levels ranging from 6.5% SRI to 36% SRI. But what do these numbers mean? Basically, an SRI of, say, 10% means that there’s a 99% probability that the portfolio won’t lose more than 10% of its value in a year.

Here are examples of its lowest and highest risk portfolios:

Lowest-risk portfolio (6.5% SRI)

Type	Name	Allocation
Government bonds	iShares International Treasury Bond ETF (IGOV)	20%
Government bonds	iShares TIPS Bond ETF (TIP)	15%
Government bonds	iShares J.P Morgan USD Emerging Markets Bond ETF (EMB)	4%
Corporate bonds	iShares Floating Rate Bond ETF (FLOT)	20%
Fixed income	Vanguard Total International Bond ETF (BNDX)	20%
Commodities	SPDR Gold Trust (GLD)	12%
International equities	iShares MSCI Japan ETF (EWJ)	8%
Cash	-	1%

Its lowest-risk portfolio is mostly made up of bonds. The rest is allocated to gold (12%) and Japanese equities (8%).

Highest-risk portfolio (36% SRI)

Type	Name	Allocation
International equities	iShares MSCI Australia ETF (EWA)	10%
International equities	KraneShares CSI China Internet ETF (KWEB)	20%
Equity sectors (US)	iShares Core S&P Small Cap ETF (IJR)	10%
Equity sectors (US)	Energy Select Sector SPDR Fund (XLE)	10%
Equity sectors (US)	Consumer Staples Select Sector SPDR Fund (XLP)	16%
Corporate Bonds	iShares Core U.S. Aggregate Bond ETF (AGG)	8.5%
Real Estate	Vanguard REIT ETF (VNQ)	7.7%
Real Estate	Vanguard Global ex-U.S. Real Estate Index Fund ETF (VNQI)	12.3%
Commodities	SPDR Gold Trust (GLD)	4.5%
Cash	-	1%

On the other hand, its highest-risk portfolio is largely allocated in the US (45.7%), China (20.4%) and Australia (10.8%).

How does StashAway re-optimise your portfolios?

StashAway automatically re-optimises your asset allocation when it identifies a change in the economic cycle. It uses a fancy-sounding framework, the Economic Regime-based Asset Allocation, to do so. For example, in the latest re–optimisation in July 2021 (at the time of writing), StashAway has maintained or increased exposure to China tech, as well as made new allocations to assets that protect against inflation. When an optimisation happens, the platform will apply the changes to your portfolio – and you can’t opt out of it. Since its launch in 2017, it’s re-optimised its portfolios four times.

Some users may have gripes with this, as it sounds similar to active management – an investment strategy that buys and sells individual investments to try to get better returns than the market. This strategy usually underperforms compared to just buying and holding an ETF for a long period of time.

However, StashAway notes that it invests passively when it comes to individual stocks, and takes an active approach when it comes to deciding which market to invest in. But we don’t know yet whether this strategy will be effective in the long term, as StashAway has only been around for a few years.

How have StashAway’s portfolios performed?

You can check out the performance details of each portfolio on the StashAway website.

Here’s how the lowest-risk and highest-risk portfolios have performed since StashAway’s launch in July 2017:

• StashAway Risk Index 6.5% – 3% annualised return
• StashAway Risk Index 36% – 17.6% annualised return

However, existing StashAway investors may have noticed that their higher-risk portfolios have experienced dips in performance this year. This is partly due to StashAway’s allocation to the KraneShares CSI China Internet ETF, which has plunged thanks to China’s regulatory crackdown on tech companies. StashAway expects these stock prices to recover in the long-term.

But if you’re looking for a robo advisor to invest with, try not to get caught up with short-term investing performance. It’s hard to evaluate a robo advisor solely based on its daily or monthly (or even yearly) performance, as these portfolios are typically built with the long term in mind.

StashAway fees

StashAway’s fees range from 0.2% to 0.8%, depending on your portfolio size. The bigger your portfolio, the lower your annual fee.

