Dividend Magic

Saving and Investing towards Financial Independence in Malaysia

Investment

ASNB – Getting Fixed-Priced ASM Units

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Amanah Saham Nasional Berhad, more commonly known as ASNB handles the funds found below.

ASB and ASM

The coveted fixed-price funds are what we will be focusing on today.
A thing to note – ASNB provides two kinds of funds. The first is the fixed priced funds – namely Amanah Saham Malaysia (”ASM”). The others, let’s just say they’re like mutual funds and you all know how I feel about them.

I’ve been trying to get my hands on additional units of the ASM funds 1, 2 and 3 for ages now. I managed to get RM17,500 worth of it a few weeks ago and here’s how I did it.

Now, if you’re a Bumiputera of Malaysia, you’re in luck. You’re automatically allocated units in the ASB funds. These typically give above 6% returns, with bonuses and stuff it’ll be in the 10% region.

Non-Bumiputeras, you don’t get to touch the ASB funds. The next best thing are the fixed-priced ASM funds I mentioned earlier. These are lower in returns compared to ASB though.

You’ve heard of aunties and uncles queueing up every damn day at banks just to ask the lady at the counter to query the system for available ASM units. This isn’t hearsay. I too do this on occasion.

The common belief is that during festive seasons, there will be a higher chance of available units as people tend to sell their units then. I’ve never gotten it this way.

In fact, I count myself among the lucky few because my mother had got me about RM3K worth of ASM units when I was younger.

Getting Additional ASM Units

The traditional way of purchasing additional units is as follows:

  1. You queue up and ask the bank if they’ve got available units. Chance? 0% for me
  2. You sign up at ASNB’s website and try to purchase online. You save time queuing but I have yet to get any.

Here’s the third way. I managed to get RM17,500 worth of ASM3 units a few weeks ago through my relationship manager at Maybank.

A few things you should know beforehand if you’re new to the blog.

  1. I’m a Maybank Premier Wealth customer and I have a relationship manager (”RM”).
  2. This is a campaign by Maybank. I ain’t sure if it’s only for Premier Wealth customers but my RM brought it to my attention.

OK. So this was the text I got:

Upcoming ASNB VP & FP Bundle Campaign 2019- Phase 3

Campaign Period: 10 – 20 Sept 2019 Bundle :
ASN IMBANG 1 or 2 & ASM3
Minimum: RM30k
Ratio: 65% ASN Imbang1/2 : 35% ASM3

The ASM3 units are limited and available on a first come first serve basis.

I had to basically put in a minimum of RM30K in. 65% will go to ASNB’s variable fund and the remaining 35% into its fixed-priced ASM3 fund.

ASNB is basically trying to promote and get you to invest in its variable fund which charges a 4% sales charge. I forgot the management fee per annum. But yeah, mutual funds.

I decided the 4% sales charge was worth it in the long term and invested RM50K into it total. Which gave me that RM17,500 in ASM3 funds.

As you can see, I was charged 4% immediately and the variable fund dropped in value since.

End.

That’s how I got RM17,500 worth of ASM funds. At a cost of RM1,300. Effectively, a 7% sales charge on it. Do you think it’s worth it?

I hope this one will help people get their ASM funds in the future. I’ll be sure to post an update whenever I receive news of new campaigns from my RM in the future. So follow me on Facebook and Instagram to get quick and immediate updates.

Emergency Funds & Fixed Deposit Laddering

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I’ll teach everyone how to set up your emergency funds using fixed deposits right here.

I know some of you veteran investors will already know all about FDs, but this one is for the newcomers.

You wouldn’t believe the number of inquiries I’ve had on FDs from readers. FDs are, by large the first form of investment everyone should have. They are a risk-free, interest generating financial product offered by the good banks here in Malaysia.

In this article, I’ll show you how to set up your Emergency Fund with FDs.

What are Fixed Deposits?

Fixed deposits or FDs as we will call them is, first of all, a financial instrument. Here in Malaysia, they’re provided by banks and gives a higher interest rate than a typical savings account.

The usual terms of a Fixed Deposit here in Malaysia:

1. You place a fixed sum with the bank for a fixed period of time.
2. The bank agrees to pay you a fixed interest rate.
3. You don’t touch that money. After the said period, you get your money back PLUS interest.

