Hustle

If want to invest better stay at KWSP lah,just draw out you will lost around 7% processing fee and the performance of fund so so only lah.

2013-01-11 17:08

kcchongnz

The long-term return of equity is 10-12%. KWSP's dividend is about 6%. Isn't clear which is better, to withdraw your epf money to invest yourself and to leave the money there? It all depends whether you are a savvy, disciplined and one not easily affected by emotion.

New investors looking to invest for in the equity market are usually faced with two main options - mutual funds or individual stocks. There are many individual investors who claim that they have been making tons of money in the market. The majority of these people probably have forgotten, or refuse to remember that they have lost a sum more than what they have made some time ago. Many investors get pulled in by the greater fool theory and buy stocks at all-time highs only to panic later during a pullback. Few individual investors have the necessary skills to pick stocks. In their 2009 paper on “option trading and individual investor performance” , Rob Bauer, Mathijs Casemans and Piet Eichholtz examine the performance and persistence of individual investors trading at a Dutch online broker. Using a database consisting of more than 68,000 accounts and eight million trades in stocks during January 2000 to March 2006, they find that: During 2000-2006, the average investor has negative alphas, meaning the return is below the market return. Not even the top tenth of performance manages to beat the market consistently. Those in the bottom tenth of performance lose more than 90% of value. So be wary if you want to invest yourself. So it appears that individual investors will have to rely on mutual funds. Is that true?

Unfortunately with heaps of academic researches, among them of the famous Michael Jensen (1968), Grinblatt and Titman (1989), and Burton Malkiel (1995) which comprehensively evaluate fund performance, consistent show that actively managed funds do not outperform various broad market benchmarks as evidenced by the negative alphas.

The under-performance of the mutual funds/unit trusts can be solely attributed to the costs of investing in them. Very few mutual funds investors understand the complexities of mutual fund expenses and know the true costs associated with mutual fund ownership.

So whether one should withdraw his money and invest in the equity market depends on himself, whether he has the necessary knowledge and discipline in investing. If not, I would think it is best to keep his money in EPF.

2013-01-11 17:29

hoyt

Mutual funds (banks) charge 3% for EPF withdrawl.
Fundsupermart 2% or 1% (during promotion)

2013-01-11 19:50

gkheng

in order to create "durian runtuh" effect; rest of the ppl can sacrifice.

2013-01-11 23:59

kcchongnz

• “Men deem all men mortal but themselves”
TKW, for me I don't like others to manage my money, unless if he is good and does not overly charge me for that. For example I don't mind buying icap as it is trading at a big discount to its NAV, which I did but sold of because cannot tahan the arrogance of the fund manager. I would buy some again when the discount widen more. Who cares, getting good return is my goal anyway. If I were to diversify my equity holding globally (talk only, where got so much money), I would buy low cost index funds or ETF. In Bursa, the FBM30 (?) is good for most people as a low cost local index fund if you don't mind getting just a little below market return. Other than these, I would prefer to keep my money in EPF to earn the risk-free and tax-free return of very good 6%. I don't like the charges as mentioned by hoyt. Those are one time initial charges though, but there is this management expense, administration fees, portfolio turnover cost, costs of play etc which are all yearly recurring charges. Wondering what is left after all these charges.

2013-01-12 04:19

hoyt

True there are hidden costs in MF. There are good funds which give >6% annually but we still need to do our homework. Its a matter of choice for the individual.

2013-01-12 08:24

moven00

KcChong,

What about withdraw EPF to settle housing loan?
Some of my friends is doing that. Don't they lose out as interest rate for housing loan is only around 4.4%?
Their argument is dont keep everything in one basket. And also to lower your debt.

What is your opinion? All bros and sis are encourage to view their point please.
Thank you in advance.

2013-01-12 09:52

lawrencelim

4.4 is the per annum rate. You have to calculate the effective interest rate.

2013-01-12 10:07

canonball

i took a housing loan from maybank in 2004 for 180k with interest rate of blr-1%. Todate i have only balance of 26k need to repay. i withdrew from my kwsp account 2 to reduce the amount. In the short run i may lose out some dividend from kwsp however in the long run i think i have much more to gain as i will be able to free up extra cash from my monthly installment payment which i dont have to pay anymore. Thats the way i think for myself.

