Return of over 60 percent above FD rate. Good job and keep it up!

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The Employees Provident Fund (EPF) has declared a dividend rate of 6.9 percent for conventional savings (Simpanan Konvensional) and a 6.4 percent dividend for shariah savings (Simpanana Shariah) for 2017. Total payout for the conventional savings is RM44.15bil while that for shariah savings is RM3.98 billion. We can see that as at currently, the shariah savings in fund size is still below 10 percent of the overall EPF savings. Media wise, it has been reported like a wild-fire. I mean, every media I know is reporting it. However, I only saw it on the Facebook of ONE (1) friend. Perhaps most of my friends do not own any savings in the EPF. Anyway, this 6.9 percent is the highest ever since 1997. In other words, right after the 1997 financial crisis, the returns has always been lower than 1997.

One reason why this is pretty high? According to the article in TheStar, gross investment income for 2017 was RM53.14bil and this is the highest since the EPF’s establishment in 1951. RM4.60bil of this was attributed to Simpanan Shariah, proportionate to its share of total shariah assets while RM48.54bil was attributed to Simpanan Konvensional. The returns for Simpanan Konvensional were enhanced by the income generated from non-shariah investments following the outperformance of global banking stocks (Yes, I think we are all aware that banks are really earning good profits!) while Simpanan Shariah does not include conventional banking stocks due to their non-Shariah compliant status. The Simpanan Shariah was also affected by the equity impairments from shariah-compliant stocks, particularly the oil and gas, and telecommunication counters. (Yes, last year was not that awesome on the whole for the oil & gas sector but I think 2018 should be better?) Here’s another full article in NST. 

My views remain the same. Whatever I have inside EPF, I will leave it inside EPF until my retirement. Hopefully, sooner than 58 years old? I have been investing into unit trust funds for at least 12 years. As I have two very good and attentive agents, my returns have been good, very slightly better than EPF’s average actually. However, be reminded that with unit trusts, the returns are almost always depend on the type of funds we buy. The higher the equity, the higher the possibility for high dividends or well, nearly none. The stock market prices do not always reflect the strength of the company. If we were to buy bond funds instead, the returns would be pretty flat.  This is why unit trust must be something EXTRA from our salary. Diversify our savings because whether it’s EPF or unit trust, it should not give us returns faster than actually buying a good stock or even property investment ROI over a couple of years. Happy investing!

written on 9 Feb 2018

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