What if you were in an emergency you say?
And you needed to uplift the FD before it matures? Well, you’ll most likely lose all your interest. But your initial sum will NEVER be touched.

This right here is a liquidity problem with fixed deposits. Don’t worry I have a solution.

My Emergency Fund

An emergency fund is exactly what it sounds like. It’s a certain amount of money, easily accessible and put away in case of an emergency.

Exactly how much to put away? You’ll first need to know your average expenses and spending per month. After figuring that out, you’ll want at least a 6-month emergency fund.

Using myself as an example – On average, I spend around RM5,000 per month. All in.

So, a 6-month emergency fund would be RM30,000. But I try to keep a 24-month emergency fund going. Just cause. Which gives me around RM120,000 in liquid cash.

Now, the key ingredient for a good emergency fund is LIQUIDITY.

My emergency fund is 90% Fixed Deposits and 10% Savings Account and/or Cash. But an FD isn’t that liquid. So here’s how you make it liquid.

Fixed Deposit Laddering

FD Laddering. This should address all the liquidity problems you have with your fixed deposits. Here’s how I do it.

Remember that RM120,000 emergency fund? It won’t make much sense if you put the whole chunk of it into one FD.

Say next month you needed to get your car fixed and it’ll cost you RM1,000. Uplifting that RM120,000 FD would mean you lose your interest. 3% on 120K is RM3,600 in interest per annum. That’s no chump change.

Solution? Break that RM120,000 up. I personally use Maybank so I’ll be giving you an example of it. The minimum FD placement is this – RM5,000 for 1 month.

My FD Ladder

If you’re up for it, you can go right ahead and break them up into 24 tiny chunks.

I differentiated mine into RM10K and RM20K FDs, with a mixture of 1-month and 3-month periods. It’ll look something like this:

The longer you place your money in an FD, the higher the interest the bank pays you. It is, however, a negligible difference because you’ll be compounding your money if its a monthly one anyway.

Also, try to make sure you place your FDs on different days of the month. I have them in the beginning, the middle and the end of the month. This will allow you to eventually uplift the one that’ll cost you the least in interest in the event of an emergency.

Fixed Deposit Perpetuity

I always select the following 2 options whenever I place an FD.

1. Credit interest earned to the principal.
This essentially means you’re compounding your interest automatically.

2. Renew FD at maturity.
This means I never have to look at my FD Ladder again. It’ll run by itself.

End.

I know most of these are common sense to some, but I still hope I managed to bring value to everyone reading this.

I’m sure some of you have more sophisticated FD hacks and tricks. Please, do share!

Basic Financial Plan for Malaysians

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I’ve gotten so many questions from all of you seeking financial guidance that I’ve decided to once and for all come up with a simple financial plan (a guide if you will) for all to use.  

We’ll begin with the basics first, getting yourself out of debt, saving up and then investing that money for passive income.

The Goal

The final goal of this plan here is for everyone to have an investment portfolio that generates sufficient passive income to sustain your lifestyle.

What is your Networth

Use a paper or Microsoft Excel and draw up your Balance Sheet. You’ll have your assets listed on one column and your liabilities on the other.

I’ve got a simple template set up for everyone to use here. Add or remove necessary items. The download link for the Excel file is below.

Personal-Balance-SheetDownload

1. Budgeting and Saving

First and foremost, you’ll need to have capital. For that regular, periodic investing. And also, for the opportunities that appear once (or twice) in your lifetime.

Acquiring capital would mean you need a surplus in your monthly budget. Now, there are tons of budgeting templates out there on the interwebs so I’m not going to walk you through this.

I will, however, tell you that the most important aspect of budgeting is to make it into a healthy habit. Keep at it for a time and you’ll thank yourself 50 years down the road.

Savings – I want you to have at least a 20% savings rate. The higher the better, in fact, try for 50% of your take-home salary. You’ll invest more during your early years and let the magic of compounding take over sooner.

2. Your Emergency Fund

After you’re done consolidating and paying off your debts, you’ll have a nice surplus in your budget and savings every month.

The next step would be to start building up what we call your Emergency Fund. This is the fund where if and when you ever need money for an emergency, you’ll never need to take out that personal loan or worse, from loan sharks.

An example – medical bills, or if your phone got stolen etc.