2013-01-12 10:08

kcchongnz

moven00, everybody has his own principle. Like your friend, he doesn't like to have debt and hence he tries to pay down his debt as much as possible. There is nothing wrong in my opinion. In fact there is this maxim in financial planning, if you have excess money, always pay down your debt first before you think of investing. (Anyway this will be my maxim, not the maxim most of the financial advisers. This is because despite financial adviser being a professional, professionals have a code of ethics, most financial advisers would think of their own interest first rather than yours. This means there is a huge amount of conflict of interest.) But for me, I am a risk taker. I agree with you they lose out because why do they pay down loan from their EPF earning a higher return than the interest rate? Don't want to keep all in one basket in EPF money? Despite of how much i read about forwarded mail about how the ruling party misuses the EPF money to do all kinds of funny thing, I think EPF is still a safe place to leave your money.
In my own circumstances, I actually leverage on my house equity to borrow money from bank 3-4 years ago to invest in the market. I thought at the peak of the US sublime crisis then, the equity was ridiculously cheap. However I don't encourage others to follow what Ido. The circumstances then may be different. And I also believe in lowering your debt most of the time, but not with money which one can get higher return with minimal or no risk at all.

2013-01-12 10:23

greatdreamer

For a layman, strongly advise them to continue park their money in EPF. Though EPF return 5% to 6% is low, it is nearly risk free. Select a good mutual fund with good return, sometimes may be as difficult as selecting a stocks. Both need to do homework.

For mutual fund, you won't be surprise to find out that some fund are very consistent, perform below market rate years after years.

2013-01-12 10:55

shirley1

debts is always bad ? will the investment plan complete without some form of protection. A true story, a friend of mine his spouse pass away, the house loan was under his spouse name and he no longer need to pay the house loan, cuz insurance company paying for him. he is using the epf for his retirement and kids education fund :)

2013-01-12 10:59

kcchongnz

shirley1, excellent point. Leave the money in EPF to earn higher return and with no risk. Continue with the housing loan with a MRTA for personal risk management. This will also force that person to save money by paying housing loan installment every month and increases his equity in the house. One of the best financial planning advice.

2013-01-12 11:10

Wendy Yap

i bought the mutual fund via my EPF account. the agent show me the historical chart and it prove that the fund performance is a lot more better than EPF. after reading the discussion, i am not sure was it a nice deal.

2013-01-12 18:25

hoyt

@Wendy - which fund did you bought?

2013-01-12 19:39

kcchongnz

I wish to do a research here to find out if the return of money you withdrawn from EPF to invest in a unit trust earns you better than leaving your money in EPF. One can work out your annual return based on the following formula:

Annual return %= [Value (now) / Cost(then)]^(1/n)-1
n = number of years since invested

For example, if initially you take out RM2000 from EPF to invest in a Public Mutual Huge Return Fund. The fund is selling at 20 sen per unit. After the initial cost of say 6.5%, your number of units is 9350 (not 10000). Say after three years, and with dividends reinvested, you now have 11000 units with NAV now at 25 sen. The total amount you have now is RM2750 (11000*0.25). Your annual return is (2750/2000)^(1/3)-1 equals to 11.2%. Not bad at all compared to your EPF of 6% per annum.

So guys, can you work out your annual return and find out if you are happy to have withdrawn your epf money and invested in unit trusts? Few I believe have done this exercise. But don't you think it is worthwhile to do it?

2013-01-12 19:46

kcchongnz

TKW, if we can get participants in the research/survey I was talking about 0n 12th January 2013 7.46pm. You would understand what message I was trying to bring forward with my posting on 4.19am on the same day. First of all I had my own experience letting a fund manager investing for me in 1990s in Singapore. Then I was enticed to invest in this BHLB unit trust in 2000 which latter changed to SSB and finally CIMB before I liquidate some time in 2007. I didn't know how and didn't bother neither to calculate what was my return in annual basis and compared to that of dividend from EPF. When I did do my maths, I shouted %*#@. Finally I have directly involved in the industry in mid 2007-2009, having read many books on investment of various different views and analyzed the returns of hundreds of unit trust funds under the platforms of ifast (OSK), Poems (Phillip Capital) and others. Telling all these experience to you may not have an impact on you. It would be better if we can hear it from many others. I hope others participate in this exercise for the benefits of all. But make sure you know how to calculate compounded annual rate of return.

