Buying Top Money Tips for Malaysians
Dear KC Lau
I would like to purchase your Top Money Tips for Malaysians, but MPH has run out of stock. How can I place an order urgently? Please revert soonest possible.
Currently, the book is out of stock at most of the local bookstores. You can still order it here at my website. But you will need to have a credit card or PayPal account for the transaction.
Here is the link:
We are going for the second print. It should be available in 2-3 weeks time.
The Return of Education Endowment Plan
Had a question with endowment education plan vs. compounding interest FD. I looked closely at quotations provided to me by Great Eastern on ‘Eduplanner’ and I find that over 15years, for a premium of almost 10k/year, the annualised rate of return is only about 2.5% for the 7% example !!! I actually can save more $ for my child by investing the same amount yearly in say a 3.5% FD. With the effect of compounding interest over 15year, I make much more than what the endowment policy will give me. I am not worried about insurance coverage because I have a dedicated SLC+ policy for my child.
What is your opinion? Are my findings correct and is my approach acceptable?
According to my calculation using Excel Spreadsheet, the return of 15 years Eduplanner is slightly higher than 3.5% Fixed Deposit. The return that I estimated is 4.15%. Refer the chart below.
You said you only get 2.5% from your calculation. The difference might be caused by the misunderstanding about the total premium paid. The premium is only payable for the first ten years.
Based on the quotation I generated â€“ premium RM10k/year, with the 7% bonus return as illustrated using Gelsis 5.07, the total maturity value is RM154,337. In order to calculate the annual compounding return rate, I have to use trial and errors method by simply adjusting the rate to give the result thatâ€™s nearest to RM154,337. Thatâ€™s how I got 4.15% as the effective annual rate.
You can download the Excel Spreadsheet here: Return calculation – education plan
My opinions about your case are:
1. For long term, endowment plan normally gives higher return than Fixed Deposit. This is true with Great Eastern policies. But I am not sure about other companies because I havenâ€™t done any research on their products.
2. It is smart to utilize education endowment plan for the tax relief. If your tax bracket is high (I think yours should have reached the highest bracket), the tax incentive of say 27% is an immediate saving. But too bad that the maximum relief is only RM3000 per person.
3. If you are not concern about protection, it is advisable to utilize up to the maximum of the tax relief claimable. The excess of your designated saving can be injected in other investment vehicle to save for your childâ€™s education. You can consider unit trust, investment-linked funds, and even real estate investment. Those instruments will most likely give higher return than fixed deposit and endowment plan.
4. One specific advantage of endowment plan is the self completion protection, which is called the waiver premium benefit when the payer suffered from critical illness, disability, or death. The policy will create the education fund needed at maturity if you are unfortunately incapable to save anymore.
Career in Financial Planning
I am in KL now and work as Accounts/Finance staff for 8 years by now. I am always looking for opportunity for a career change and would consider financial planning as one of the best option. Consider to take up the following course:
RFP,CFA etc but not quite sure which one more relevant for Malaysia context. My qualification: degree holder in accounting & finance and ACCA cert level. Or wonder should I get some exposure first in insurance/unit trust?
Appreciate some valuable advice(s) from you.
There are several qualifications you can look into. The main two options are RFP and CFP. CFP (Certified Financial Planner) is recognized worldwide, while RFP is a local program by MII (The Malaysian Insurance Institute). The fee for the entire course of CFP is around RM10k, while RFP is only RM3050 by self-study. Since you have qualification in accounting, you may take the challenge paper (the last module of CFP) and the other previous modules will be exempted.
If you want my advice, I would say you should start with some financial products. Be the agent and start doing business. In this industry, you canâ€™t (at least at this moment) just get the CFP or RFP, and then become a financial planner. You wonâ€™t survive without your client base. It is wise to start your career as an agent (whether unit trust or insurance), build your customer base, and learn as your earn to become a financial planner in the future.
Wish you all the best!
Invest in Public Mutual
Hi KC Lau,
I’d read your family budget article. It is informative, very good.
I’ve also study your blog on Unit Trust Investment.
FYI, previously I did some investment on unit trust. Now, still continuously invest the same funds with DCA (dollar cost averaging). The funds that I invested are Public Mutual, PBADF & PBCPEF.
Now, I would like to invest also in below funds with DCA basis.
I’d set aside a budget of RM30k for period of 5 to 10 years for this investment.
a) Public Index Fund (PIX),
b) Public Far-East Telco & Infrastructure Fund (PFETIF) &
c) Public China Titans Fund (PCTF).
1) What is your comment & advice on how can I effectively utilise my capital efficiently?
2) What investment plan will be good for my future retirement about 15 years from now?
I am looking forward to your valuable advice ahead.
Sorry that I canâ€™t provide any personal comment about any unit trust fund. Frankly speaking, I donâ€™t study in depth in a specific fund or keep track of their performances. In order to give you valuable feedback on some funds, a financial analyst will be more capable to provide you the info as it is their job to research and keep track of the market movement.
Regarding your questions:
1. You are doing fine because you certainly know that you should invest your money. Some people are just leaving their money idling in bank saving or fixed deposit even though it is for long term savings.