Total investment	Annual fee (including GST)
First RM50,000	0.8%
Any additional amount above RM50,000, up to RM100,000	0.7%
Any additional amount above RM100,000, up to RM250,000	0.6%
Any additional amount above RM250,000, up to RM500,000	0.5%
Any additional amount above RM500,000, up to RM1,000,000	0.4%
Any additional amount above RM1,000,000, up to RM3,000,000	0.3%
Any additional amount above RM3,000,000	0.2%

This doesn’t include the annual expense ratio charged by the ETFs themselves, which is approximately 0.2% p.a. On top of that, there’s a currency conversion fee of 0.1% when you deposit your money, as StashAway converts your ringgit into USD to invest.

StashAway’s fees are fairly competitive. Of course, to get the best rates, you’ll need to invest a few million, which is out of reach for most Malaysians. But even at lower tiers, it’s slightly cheaper than competitors like MyTHEO and Wahed Invest. It’s also a lot cheaper than investing in unit trusts – these charge annual fees of 0.5% to 2.5% and upfront fees of 1.5% to 5%.

We like

• Competitive fees. StashAway’s fees start at 0.8% per year, which is lower than some competitors. It’s a cost-effective way to start investing globally.
• Easy access to international stocks. To invest internationally, you’d either need to sign up for an international brokerage, or invest in international ETFs or unit trusts through local institutions. This can be intimidating to a complete beginner – StashAway makes it a bit easier to start investing internationally.
• Goal-based investing. StashAway makes it easy to invest for your financial goals. It can help you estimate how much you may need to reach your goal, and how much you may need to invest every month to reach it.
• Good UI, user-friendly app. Financial apps can sometimes be slow and clunky, but StashAway’s platform makes signing up and investing super easy.
• Lots of free learning resources. StashAway publishes market commentary, articles on how to invest and insights into how it makes certain investing decisions. It even offers free investing webinars! These resources make it easier to learn and grow as an investor.
• Access to a cash management portfolio. Signing up to StashAway also gives you access to StashAway Simple, which is useful for getting interest on your spare funds.

Things to consider

• Cannot opt out of re-optimisation. Investing with StashAway means giving up a lot of control over your portfolio. A re-optimisation may change allocation in your portfolio, but you can’t opt out if you disagree with it.
• Dividend withholding tax. When you invest in US funds, your dividends will be subject to a 30% withholding tax. This tax is applicable when you invest in US securities as a non-US citizen, not just when investing through StashAway. But it’s worth noting, as StashAway has a high exposure to the US (almost half of its highest-risk portfolio is invested in the US). However, StashAway is able to claim back some of these taxes for you.
• Currency fluctuation risk. StashAway portfolios are denominated (i.e. held) in either USD or GBP. When you deposit funds in StashAway, it converts your MYR into either USD to GBP to purchase the ETFs that make up your portfolio. This means that your investments will be impacted when the USD or GBP rises or falls against MYR. For example, if the USD rises against the MYR, your portfolio will now be worth more in ringgit. But if the USD falls against the MYR, your portfolio will be worth less in ringgit. However, currency fluctuations risks aren’t specific to StashAway – it’s something you’ll have to keep in mind every time you invest in a foreign currency.
• Not Shariah-compliant. The ETFs that StashAway invests in are not strictly Shariah-compliant. However, the underlying fund in StashAway Simple is Shariah-compliant.

StashAway alternatives

Interested in passive investing, but not keen on StashAway? You could try these other options.

If you want to invest through other robo advisors:

Robo advisors Akru, MyTHEO and Wahed Invest are good alternatives to StashAway, as they also invest in international ETFs. But if you prefer your robo advisor to invest in unit trusts instead, consider BEST Invest or Raiz. Check out our robo advisor comparison for more information.

If you want to go the DIY route:

Instead of investing through a robo advisor that invests in ETFs, you could just directly invest in ETFs yourself. You could open an international brokerage account (for example, with Interactive Brokers or TD Ameritrade) and invest in the same ETFs that StashAway invests in.

If you want to invest through a local brokerage instead, Bursa Malaysia has a range of ETFs that could give you exposure to international equities. For example, you could invest in US equities through the MyETF Dow Jones U.S. Titans 50 or focus on US tech companies through the TradePlus NYSE FANG+ Daily (2x) Leveraged Tracker. You could also invest in Chinese equities through the Principal FTSE China 50 ETF or TradePlus S&P New China Tracker.