2013-01-13 08:12

kcchongnz

Posted by Tan Kian Wei > Jan 12, 2013 09:32 PM | Report Abuse
@kcchongnz, i plan to invest some EPF to MF if the return is nice... any good suggestion?

Posted by greatdreamer > Jan 12, 2013 10:55 AM | Report Abuse
For a layman, strongly advise them to continue park their money in EPF. Though EPF return 5% to 6% is low, it is nearly risk free. Select a good mutual fund with good return, sometimes may be as difficult as selecting a stocks. Both need to do homework.
For mutual fund, you won't be surprise to find out that some fund are very consistent, perform below market rate years after years.

TKW, greatdreamer, though always dreams, provide a good point here. Is he really a "layman" as claimed by him?
Standard & Poor’s research shows that a healthy percentage, and in most cases a majority, of top-quartile funds in the future will most likely come from the ranks of prior period second and third quartiles. Other research by Morning Star etc shows the same result. So how to find the next winner? There are of course some consistent good stock pickers. However they move often from here and there. Don't you agree with me that Mr Tan Teng Boo of the icap fame is a good stock picker? Its icap fund returns a compounded annual rate (CAR) of 18% for a seven-year period. Do you think he can continue to do it for the next 10 years, which of course he claims he can and believe me, 90% of icap shareholders believe him. But has anybody sit down and analysis his past performance and see if he can? I did. I only did it when he became so arrogant as to ridicule the shareholders before and during the last AGM, the very ones who employs and pays him for his service. This is what I wrote:
"The gain of 18% pa of icap’s NAV over the 7 years period from inception to now (October 30 2012) outperformed KLCI of 12.0% (including dividend) by a wide margin of 4.8%. However a closer look at its performance shows that all the out-performance was achieved in the initial period from inception up to 3 January 2008, a slightly longer than 2 years, when its NAV improved by 126% compared to 60% of KLCI. I dare say, no fund manager in Malaysia, or maybe even in the world could rival him. Does anyone disagree with me that though skill is very important, luck is also crucial for such extraordinary performance?
However, soon after that, in tandem with the decline of the world markets and KLCI, icap’s NAV declined to its lowest at RM1.42 on 31st October 2008. After that NAV increased steadily again to RM2.96 on 2nd November 2012. Since the peak NAV on 3rd January 2008, the CAR of icap NAV is only 5.9%, closely follows the total return of KLCI of 6%. Even from the low of the market on 5th March 2009, CAR of NAV of icap to 2nd November 2012 of 21% doesn’t match up with the total return of KLCI of 22% per year. Where is the hot hand of TTB during this period? Was it just a temporary phenomenon happened by some luck factor in the early days?"

Well I don't expect anyone to take my words. As a matter of fact, I may be wrong in my analysis. I am just a small retail investor. But analyze yourself and make your own judgement. The point I wanted to reinforced the points brought forward by the great dreamer.

2013-01-14 04:30

stock5678

simple says that: If want to invest in unit trust, invest in the best performance fund. Get the agent to show all the comparison either YoY or YTD (Year to Date), then you will have better picture whether worth or not and which fund to invest. Let the agent do that for you since they earn your commission. And business is like that where you can ask everything and not to invest if you found not suitable for you. Although not all agent willing to sacrifies so much without knowing your investment amount but I believe there are also agent who is passion to this field (not only because of making money) will be able to share all to you. This, will have to see your luck. Always test the agent until you get good one. Many unit trust investors complaint their agent lost contact or even not expert, not knowledgeable, not passion. Good luck.

2013-01-14 07:45

KowChye

Whatever will be, lets wait to see what dividend will be declared by EPF this year.

2013-01-14 09:01