Can You Invest In individual Stocks Using EPF Money?

Many people are probably aware that they can withdraw money from their EPF (Employees Provident Fund) savings to invest in ministry approved Unit Trust funds. However, many are probably not aware that there is also a way to invest the EPF money on individual Bursa Malaysia stocks!

Some people prefer the idea of leaving the tough decisions on choosing the right investments with Unit Trust Fund Managers but in doing so, they effectively relinquish control over how the money will be invested. Ironically, the objective of Fund Managers are often to safeguard their jobs, instead of looking after investors' best interest, i.e., make money and return on investments!

On average, EPF's average annual rate of dividend is between 5% to 6%. The rate of return is no doubt better than Fixed Desposits (FD) return but for the savvy or wise investors, this sort of return is barely sufficient to counter inflation! (By the way, forget about the so-called officially reported inflation rate of 2% to 3% because the reality is much higher than that!)

So instead of keeping all your money in EPF or leave the money with someone else, why not consider moving some money from EPF to investing in individual stocks of your choice? Without doubt, there are risks with this approach because one can potentially lose this hard earned money if the wrong choice of stocks is chosen! With the stock market being so volatile, you may think that this is extremely risky!

To mitigate the risk, one of the key success factor is through first of all doing a little bit of homework up-front and selecting stocks or companies that possess good quality and fundamentals, plus supported with decent dividend yield. To be comparable with the annual rate of dividend from EPF, one should look for dividend yield that can at least match EPF's if not better. A scan across some of the quality Bursa stocks will reveal that a number of companies under REITs and consumer businesses generally do fit such criteria!

So how do you qualify to withdraw funds from EPF for the above investment? Let's list down some of the salient points:

1. savings of at least RM5,000 more than the Basic Savings amount required in Account 1, and must be equal or below 55 years old. The basic savings is the minimum amount you must have in Account 1 before you can apply under this scheme. The table below shows the different minimum savings required for people of different ages:
   
   
   2) 20% from your savings in excess of your Basic Savings amount in your Account 1, that means the minimum amount for investment withdrawal is RM1,000.00, given the condition set in point (1).
   
   3) Formula of eligibility = (Account 1 – Basic Savings) x 20%.
   4) Investment can be made at the intervals of 3 months from the date of the last transfer, subject to the availability of the required balance in Account I.
   5) Investment must be through appointed external Fund Manager by the Ministry of Finance. Click here for the complete list.
   
   I hope this gives you an idea of an alternative form of investing, for your hard-earned savings that you can't simply screw up, i.e., EPF. In my next post, I shall touch on precisely how you can invest in individual Bursa stocks using your EPF funds and the inherent costs that you should be aware of.
   
   Here's the link to EPF should you require further clarification.

How To Invest In Gold?

Arguably, gold is the only investment asset class in the world that is widely perceived to be the safe investment haven. Many investors will therefore choose to invest in this precious metal as part of their wealth preservation and creation strategy.

During last two years, when all the asset classes have failed to perform, gold is the only investment asset that has remained outperformed. As such, Gold is also widely believed to be the best hedge against the U.S. dollar and inflation. When U.S. Dollar falls, demand for gold is set to increase as investors sought to preserve their wealth. In addition, gold has a very low correlation with other asset classes like equity and debt thereby it's a very good asset to diversify for the overall portfolio.

The most direct way of investing in gold is to purchase the physical gold bullion directly from financial institutions or dealer. You can then choose to safe keep the gold yourself or the safer alternative is to keep them in a secured vault owned by third party such as banks.

Instead of holding physical gold bullion, there are a number of other forms of investment in gold without the need to hold physical stock. In Malaysia, both Maybank and Public Bank offer the convenience of gold investment account with a passbook, whereby every trade is done through the account without the involvement of physical stock. Transactions are highly liquid as the buying and selling are based on the bank's prevailing quoted buying and selling prices.

Other means of gold investment (without physical delivery) include Gold Exchange Traded Funds (ETFs), unit trusts (mutual funds) and also the choice of investing directly in gold mining companies.

Gold ETFs are open-ended mutual funds that are passively managed and they mirror the return of spot price of gold. Gold ETFs are listed and traded on stock exchanges just like stocks. As such, the cost of trading Gold ETFs is lower compared to mutual fund type of investment. Gold ETFs provide returns, which before expenses, closely correspond to the returns provided by physical gold. Each unit is approximately equal to the price of 1 gram.