Of course, when you go the DIY route, you’ll be responsible for researching every ETF you’ll be investing in. You’ll also need to rebalance your investments periodically on your own.

How to open a StashAway account

It’s easy to get started with StashAway. Here’s how:

1. Use this link to get 50% off your management fees for your first six months.
2. Click on “Invest Now” or “Get Started”.
3. Register a new account.
4. Provide personal information (so StashAway can verify your identity and customise your portfolio).
5. Wait for your identity to be verified, then start investing!

StashAway

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The post StashAway Malaysia Review: Is This Robo Advisor Worth Using? appeared first on iMoney Malaysia.

Looking for an investment that’s affordable, easy to manage and lets you invest in many different assets at once? Exchange-traded funds (ETFs) could be what you need. Here’s how ETFs work, and why they could be a great addition to your portfolio.

What are exchange-traded funds, or ETFs?

ETFs are similar to unit trust funds, in that they pool investors’ money to buy a group of stocks, bonds or other investments.

Unlike unit trusts that involve regular buying and selling by the fund manager, ETFs are typically passively managed to track an index. This means that the fund manager of an ETF tracks or replicates an index, rather than selects individual stocks or assets to invest in.

How do you make money from ETFs?

Investors generally make money from ETFs through two ways:

• Capital appreciation. Like stocks and unit trusts, you can make money from ETFs when you sell them after their prices go up.
• Dividends. Some ETFs may also pay dividends on a half-yearly or yearly basis. You can find this information on an ETF’s prospectus, which is available on its company’s website.

How are ETF prices determined?

An ETF has an underlying net asset value (NAV), which is the sum of all the fund’s investments, after subtracting liabilities such as the cost of managing the fund, divided by the number of shares currently held by all its shareholders.

Although it has a NAV, an ETF’s trading price depends on demand and supply. If more people are interested in buying the ETF (demand) than selling it (supply), its price goes up. But if more people are interested in selling the ETF than buying, its price goes down. An ETF’s traded price will generally not stray far from its NAV.

Types of ETFs

There are many types of ETFs that can differ by asset class, geography or investment approach. Here are common types you’ll see on Bursa Malaysia and international stock markets:

• Equity. These ETFs invest in stocks. They might differ by region (e.g. only Malaysian stocks) or industry (only tech stocks).
• Fixed income. These ETFs invest in fixed income securities, which refer to low-risk investments like bonds or sukuk.
• Leveraged. These ETFs use debt to increase your returns. For instance, a 2x leveraged ETF would allow you to make (or lose!) two times more money for every price movement of the index.
• Inverse. These ETFs allow you to gain returns when its index loses value. Conversely, you will lose money with an inverse ETF if its underlying index gains value.
• Commodity. These ETFs track commodity indices, which in turn measure the performances of commodities like gold, silver and oil.

What are the pros and cons of investing in ETFs?

Here’s why you’ll want to consider investing in ETFs:

• Low fees. As ETFs are usually passively managed, they tend to incur lower fees of between 0.08% and 1.09% a year.
• Diversification. Investing in ETFs means that you’ll be able to invest in many assets at once with little money. By investing in the Dow Jones Islamic Market U.S. Titans 50 Index for example, you’ll immediately get to invest in the top 50 companies in the US that comply with Islamic investment guidelines. By diversifying into many types of investments, you can reduce the impact on your portfolio if any one of the investments within the fund underperforms.
• Bought and sold like stocks. As they’re traded on the stock market, it’s quick and easy to buy and sell your ETFs.
• Fits into a passive investment strategy. Don’t want to spend a lot of time picking out the right stocks? With ETFs, you won’t have to worry about individual stocks, as they are automatically selected for you.

As great as ETFs are, they do have their disadvantages:

• You won’t beat the market. An ETF usually matches the performance of a market (or a segment of it), so your investment returns won’t outperform the market.
• You give up some control over your portfolio. You can’t include or exclude specific stocks from an ETF.

