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EPF, market volatility, rebalancing and long term returns

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Someone sent me an article about Employee Provident Fund (EPF) in an English local daily. I happened to miss this article. Anyway, I have not been buying newspaper for at least 8 years. It has nothing to do with politics. He was sending me because I wrote an article about EPF vs Unit Trust some time back. Read here:  I am not using EPF for Unit Trust. My views.  Anyway, it’s a good news for those with funds inside their EPF accounts. EPF’s return is up thanks to higher returns from its portfolio of assets. Investment income grew 9.73 percent to RM11.41 billion for Q2 2015, from RM10.4 billion in the same period in 2014. In brief, EPF should be declaring healthy returns for the year ending 2015, unless some untoward ‘accident’ happens between now to year end.

Now for something more realistic. This good performance is tough to maintain. To anyone who is now shouting, WHY? Please do take a look at the typical returns for majority of all listed companies plus an average return for majority of all the typical unit trust funds that is in the market, then only continue reading on. Alternatively, stop reading now. EPF’s Chief Executive officer Datuk Shahril Ridza Ridzuan said that markets are now becoming more volatile due to the anticipated US interest rate hike, a slowdown in China as well as other concerns from emerging markets. Yes, Malaysia is still considered an emerging market today.

On a positive note, Datuk Shahril said, “The current market conditions allow the fund to rebalance its portfolio for continuous return and risk diversification over the long run.” Okay, perhaps only positive for some like me. This is because if you followed by articles, you would know that I continue to be active in the share market, buying stocks which I feel is undervalued. Especially those which has fallen so much that the dividends would be above the usual Fixed Deposit rate and yet provided me a potential for capital appreciation when market gets better.  Yeah, I know I may have to wait for a long time, right? Haha. It’s ok, let’s try best to follow Warren Buffet. Buy undervalued and soon the business would be reflected in its share price.

Last but not least, take appropriate actions whether or not you believe EPF’s fund managers or even the current CEO. Buy your own shares or properties. If you do not believe your own judgement, then buy unit trusts or REITS. I think the equity ones may have dropped a lot. No idea how much more it can drop but if you start buying today, perhaps in the near future you may get good returns. I have zero idea about this. Please make your own decision based on what you believe in. Please do not use that extra fund for extra unnecessary stuffs like smartphones. Happy investing and anticipating.

written on 30 Aug 2015

Next suggested article: EPF ‘punts’ to profits vs other investment options?

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