“Not bad?” Look around, ok? 6.4% from EPF is good.

A friend remarked today that the 6.4 percent declared by Employees Provident Fund (EPF) is “not bad.” I saw an article saying that this return is “so-so.” Objectively, it was achieved in a year which so many thought Malaysian economy was spinning into a crisis. It was also a year when Ringgit ended up as Asia’s worst currency. Fortunately, it has recovered to be one of the strongest in Asia currently. Of course, everything hinges on the largest economy and the actions of Federal Reserve. Our neighbour declared 2.5 percent for 2015. Many of its people believe it’s a good return because it was achieved in a year when everything was bad. Hmmm….. I wonder.

I have written about EPF earlier. Read here: EPF “punts” to profits versus other investment options I always believe an organisation is only as strong as the leadership at the top. I like the current EPF’s CEO, Datuk Shahril Ridza Ridzuan. His profile? Some education bits here: He has been called to the Malaysian Bar and the Bar of England & Wales. He holds a Bachelor of Civil Law (1st class) from Oxford University, England in 1992, a Master of Arts (1st class) from Cambridge University, England in 1993. Oh yeah, he said that EPF will increase the diversification into more foreign assets from 25 percent as at 2015 to 27% by end 2017. Investing only within Malaysia means options are limited or share market is distorted because EPF is an extremely huge investor.

He further elaborated, “EPF had remained fairly prudent in its investment approach throughout the last year, with slightly more than half of its assets in fixed income. “This protects the capital and maintain the minimum dividend. Whereas the equities and real estate portion protects us against inflation.” Seriously, if you ask me, I have no issues with EPF’s current strategy. If majority of everything is only in fixed income, we should understand that the returns would be like the FD rates that we receive. Of course, wombats not rely on just EPF. Read here: EPF alone is not enough, beware

In terms of diversification however, it cannot be good years throughout and one must be ready to expect some volatility too. Foreign assets are a totally different cup of tea and even if EPF has the experience, thorns’ guarantee that it will turn out as per their expectations. As a property investor, it has never crossed my mind yet to invest overseas. I think there are still lots of opportunities here but another major reason is because I am also not familiar enough.

2016 is going to be a very tough year, for all of us. Read here: Best time ever or worst time ever for property market 2016?  I look forward to EPF’s announcement in February 2017. Last but not least, my view is very clear. If I would like to invest in unit trusts, I would use my savings to invest in unit trusts and not use my ‘retirement money’ in EPF. Read here: I am not using my EPF front trust, my view As for those who have renounced their citizenship so that they can withdraw all their EPF money and invest somewhere else, I also wish them all the best. If 6.4 percent is compared to my personal property investments thus far, I think it’s a very low return. However, with property investment, I am assuming much higher risks too. Happy enjoying these returns we prepare future retirement.

written on 22 Feb 2016

Next suggested article: Property bubble in 2016, Huh?

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