Why you should pay attention to investment fees

A big draw of ETFs is that they generally have low fees. When you buy ETFs on the stock market, you’ll have to pay an upfront brokerage fee. Depending on your broker, that could mean around 0.1% to 0.7% of your transaction value, with a minimum of around RM7.

Similar to unit trust funds, an ETF also has an annual expense ratio – this is the annual expense of the fund that includes the management fee, trustee fee and other administrative costs.

However, since ETFs tend to be passively managed, they usually incur lower costs. In Malaysia, the annual expense ratio of an ETF can be between 0.08% and 1.09%. This can be much lower than unit trust funds, which can have an expense ratio of around 1.9%.

That doesn’t sound like a big difference, but a slightly lower expense ratio can save you a lot of money in the long run. Here’s an example of how it can impact your investment return over time, assuming a return of 7% every year. To keep things simple, we didn’t account for any upfront fees you may incur.

Portfolio growth at 7% return p.a.

	Zero-fee portfolio	ETF	Unit trust 1	Unit trust 2
Expense ratio	0%	0.6%	1.5%	2%
Initial investment	RM10,000	RM10,000	RM10,000	RM10,000
10 years	RM19,672	RM18,596	RM17,081	RM16,289
20 years	RM38,697	RM34,581	RM29,178	RM26,533
30 years	RM76,123	RM64,306	RM49,840	RM43,219

In the example above, a difference of a few percentage points in your expense ratio could mean tens of thousands of ringgit over many years. This isn’t to say that you should always go for the investment option with the lowest fees – paying a unit trust’s annual expense ratio can make sense if you want to leverage on a fund manager’s expertise – but it does mean that you should be mindful of how it could impact your portfolio.

Here’s how Malaysian ETFs have performed

Here’s a list of all the Malaysian ETFs you can invest in, and how they have performed in the past few years.

ETF	Type	Expense ratio	Price (RM)	YTD return	3-year return
ABF Malaysia Bond Index Fund	Fixed income	0.1575%	1.2	-0.31%	17.76%
*FTSE Bursa Malaysia KLCI ETF	Equity	0.59%	1.68	9.63%	-3.02%
Kenanga KLCI Daily (-1x) Inverse ETF	Leveraged and inverse	0.59%	1.91	-11.22%
Kenanga KLCI Daily 2x Leveraged ETF	Leveraged and inverse	0.59%	1.98	19.73%
*MyETF Dow Jones Islamic Market Malaysia Titan 25	Equity (Shariah compliant)	0.49%	1.175	2.61%	13.42%
MyETF Dow Jones U.S. Titans 50	Equity (Shariah compliant)	0.475%	1.85	30.06%	82.38%
*MyETF MSCI Malaysia Islamic Dividend	Equity (Shariah compliant)	0.505%	1.52	0.61%	21.59%
MYETF MSCI South East Asia Islamic Dividend	Equity (Shariah compliant)	0.755%	0.74	9.82%	-4.52%
Principal FTSE ASEAN 40 Malaysia ETF	Equity	0.08%	1.66	12.38%	-4.66%
Principal FTSE China 50 ETF	Equity	0.72%	1.8	14.44%	9.80%
TradePlus DWA Malaysia Momentum Tracker	Equity	0.21%	1.12
TradePlus HSCEI Daily (-1x) Inverse Tracker	Leveraged and inverse	1.08%	1.7	-18.99%
TradePlus HSCEI Daily (2x) Leveraged Tracker	Leveraged and inverse	1.08%	1.73	20.41%
TradePlus MSCI Asia Ex Japan Reits Tracker	Equity	0.555%	1.04
TradePlus NYSE FANG+ Daily (-1x) Inverse Tracker	Leveraged and inverse	1.09%	1.6	-42.04%
TradePlus NYSE FANG+ Daily (2x) Leveraged Tracker	Leveraged and inverse	1.09%	12.94	167.39%
TradePlus S&P New China Tracker-MYR	Equity	0.59%	8.16	35.53%
TradePlus S&P New China Tracker-USD	Equity	0.59%	2	34.31%
TradePlus Shariah Gold Tracker	Commodity	0.3675%	2.5	3.70%	48.24%