2. For retirement of 15 years later, you still have a long time to get your money invested. It is advisable to have more aggressive investment approach for this rather long term investment horizon. For example, you can allocate 80% in equity-based funds now, and slowly switch to lower risk funds when it is approaching your retirement.
3. Unit trust investment is a very effective way to save and invest for a passive investor. The passive here means that you wonâ€™t be doing active trading, or actively monitor your investment (e.g. track the price every morning). Unit trust gives you the diversification and the access to expertise of fund manager in stock selection.
4. If the return you need and expect is around 6-12%, unit trust is really an effective tool. However, if you want to get return like 15-50% per annum, you will need to be knowledgeable and master other â€œriskierâ€ investment such as stock, business venture, commodity and real estates. I believe that if you are an expert in certain area, the risk would be significantly lowered.
Refinancing from Alliance
Yes I have read through your 2006 Dec tips and found useful to me.
Currently I am refinancing with Alliance bank and at that time 2008 August is the best rate in town that I can obtain which is BLR-2.05%. But it takes me till now still not settle the bank document yet. Now is in redemption stage where AB has to release the outstanding sum to MBB. Now all in progress and hopefully by end of Feb 09 all settle and I can start my new AB instalment from March 09.
I have done this refinancing thing twice. The first time is from HSBC bank to Alliance Bank, which takes only 2-3 months. The second time, which is still pending until now, I am refinancing the home loan from Alliance Bank back to HSBC bank. We signed the documents on Aug 08. Until today, it is still pending. Alliance bank canâ€™t find our property title kept with their custodian. But after we simply send an email to Bank Negara and cc to Alliance Bank, they are very quick to respond to our issue. And our home title suddenly â€œpopped upâ€ from somewhere!
Your case has been dragging for so long. This shouldnâ€™t happen. The most effective way to complain is to send an email to Bank Negara, and cc to the banks and lawyers.
Online Profits Training Course
Firstly, many thanks for your money tips.
I have bought your book recently before Christmas – Top Money Tips for Malaysians and have read it many times. I also bought an E-Book via your website.
Today I have signed up for Online Profit and plan to UNLEARN, RELEARN AND KEEP ON LEARNING about internet marketing…..
This is great!
After you have registered and gone through the classes available, there are a few important things you can do to make full use of your membership:
1. You should participate actively in the member forum. Thatâ€™s a good place to network and make friends. Those are all like-minded webmaster who want to be successful in making money online. You may find partners and some other good deals just by being supportive and contribute your thought and expertise.
2. Donâ€™t just learn. You need to take action on what youâ€™ve learnt. You must put all the lessons into practice. Thatâ€™s the only way to improve your knowledge and skills.
Happy learning and see you there!
Note: Online Profits will be closed for registration today. If you are interested to learn how to start and build a successful online business, this is a very comprehensive training course that I would recommend. Iâ€™ve joined on the very first day of the opening. It is now being offered at 50% discount. If you miss the boat today, Online Profits will only be opened again end of the year but the price will be doubled.
Should I Refinance?
Should I refinance?
(Current BLR = 6.5 %)
Package 1: Existing Home Loan:
Loan provider: Alliance Bank
Original loan amount: RM206000
Current interest rate at 3rd year: BLR +0% = 6.50%
Interest Rate: 1st year at 1.5%, BLR+0% for next 1 year; BLR+0.1% p.a. for next 8 years; BLR-0.35% for next 10 years; thereafter BLR-1%
Outstanding loan: RM180,000.00
Money in link account: RM 150,000.00 (Borrow from friend, parents and pay them interest 4% per yr)
Actual interest rate charge: 30,000 (180000-150000=30000, the beauty of flexi package)
Remaining tenure: 22 years
Penalty for early settlement: 3.5% of original loan amount or RM5,000 whichever higher = RM206000.00 x 3.5% = RM7210.00
Package 2: Refinance with SAME Bank:
Year 1-3: BLR – 0.5% = 6%
Thereafter: BLR â€“ 2% = 4.5%
Instalment Year 1-3: RM1200/month
Instalment Thereafter: RM1050/month
Lock in another 5 years
Package 3: Refinance with EON Bank (Super Flexi 123 with non-zero moving cost):
Whole Tenure: BLR â€“ 2.2% = 4.3%
New Loan Amount (Need to pay penalty + outstanding loan): RM 180 000 +7210.00=187210
1) Should I refinance with EON bank whereby Iâ€™ll have extra RM300 to spend each month but need to pay penalty and lawyer fee about RM14k?
2) Should I refinance with the same bank whereby Iâ€™ll have extra RM200 to spend each month?
3) Should I wait after lock in period and refinance whereby there will be more options since interest rate is not a main determinant because it only charges RM30k interest?
If I were you, I will wait until the lock-in period is over before refinancing the home loan. As you said, you have found a very good solution to minimize the payment of interest charged. The penalty can be prevented just by waiting another 2-3 years.
The only reason to opt for refinancing may be the extra cash flow of RM200-300 per month. Do you need that money? Thatâ€™s up to you to decide. If you donâ€™t refinance, the extra cash flow is actually saved and at the same time building equity in your current home loan.
Wish you all the best!
If you have any question regarding personal finance, please don’t hesitate to use our forum or contact me.