How much should you have you ask? Some sites will tell you 3 months of your expenses. I say at least 6 months, go 12 months if you’re the risk-averse kind.

I typically keep my emergency funds in Fixed Deposits (‘FDs’). Now, you may need to liquidate this cash immediately, so put them up in one-month FDs.

3.1 Investing

You’ve got a kick-ass budget going on, your behind is covered by your emergency fund, now let’s talk investing.

As you all know, I invest heavily in stocks.
Here’s what I do – I continue saving and accumulating my wealth. I then wait for and seize any opportunities that present itself. I try to always have cash on hand.

Of course, you may not want to invest in stocks. And that’s perfectly fine, you should invest in assets you KNOW and you’re comfortable with. Just as long as you INVEST. Don’t leave your money lying around in FDs and what not because inflation is gonna take a bite out of it every single day.

The 7 investment options in Malaysia can be found hERE.

Investing your money is essentially making your money work for you. The first few years of your investing will determine the outcome of your financial well-being so invest with care and diligence.

3.2 Building Your Passive Income

For me and hopefully for you, the goal is to have enough passive income to not have to worry about work. I’ve calculated that to about RM3,000 per month or RM36,000 per year. This is the essence of FI/RE – Financial Independence and Retire Early.

To learn more about FI/RE – click hERE.

There are lots of people and information out there that touts and scream passive income in your face. But when I say passive, I mean the true passive. You receive regular income with little to no effort on your part.

For example, a rental property where you manage it yourself and you’re getting complaints from the tenant every other month is not passive.

Whereas if you let your agent handle every single thing regarding the said property and check-in maybe every quarter with him/her, I’d classify that as passive.

Or you know, just buy Real Estate Investment Trusts (‘REITS’).
Let huge ass property managers manage your property instead. No worries. Hakuna Matata.

4. Protection

Now I’m including protection into your financial plan because many either overlook this or overprotect and overinsure themselves.

This step should be done simultaneously with Step 3.

Let’s talk insurance. I know I’ll be getting flak from insurance agents for saying this but – You don’t need life insurance. This is my opinion.

What you should focus on right now, is medical insurance. To cover your medical expenses, should you be hospitalized or some critical illness should befall you. That’s all I have and that’s all I need. I can pass on my whole portfolio to my next of kin and dependants upon my demise.

While we’re on the topic, fuck investment-linked insurance. Get a standard, simple one. Don’t let the premiums in your 80s scare you. You’ll invest the money yourself, without paying a fee to the insurance company.

5. Review and Monitor

You finally have everything in order. The final step is a step that is continuous and on-going. It is for life. And it is for generations to come.

You’ll need to monitor your budget monthly, make sure your savings increase in tandem with your salary and income.

Your emergency fund will increase as your monthly expenditure goes up.

Your investments and assets AND passive income should always go up, up and UP.

And, your insurance should always be updated to include the latest offerings and cover all illnesses.

I myself go over my finances every month. Part of the reason I started Dividend Magic is to keep track of my investment portfolio as well as to hold myself accountable.

End.

It is my hope that this here Financial Plan would be of help to every single Malaysian. It is a very basic plan, I’ve left out some more advanced features of financial plans but the essentials are all there.

You and you yourself are responsible for your finances.

Remember – Save, Invest and FI/RE.
I’ll leave you one of my favourite quotes by William Shakespeare.

”There is a tide in the affairs of men, Which taken at the flood, leads on to fortune. Omitted, all the voyage of their life is bound in shallows and in miseries. On such a full sea are we now afloat. And we must take the current when it serves, or lose our ventures.”

Now go out there and don’t let them opportunities pass you by.

Funding Societies – My First Default

By 3

First off, an update on my portfolio’s performance with Funding Societies Malaysia. Annualised returns have gone down from 13% to 9.23%.

A lower figure compared to January but still, a 9.23% return is commendable for an investment.

Mainly due to –
1. A default; and
2. New unutilised capital.

My First Default(s)

It caught me off guard when I first received notice on the default on the issued notes, of which I’ve put in RM300 each into the affected notes.

MBBT-18080032
MBBT-18080033
MBBT-18080034

Being caught off guard like that isn’t always a nice experience but it was mitigated somewhat because I’ve constantly been managing my own expectations and prepping for a few defaults.