*Total returns are calculated using NAV per unit with the assumptions that dividends are reinvested. Data is accurate as of June 8, 2021.
Performance data from Bursa Marketplace; expense ratio data from Bursa Malaysia

How to invest in ETFs in Malaysia

a) Through the Malaysian stock market

ETFs are traded on the stock market, so if you want to invest in local ETFs, just open a stock trading account. You can find a full list of Malaysian ETFs on the Bursa Malaysia website.

b) Through an international broker

There are only 19 ETFs in Malaysia. But look overseas, and you’ll find a dizzying array of funds for every region, industry or asset you can think of. For example, you could invest in the space industry through the Procure Space ETF (UFO) or invest in livestock futures contracts through the iPath Bloomberg Livestock Subindex Total Return ETN (COW). We honestly didn’t make these stock tickers up.

Buying US stocks through a local broker can cost you a minimum of US$25 per transaction. Alternatively, you can also buy them through international brokers like TD Ameritrade, Saxo and Interactive Brokers. Some international brokers charge 0% commission when you buy US ETFs.

c) Through a robo advisor

Robo advisors typically invest in ETFs. When you invest through platforms like StashAway and MyTHEO, you’ll be investing in many international ETFs at once. This can be convenient, as you’d be able to diversify in many ETFs with little money. Robo advisors also help you set up, manage and rebalance your portfolio for a small fee.

But on the other hand, you won’t be able to choose the individual ETFs that make up your portfolio.

Do ETFs fit in your portfolio?

ETFs can make sense if you are looking for a beginner-friendly investment, if you don’t want to spend a lot of time on your portfolio, if you want to easily diversify your portfolio or if you’re looking for a unit trust alternative with potentially lower fees. Just remember that ETFs, like any other investment, aren’t foolproof. Always do your research before going in, and be aware of the investment risks.

The post A Beginner’s Guide To Investing In ETFs In Malaysia appeared first on iMoney Malaysia.

Being financially prepared for life’s unexpected events is something many of us put off doing until it is too late.

As we have seen in the past year filled with uncertainty brought on by the pandemic, being in control of our finances allows us to be better prepared. If something unfortunate happens and we are financially unprepared, the financial impact on our loved ones can be a very heavy burden.

Let’s start with managing our finances better and making our extra cash work harder as well.

So, how do you make your money work harder and smarter? Start by taking a closer look at your finances, and finding ways to make the most of each ringgit you earn and save.

Here are 3 simple steps you can take to improve your financial stability for long-term security.

1. Take control of your money

Understand where your money is going each month in order to make better use of it by budgeting.  

Here’re some easy guidelines to create a budget:

• Track your expenses to see where your money is going towards each month.
• Use the popular 50/30/20 budgeting system where you spend 50% of your income on ‘necessities’, 30% on ‘wants’, and put aside 20% for savings.
• If you are overspending on certain areas, decide what expenses you can cut down.
• Track your monthly budget regularly to see how you fare financially as well as your spending habits.

Budgeting helps you figure out how much money you need to cover your daily expenses and in the long term, to pay off debt and still save for other life and financial goals.  Getting charged for interest on your outstanding debts can take a big chunk out of your income each month and reduce the amount you can save.

Ways to pay off your debts:

• If you have multiple debts, start paying off the one with the highest interest rate first. High-interest debt can eat up a lot of your monthly income because the unpaid interest adds up and increases the amount you owe every month.
• Watch your credit card debt which is a common high-interest debt that can increase rapidly especially if you pay only the minimum amount each month.
• Consolidate debts or focus on clearing off smaller debts first, so you have more funds to pay off larger debts.

Once you have a plan, be prepared to commit to it as it may take months or even years before you start to see the results.

2. Start saving and investing

When you start saving, putting money aside for emergencies is important because you never know when you may need to pay for unexpected events like your car breaking down, health emergencies or sudden household repairs.

What is an emergency fund?

• A pool of savings you set aside to pay for unexpected expenses, so you don’t have to borrow money.
• This is money you can get to quickly and withdraw from your account without penalty.
• The amount should be three to six months of your living expenses.
• If you have many financial responsibilities, you need to set aside more money for this fund.

