Our government launched the Skim Amanah Rakyat (SARA) 1Malaysia which is offering 32.16% return per annum on your investment. Is this too good to be true? 32.16% return is definitely higher than most of the investment vehicles available in the market right now.
How it works?
SARA 1Malaysia is a hybrid of a unit trust investment and a loan product aimed at encouraging low-income earners to save and invest.
1. Invest with your own money.
The investment is limited to RM5000 per household and you’ll receive RM134 dividend every month up to 5 years, according to PNB president and group chief executive Tan Sri Hamad Kama Piah Che Othman.
In this case, the effective rate of return is more than 30% per annum!
2. Invest with bank’s money (taking up RM5000 loan)
You’ll still receive a handsome dividend of RM134 a month and after deducting the bank’s monthly repayment of RM84, you get to enjoy a profit of RM50. But in this case you’re not forking out any money so the actual return is “INFINITY”. These is how rich people get rich by using other people’s money to invest.
For how to calculate the actual return, you can refer to this great article by LCF:
SARA 1Malaysia Return Calculation
Are you qualified?
The purpose of this investment scheme is to help the poor to start investing and saving.
You are qualified to invest the fixed amount of RM5000 if
- Malaysians aged between 18 and 58 years;
- Applicants must have a combined gross household monthly income of between RM500 – RM3,000;
- Applicants must not be declared bankrupt throughout the loan funding period
- Applicants and / or spouse(s) must not be a beneficiary of other Government special schemes managed by Amanah Saham Nasional Berhad (ASNB) i.e.”Program Pembangunan Rakyat Termiskin (PPRT)”, “ASB Sejahtera” and “ASW2020-Bandar”;
- Applicants and / or spouse (s) do not have any investments in ASNB unit trusts, OR, if there is, applicants and /or spouse(s) (household) have a combined aggregate investment totaling RM10,000 or less in all ASNB products;
- Only one household is eligible to obtain the loan funding
How to invest?
- Apply for loan from any of these 4 banks: Maybank, CIMB, RHB and Bank Simpanan Nasional
- Applications open on January 30th 2012 and will extend for a year or upon full subscription. (I think it will be fully subscribed within the first few hours, if not days)
More information: visit the official website: SARA 1Malaysia.
Should you invest in SARA 1Malaysia Fund?
So now it comes to the big question of whether you should invest in SARA 1Malaysia fund?
I guess if you are eligible, the question should be “why not?”. Get the loan to invest. It is free money.
What do you think about this investment scheme? Are you eligible to invest?
{ 12 comments… read them below or add one }
Hi KC Lau,
Thanks for highlighting the SARA 1M Fund. I’m looking forward for its additional info; but then, I’m not really interested as I know that the money invested would be gone “elsewhere”.
Anyway, could you highlight on Amanah Saham BSN (http://www.bsn.com.my/pbsn/dana/danaasbsn.asp) and BSN Dana Al-Jadid (http://www.bsn.com.my/pbsn/dana/danaaljadid.asp)? It seems that ASBSN is less attractive compared to ASB; Al-Jadid – at a cost of RM0.25/share – can get around 12% annual returns…
As a passive investor, Al-Jadid seems “quite OK” to me.
Dear KC,
Couple of questions pops in my head!
1. how many people do you think are really eligible to apply? so many exclusions attached – and can they physically do it?
2. how does the government earn equal or higher IRR of 30% to fund this dividend payout of monthly RM134 per RM5000?
Thanks,
Nara
Hi Nara,
I think to those who are qualified to invest, it doesn’t matter how the government generate that return as long as they got the dividend as promised. Of course there will be “udang di sebalik batu”.
I think there’s a mistake in LCF’s assumption (thus causing a mistake in the calculation and the answer).
If you invest with your own cash of RM 5,000, you either get RM 134 per month OR RM 13,000 at the end of 5 years (if you choose Not to take the monthly withdrawal), Not both.
Thus, the IRR is Not 32.6%, but 21.05%.
Thanks Peter for clarifying this. You are right.
I think, there are something behind. do think twice before invest.
it better look for other investments.
Don’t see a reason not to invest if you’re eligible but I’m still sad with all these things.
its 12.16% return not 32% because in the end u cannot get back the rm5000
which mean u can get rm134 x 12mth x 5yrs = rm8040
If not mistaken, the scheme requires investor to put in RM5000. Then after 5 years, investor gets back RM5000 in tact. Within that five years, RM134 dividend is paid every month.
So in one year RM134 x 12 = RM1608.
The return per year is RM1608/RM5000 = 32.16%
Effectively, the return is even higher if investor is paid per month basis, not in a lump sum at year end.
If you borrow money to invest, you get RM50 per month without putting any capital. The return is even highest, in fact infinity which is equal to free money.
As for the banks, they do make profit because government subsidize the interest that’s supposed to be paid by borrower.
I think this is how it works. Since government is giving free money, why not take it if you are eligible?
But you are not obligated to vote certain party though.
Too Good To Be True.
Should you read and refer to the scheme features?
The RM5000 you put in is use to BUY unit of Amanah Saham 1Malaysia, in the mean time the money you invested is locked in the Unit Trust. And beware that price of the Unit Trust is moving up and down, who knows what happen after 5 years? Total return is not what you expected, at least not easy money as you thought.
kindly refer to the link below, and the footnotes
http://www.sara1malaysia.com.my/subpg.php?id=au&idctn=20
Correct me if i am wrong.
KS
For your info, you can only invest SARA 1Malaysia using loan instead of own money (cash). Besides, single people also not eligible to apply the scheme.
thanks for your valuable news.
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