Re-adjusting Funding Societies’ Auto-invest Bot

If you’ve noticed, all the notes come from a single issuer or company. So it’s back to the drawing board for me.

I’ve now switched my auto-invest bot settings to have ‘Max Issuer Exposure’ from the previous 25% to a mere 5%. I don’t want to be over-invested in one single issuer.

In the event that a single issuer defaults, my loss exposure will never exceed 5% of my total loan portfolio.

Steps Taken by Funding Societies

It all started on 7 January 2019. The issuer contacted Funding Societies to delay payment. Below will be the notices I received from Funding Societies. In chronological order.

This will be pretty lengthy but it is important you as investors know the step-by-step process taken by Funding Societies.

7 January 2019

Dear Investor, The Issuer has reached out to us to push back the repayment of January 2019 due amount because pending receivables from their client, this will include late interest charges. Tentatively, repayment of January 2019 due will be on 18 January 2019. Thank you for understanding the situation. Team Funding Societies 7/01/2019, 6.20pm

** And thereafter, lengthy amounts of back and forth discussions with the issuer on the settlement. I’ll spare you the details. With the issuer failing to make repayments in March, Funding Societies finally decided to serve a letter of demand.

10 April 2019

Dear Investor, We wish to update that we have served the Letter of Demand as of 8 April 2019. At this stage we continue to be in contact with Issuer through our lawyers to demand for RM 50,000 which due on 31 March 2019, and upcoming RM 150,000 which is due 15 April 2019. As we wait for Issuer response to the Letter of Demand, kindly allow us to update you by 17 April 2019. Team Funding Societies 10 April 2019, 8.30pm

18 April 2019

Dear Investor, We would like to inform you that Note Issuer has made a partial payment of total RM 10,000 and it has been distributed as principle to investors on 16 April 2019. However, the amount made by Issuer is less than what we have requested from the Issuer. We are still in the midst of negotiating the outstanding repayment term with Issuer. As per our last update, the Letter of Demand has been served to the Note Issuer, and the Note Issuer has only made payment of RM 10,000.00 of the promised RM 200,000.00 upon the expiry of the Letter of Demand on 17 April 2019. At the meantime, we are escalating our recovery efforts through legal avenues and are discussing with the appointed panel lawyer on how to approach this matter effectively. You may refer to your email for full update. Kindly allow us until 3 May 2019 to provide you updates on the progress of recovery. We truly appreciate your kind patience and continued support. Team Funding Societies 18 April 2019, 1.25PM

End.

So there you have it. I’ve said there would be defaults and I’m sharing with everyone the first of mine.

There are inherent risks in investing in P2P financing. To mitigate, I am diversifying as much as I can. Putting in small amounts in every note issued.

And now, as I’ve learnt the hard way, not to overexpose myself to one single issuer.

I hope everyone learns from this.

That being said, I am still getting a 9.23% return. So don’t let yourself be discouraged by my defaults.

😀

Sign Up!

If you have not already, you can sign up with Funding Societies hERE.
Alternatively, you may use the code: j1mwa37p
You’ll receive RM50 upon investing your first RM1,000.

Note:
Funding Societies has reduced their referral bonus from RM50 to RM30 effective 1st March 2019.

Using my code and link, you’ll still receive RM50.

StashAway

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Meet Up

Having been watching and hearing a lot about StashAway for the past few months, I finally met up with Wai Ken and Albert Kok from the StashAway team.

I got to know more about the company itself and the team behind it. I was impressed by both the team and the technology behind StashAway. I’ll, therefore, be guiding you to opening a new account and investing in them with this article.

Economic Regime-based Asset Allocation (ERAA)

I’ve put off opening an account for a while now as I wasn’t too sure what kind of ‘sophisticated investment strategies’ the company was going to apply to my hard earned money.

They call it the ERAA. In short:
1. You determine your risk levels
2. StashAway picks the securities to invest in for you
3. ERAA will re-adjust the asset allocation to maintain your previously determined risk level

What I Like About StashAway

  1. As a retail investor, you get access to a multitude of investments from the US, Japan etc.
  2. You also pay fees only available to the big boys.
  3. Auto readjustment of your portfolio. You can leave your portfolio as it is for years and let StashAway handle it.
  4. Annual fees start at 0.8% and it goes down as you invest more

Dislikes

I found that I was unable to pick and choose personally the assets which I want to invest in. The only choice I had as an investor was to reset my risk profile and look at the breakdown of assets to be invested in.