Some of the most popular regional gold ETFs and mutual funds include:
- DWS Invest Gold and Precious metals Equities (listed in Singapore)
- United Gold & General Fund (listed in Singapore)
- DWS Noor Precious Metals Securities A USD (listed in Singapore)
- SPDR Gold Trust ETF (listed in U.S., Hong Kong, Singapore and Japan)

Here you are some of the gold investment vehicles available for your consideration, should you decide to get hold of one of the world's most highly sought after precious metal!

Exchange Traded Fund vs Mutual Fund (Unit Trust)

During an uptrend market like the current, you may consider to invest in an index linked security (alternatively also known as tracker fund) instead of trying to pick the right stock. An index linked security essentially links its performance according to the broad market index performance, such as Dow Jones Industrial Index or Malaysia's FBMKLCI. Locally in Malaysia, there are many index-linked unit trust funds available in the market. However, before you consider parting your money in an index-linked Fund, understand your cost of investment and consider the alternative such as ETFs (Exchange Traded Funds).



ETFs are baskets of securities that trade like stocks on an exchange and are designed to track the performance of an index. Examples are FBM KLCI ETF Fund and MyETF Dow Jones Islamic Market Malaysia Titans 25, the first Syariah compliant ETF in Asia.

Investors who want to buy an index linked unit trust fund may be better off buying the ETF which does exactly the same. The obvious benefit is that the cost of ETF is cheaper. This is because there are no management and upfront fees, unlike unit trusts.

 The upfront fees for unit trust in Malaysia on average is about 3% to 5% but could be as high as 7%!

Besides, a unit trust fund may charge up to 1.5% a year on management fee, which is much higher than the 0.5% charged by the FBM KLCI ETF.

Buying ETF is exactly the same as buying a stock, with the same lot size of 100 units. Unlike unit trust, buying and selling ETF is easy and traded real-time. Dividend is also distributed by ETFs generally on a half yearly basis.

So next time when you were to be approached by unit trust salesperson, find out about the cost of investment first. Don't let the hidden charges affect your fund performance.

How To Stay On Top Of Your Mutual Fund Investment

Let's face it, most people out there have some form of mutual fund (unit trust) investment, whether present or past. It's also fair to assume that if you have a personal insurance protection, chances are your financial planner or insurance agent might have also sold you some form of mutual funds in the past. Many insurance policy these days are also attached with an investment linked policy, which allows policy holders to choose their choice of funds.

As per any form of investments, one should always monitor the performance periodically to make sure that your funds are performing up to expectation, and the fund continues to be invested in its original objectives and allocation. At times, reallocation of funds may be necessary to counter the cyclical trends, under-performance, etc.

In reality, sadly, many people simply leave their funds aside the moment they signed the dotted lines, and HOPE FOR THE BEST! For the "lucky" ones, their Financial Advisor may update them periodically of the funds' performances. However in most cases, they will never hear from their good old Financial Advisors any more, other than the time when the advisors "want" more money!

With the advancement of software technology and the internet, it is now very easy to track and monitor your mutual funds performance, all at one glance! I call this the "Mutual Funds In A Box"!

Introducing Morningstar. It is the most comprehensive database of mutual funds covering all major countries including US, UK, Asia Pacific and Malaysia. Besides offering up-to-date information such as fund objective, price, asset allocation, and performance on all mutual funds funds, the website also offers insightful analysis, unbiased fund ratings, and sophisticated analytical tools to help both individual and professional investors make more intelligent investment decisions.


When you are at the site, make sure you sign up as a member and it's absolutely free! Add a portfolio and assign the individual mutual funds that you have purchased. You may enter the date of purchase, amount and the unit price. With the click of a button, the system will automatically update the latest performances of all your individual funds, including market price, year-to-date and past year's performance, latest analyst rating and their respective asset allocation. Above all, you can also monitor all your trust funds COMBINED and assess your portfolio weightage for each trust fund and even individual assets!

In a nutshell, you are now able to track and monitor all your global trust funds investments by the simplest of clicks and hassle free! I strongly recommend you to check this out now! To choose different countries, simply click on the specific country located at the bottom of the website. For US residents, you may visit this link to take you there directly instead.