However, money you leave in your savings account over the years can also lose value over time due to inflation. Once you have saved enough for an emergency fund, consider investing your money. Investments can potentially provide bigger returns over time and help protect the value of your money too.

How to grow your savings with investments?

• Start investing as early as possible to take advantage of compounding interest to grow your savings over years.
• Invest regularly even with a small amount of several hundred ringgit can make a big difference over time.
• Create passive income through investing in lower risk investments like unit trust funds, exchange traded funds, REITs and some blue-chip stocks that can provide income in the form of interest payments or dividends.

3. Be financially and medically protected

Can your investments protect you financially and medically at the same time? With ILPs, you can make your money work harder and smarter by doing both at once.

According to the Life Insurance Association of Malaysia (LIAM), ILPs account for more than half of active policies with on-going premiums in 2018. ILP is a popular choice for Malaysians who want to be financially prepared for unpredictable events and life challenges and at the same time make their money work harder for potential investment returns.

Sun Life Malaysia offers the Sun Shield Link, which is a flexible ILP that helps you protect yourself and your loved ones financially. At the same time, it provides the potential to achieve long-term financial health by growing your savings with an array of investment-linked funds.

Additionally, Sun Shield Link gives you the freedom to protect what matters to you most with 6 optional protection riders to fit your needs at different life stages:

As you are going through life’s important moments like advancing in your career, getting married and having children, your financial protection needs will change. Don’t wait till it’s too late. Act now to protect your financial health and loved ones with one insurance plan that can give you all the benefits.

The post 3 Smart Ways To Make Your Money Work Harder For You This Year appeared first on iMoney Malaysia.

You have been working your whole life, saving for your retirement. Perhaps you have millions of ideas about what it’ll be like when it finally comes to the moment where you break away from the 9-to-5 rut. However, with a few more years to go before the day finally arrives, it’s time to take serious action, and get things in order for your golden years ahead.

Most of us would want to achieve financial freedom by then and having not to worry about money any further. To ensure everything is in order when your last conventional pay cheque comes your way, here are ten things you need to do:

1. Decide on your goal

Many a times when we plan for our retirement, we don’t have a clear picture of how we really want to retire. Do we want to retire at a small and quiet village, outside of town, or perhaps stay in a small(ish) condominium in town, where everything is within walking distance?

By this time, with just a few years to your retirement, you should really have a clear idea whether you want to upsize or downsize your lifestyle post-employment.

The first question you ought to ask yourself is what you want after you retire. Travel around the world and eventually, retire at one of the Caribbean islands? Whatever your goal is, you need to align your retirement plan towards achieving it.

2. List down your obligations

Before embarking on your adventure after retirement, you should consider any financial obligations you may have that can adversely affect your finances after employment.

Do you still have dependents (parents or children) you have to support even after you retire? Will your child(ren) still be in college, with hefty tuition fees coming your way every few months?

How about your lifestyle? If you have planned for your retirement optimally, you should not have to downsize your lifestyle too much. The key word here is sustainability. You should have a clear idea of how much you need every month during your retirement, and how long your retirement fund will last.

3. Clear your debt

Ideally, you should have cleared all your debts before you hit retirement. By clearing your debts, you improve your net worth and credit rating which might be helpful should you need to take another loan in the future.

Consider paying off loans with high-interest rates first, such as credit card debts, personal loan and car loans.

Next, consider your home loan. There has been an ongoing debate on whether home loans should be cleared off sooner than needed for the peace of mind of being debt-free. If you think paying off home loan last is a better idea, perhaps you should look into the option of refinancing your mortgage.

Currently, Malaysia’s Base Rate ranges from 1.75% to 3.22%. This is lower compared to previous years, thanks to the four Overnight Policy Rate reductions last year. This is good news for those taking out loans, as it means lower interest rates. If you are able refinance your home loan at lower interest rates, you may enjoy lower interest payments as well.

4. Preserve your assets

When we are still earning an income, we mostly focus on accumulating assets. However, when retirement hits you, more focus should be put on preserving your existing assets.