Why? This is in StashAway’s FAQ –
Based on your risk preferences, selected goal, and current economic regime, our algorithm carefully picks the ETFs most suitable for your goal. This allows us to provide the most optimal diversification personalised to you. As such, it is not possible for a customer to handpick the ETFs or the allocation.

Getting Started

First things first, sign up at this link hERE.
Dividend Magic has partnered with StashAway to get you 50% off your fees for the first RM100,000 invested for 6 months.

Now, I didn’t have too much trouble with the account sign up. It took me about 5 minutes but I’ll guide you through it as best I can. With pics.

Step 1 – Getting Started
Step 2 – Your Email and Password
Step 3 – Your Goals and Portfolio
My Parameters
Projections for my Portfolio – I wish.
Step 4 – Eligibility
Step 5 – More Assessments
Final Step – Set up your risk profile!

My Investment

I’ll personally be depositing about RM3K to RM10K as a start.

This will be a long term passive investment for me and I’ve decided to put my money into a balanced portfolio, with a StashAway risk index of 14%.

The portfolio mix will consist of 54.5% growth assets and 45.5% protective assets.

Have any of you started investing in StashAway? How is your porfolio doing? And for those who are planning to start out, please do share the portfolio mix you’ve decided on and why.

The Employees’ Provident Fund (EPF)

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EPF Dividends 2018 – 6.15%


The Employees’ Provident Fund has a good track record of declaring above average returns to Malaysians. Also, have a look at their very simple vision and mission.

Vision

Helping members achieve a better future

Mission

Safeguard members’ savings and deliver excellent services

Quality Policy

The EPF is committed to help members achieve a better future through continuous improvement in safeguarding members’ savings and delivering excellent services. 

With the EPF, Malaysians essentially have in place a system of forced savings, investing and reinvesting for their retirement.

An independent governmental body whose goal is not motivated by fees but to earn the highest possible return for its members.

In general, Malaysians are happy with the 6.15% declaration of dividends by the board of our good old EPF.

And YES! 
EPF = KWSP. They’re one and the same.

We’re all familiar with EPF as our retirement fund. But what does EPF actually invest in?

dividend magic - retirement
‘How late do you expect to be working?’

Main Assets of EPF


As of 2018, equities made up about 41% of EPF’s total assets.

A further 50% is invested in fixed income instruments.

Let’s have a look at some of EPF’s largest equity holdings.

It’s a good idea to have EPF’s investments as a reference, apart from my Freedom Fund of course. ; )

What Will Become of Your EPF Savings?


With the recent 6.15% declaration in dividend, what do you plan to do with your savings in the fund?

I’ve created a simple poll in an attempt to gauge the mentality and financial decisions of everyone here.

No pressure. Also, there are no wrong answers.

What Will You Do With Your EPF?

View Results

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What I Do With My EPF

I personally am leaving my EPF untouched till I reach 55. And then I’ll withdraw a monthly amount to keep me alive, slowly drawing down on the capital.

Your EPF is essentially forcing you to save a portion of your income every month. And it helps you reinvest those 6% and above dividends every single year.

Even though I’ve mentioned there being no wrong answers to the poll above, I do believe Option 2 and 3 – where you’re essentially drawing down on your funds from your EPF savings is the least financially sound decision.

I see no reason for one to forego that 6% return in lieu of mutual funds or property. If you’ve got to take money from your retirement savings to purchase something, you definitely can’t afford it. In my opinion, of course.

Has anyone done this long term and made good money from Options 2 and 3?

End.

You may have heard from uncles and aunties telling you to withdraw as much as you can during times of uncertainty.

Mutual fund agents may have enticed you to believe their RM100 million funds are superior to our national fund – worth over RM800 fucking billion dollars.

Property agents may have hinted that your purchase of that 3BR apartment is a better decision than leaving your money in the hands of a professional investing team.

I think all are a load of hokum and I’ll stick with EPF for the foreseeable future.

I think you should too. 
And this is a plea to all Malaysians, don’t squander away your retirement savings.

TL;DR – Withdrawal from EPF? Bad idea.

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