Be your Own EPF Fund’s Manager

Be your Own EPF Fund’s Manager

How to maximize your return by using your EPF Account 1( This Scheme is temporary freeze to apply but good for your knowledge)

Have you ever notice that you are able to withdraw your money in EPF account 1 to invest in the Malaysia Equity Market in selected Broker firm even when you are yet to reach the age of 55? As a resident in Malaysia, you might not be fully aware of the option that you are able to do with your EPF savings unless you find it out.

The purpose of this article is to help you understand how you can invest yourself in the Malaysia Equity market by using a small portion in your account 1 to potentially increase your return and have a better financial return upon your retirement age. As quoted in the Wikipedia, EPF is legally obligated to provide only a 2.5% return rate annually, but historically it has been far more generous than that. Please find below the article for your additional knowledge about the EPF investment account :

EPF recently declared 6.75% dividend in 2014. Many might ask, “The price of share has gone up more than 10% last year, but the dividend from EPF was only 6.75%?” Please find the below data for the history return from EPF

The benefit of Using this EPF Investment Account :

1.Be your own Fund Manager

You can now decide when to buy and when to sell the particular share from your holding when you know the sentiment in the market is changing. Below is the top 30 investment as of 2015

EPF Latest top 30 Investment	No. Share % Holding	Dividend from The company
1 Malaysia Building Society Bhd	64.17	3.82
2 RHB Capital Bhd	41.49	2.03
3 Malaysian Resources Corp Bhd	38.94	0.73
4 Shell Refining Co F.O.M. Bhd	16.55	0
5 Media Prima Bhd	15.75	7.52
6 Genting Plantations Bhd	15.52	4.48
7 Alliance Financial Group Bhd	15.33	4.5
8 UMW Holdings Bhd	15.2	4.01
9 Telekom Malaysia Bhd	14.73	2.24
10 Public Bank Bhd	14.7	2.63
11 CIMB Group Holdings Bhd	14.65	3.79
12 MBM Resources Bhd	14.46	2.22
13 Tenaga Nasional Bhd	14.37	1.69
14 AMMB Holdings Bhd	14.36	3.8
15 United Plantations Bhd	14.15	7.15
16 Sime Darby Bhd	14.13	3.37
17 Kuala Lumpur Kepong Bhd	14.02	2.18
18 Axiata Group Bhd	13.54	3.08
19 Malayan Banking Bhd	13.32	5.75
20 Sapura­Kencana Petroleum Bhd	13.3	0.84
21 Digi.com Bhd	13.27	3.91
22 Hong Leong Bank Bhd	13.1	3.08
23 IJM Corp Bhd	13.02	3.53
24 Malaysia Airports Holding Bhd	12.99	1.54
25 Axis Real Estate Investment Bhd	12.63	4.87
26 Petronas Gas Bhd	12.14	2.68
27 IJM Plantations Bhd	12.04	1.79
28 Dialog Group Bhd	11.89	0.97
29 Pos Malaysia Bhd	11.53	3.83
30 Capitamalls Malaysia Trust Bhd	11.25	6.26

There are many shares have hit their historical high price in last year before the weakening of RM and the slump of Oil price. With this EPF investment account, you can decide when to exit the market or switch the stocks to your own preference portfolio.

2.Flexibility on your investment period

You can now decide when to invest and which Malaysia Equity stock to be invested into regardless whether the stock is Blue Chip, Growing, Defensive or dividend stock. You can adjust your own preference portfolio from time to time and adjust according to any macroeconomic changes. Even if you are not buying any share, the money you have drawn down from your account will stay inside your trading account and you will enjoy interest on your balance of amount.

3.One Time draw down cost (3%)

There will only be a one off fees of 3% incurred for the EPF investment account, which is different from the Unit Trust withdrawal. In most of the cases once you sell off your unit trust, the amount will be return to EPF account and if you want to invest in another fund, you will be charged another round of draw down fees.

Conclusion

If you are market savvy and wish to manage your own investment portfolio instead of hoping to earn only 4%-7% returns on your EPF monies, we would like to encourage you to take advantage of this low cost investment scheme that may help you achieve higher returns.

Please find the below for the criteria to participate in this investment product.

There is some requirement to be meet for this product.

1.Minimum withdrawal amount- 10K

2.Sufficient Account 1 Balance -How to calculate

Formula : (Account 1 Balance -Basic Saving) * 20%

EPF Member	Age	Account 1 Balance	Basic Savings(According to the table)	Computation	Eligibility to meet the min first investment
1	29	RM70,000	RM24,000	(70,000 -24,000) X 20% =RM9,200	Not qualified
2	30	RM80,000	RM27,000	(80,000 -27,000) X 20% =RM10,600	YES- You can withdrawal 10,600 from your account 1 to do your own investment

TABLE: EPF BASIC SAVINGS (EFFECTIVE FROM 1 JANUARY 2014)
AGE	BASIC SAVING	AGE	BASIC SAVING	AGE	BASIC SAVING
18	1,000	31	30,000	44	95,000
19	2,000	32	34,000	45	102,000
20	4,000	33	37,000	46	109,000
21	5,000	34	41,000	47	117,000
22	7,000	35	46,000	48	125,000
23	9,000	36	50,000	49	134,000
24	11,000	37	54,000	50	143,000
25	13,000	38	59,000	51	153,000
26	15,000	39	64,000	52	163,000
27	18,000	40	69,000	53	174,000
28	21,000	41	76,000	54	185,000
29	24,000	42	81,000	55	196,800
30	27,000	43	88,000

This is a guest post contributed by Martin Heng Sin Soon, a 5 year experience Equity Dealer with RHB Investment. You may contact him anytime to find out more via heng.sin.soon@rhbgroup.com.my

Appendix

The CPI data for calculating inflation rate is provided by the Malaysia time series on consumer price index here. With this data, we may derive the real rate of interest paid on EPF deposits as follows.

Malaysia
Year	Inflation rate	EPFInterest rate	Real interest rate
1983	3.70%	8.50%	4.80%
1984	3.60%	8.50%	4.90%
1985	0.50%	8.50%	8.00%
1986	0.50%	8.50%	8.00%
1987	0.80%	8.50%	7.70%
1988	2.60%	8.00%	5.40%
1989	2.90%	8.00%	5.10%
1990	3.10%	8.00%	4.90%
1991	4.20%	8.00%	3.80%
1992	4.80%	8.00%	3.20%
1993	3.60%	8.00%	4.40%
1994	3.90%	8.00%	4.10%
1995	3.50%	7.50%	4.00%
1996	3.50%	7.70%	4.20%
1997	2.50%	6.70%	4.20%
1998	5.20%	6.70%	1.50%
1999	2.80%	6.80%	4.00%
2000	1.50%	6.00%	4.50%
2001	1.40%	5.00%	3.60%
2002	1.80%	4.30%	2.50%
2003	1.20%	4.50%	3.30%
2004	1.40%	4.80%	3.30%
2005	3.00%	5.00%	2.00%
2006	3.60%	5.20%	1.60%
2007	2.00%	5.80%	3.80%
2008	5.40%	4.50%	-0.90%
2009	0.60%	5.70%	5.00%
2010	1.70%	5.80%	3.40%
2011	3.20%	6.00%	2.80%
2012	1.70%	6.15%	4.45%
2013	2.10%	6.37%	4.27%