A person may own multiple properties and be worth millions of ringgit, but he or she may not be able to even afford lunch! In finance, two terms arise: solvency is the ability to meet long-term (more than two years) financial obligations, and liquidity is the ability to meet short-term (less than two years) obligations by converting assets quickly into cash.

In other words, how we preserve our assets depends on our ability to sustain our short-term needs (daily expenses and outflow) without needing to liquidate (force sell) our assets. Consolidating your assets by consulting wealth management and financial planning advisories may be a good idea to have clearer view of your current financial health and have more control in monitoring and preserving your assets.

5. Create or update your will

To prevent your family from exploding into those family feuds infamously depicted in Hong Kong soap operas, updating your will (or creating one if you don’t have one yet) is essential. Jokes aside, it is important to have estate planning so that you can be assured that your family is being taken care off in the manner of your preference.

Having a will doesn’t just ensure your hard-earned assets are distributed properly and rightfully, according to your wishes – it also helps your family go through the process quicker and with greater ease. Remember, avoid hassles by having different wills for assets in different countries and jurisdictions.

6. Review your investment portfolio

As you retire, you would require a substantial steady stream of income to replace your previous conventional income that takes care of your daily expenses and other obligations.

As a result, your capacity or holding power of your investment is limited. Perhaps toning down your investment appetite from aggressive growth equities to more conservative and passive dividend-paying funds such as bonds or government securities might be a good idea. Reviewing your risk tolerance is essential to sustain good cash flow and preserve your assets.

Here are some financial mistakes you should avoid before you hit retirement.

 7. Establish passive income

If the retirement you envision for yourself is one where you stop working completely, it becomes even more crucial for you to establish at least one source of passive income, which will be your new primary source of income. This could mean investing in low-risk assets that provide a steady stream of income, such as bonds or money market unit trust funds.

As an alternative to your investments, you can also create another stream of income by working part-time or taking up freelance jobs. For those who have years of professional work experience, they can opt for consulting or an advisory role to other firms or institutions – this may not exactly be ‘passive’ but if it’s something you enjoy doing, it won’t feel like a job for sure!

8. Healthcare

The unfortunate thing with healthcare is that it becomes more expensive the older we get. Most people give up on their medical card due to the exorbitant price they have to pay — especially in view of the diminishing income after retirement.

Therefore, it is important for one to have a clear idea of your health and fitness level before you hit their golden years. Prevention is certainly better than cure.

Find out if you have any medical conditions that may require substantial amount of money to finance, especially when Malaysia’s medical inflation is expected to be 14% in 2021. Maintain your medical card, review the policy to ensure it is adequate, then set up a budget for rainy days, so that it can cover medical emergencies.

9. Withdraw your EPF

Should you withdraw everything or should you withdraw a set amount regularly? Prematurely withdrawing and depleting your Employees Provident Fund (EPF) savings, even if you can, may bring adverse effect to your retirement fund. Unless you have a strong reason or solid financial plan to invest elsewhere that could potentially provide better returns, your EPF savings should be remained untouched and used as a last resort as this will be your retirement fund for the next 20 or so years.

If you don’t think your EPF savings enough is adequate to outlive your retirement years, you can consider withdrawing some of the money for selected investments.

10. Continue working

According to a survey conducted by University of Malaya’s Social Security Research Centre (SSRC), almost every participant said they would like to live until 80, but are not confident of being able to live financially comfortably. Additionally, 70% of them plan to continue working beyond retirement, as long as they are physically and mentally able to do so.

Review your retirement savings before your retirement to understand where you stand financially post-employment. Will you be able to live comfortably on those savings, or do you need to continue working to generate income for your golden years?

For some, the idea of not doing anything for next two decades may not be conceivable at all! However, the point is to plan for your retirement, so that semi-retirement is an option and not a means to survive.

We need to start retirement planning as early as possible in order to have a comfortable retirement in years to come. However, planning your retirement is not just about saving money religiously, but also about making the right decisions at the right time to boost your savings.

This article was first published in 2014 and has been updated for freshness, accuracy and comprehensiveness.

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