Tuesday, November 16, 2010

5 Reasons Why I Invested My EPF@KWSP savings in unit trust

Most of us know that EPF@KWSP members are allowed to invest certain portion of their EPF@KWSP savings in selected unit trust funds. But, not many of us are taking the action to start investing in unit trust using their EPF@KWSP savings. For me, at first I was quite reluctant to invest my EPF@KWSP savings in unit trust. But, after some investigation and further considerations, I decided to invest partial of my EPF@KWSP savings in selected unit trust funds. I listed below, 5 reasons which I considered good enough to convince me to start investing my EPF@KWSP savings in selected EPF@KWSP approved unit trust funds:

1) Higher return of investment
This is the main reason why I invested my EPF@KWSP savings in unit trust. Based on the average performance of my existing unit trust funds, the return of investment is much higher compare to the 5.65% dividend rate given by EPF for year ending 2009.

2) Lower sales charge
For most unit trust investment, the common service charge range between 5% - 6%. But, for investment from EPF@KWSP savings, the maximum service charges is only 3%. For long term investment, the difference of 2%-3% can mean quite a lot of money.

3) Take control of my own EPF@KWSP savings
Perhaps I can't take control of all of my EFP@KWSP savings, but at least I have a control of small portion of it. Over the long run, I hope this small portion can grow into something significant.

4) It's not the money from my own pocket
Sometimes it is quite painful to transfer some of our hard earned money from our own pocket into unit trust investment. Because there are risks in unit trust investment. So, EPF savings is another alternative. After all, I can't withdraw my EPF@KSWP savings till I am 55 years old. So, why not take some risk with a small portion of my EPF savings?

5) Free Takaful Coverage
There are some EPF@KWSP approved funds come with Takaful coverage. This is something really worth it - investment come with insurance coverage. But, of course, there are terms and condition to enjoy this benefits.

The above 5 reasons are solid enough for me to start investing my EPF@KWSP savings in selected unit trust funds. Anymore reason which I missed out? Do feel free to share with me.

However, must always bear in mind, all investment come with risks. We always hope to get higher and better returns from our investment. But, must be aware that there are also some risks that the investment might not be able to give us the type of returns we wish for. Prepare ourselves with these possibilities. Make sure we can accept these possibilities.

All the best in your investment!

Note: If you wish to know how much you can withdraw from your EPF@KWSP savings to invest in unit trust, click here. If you wish to know the list of approved unit trust funds for EPF@KWSP members' investment scheme, click here. Do take note, the list of approved unit trust funds can change from time to time.

10 comments:

  1. 1) Higher return of investment
    - This is depend on the entry point. If you withdraw money from KWSP to invest equity fund, now most of approved equity funds are reach year high. If there is 'crash' at peak, you might not able to get "just 5.65% dividend". Withdraw to invest while equity funds reach 'bottom'.

    2) Lower sales charge
    - KWSP encourages members to invest their retirement money, but there still having management charge annually, "1.5% per annum of the NAV"

    3) Take control of my own EPF@KWSP savings
    - You still out of control of your money. It seems your withdraw your money from one pool (KWSP) to another 'approved' pool. 'Approved' is another mean of 'Controlled'.

    4) It's not the money from my own pocket
    - Anyway, it is still your money unless you won't feel sad while you lost it.

    5) Free Takaful Coverage
    - It is included under Management Fees. But I never hear anyone claim from this.

    Please think twice if you want to act now.

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  2. Hi,

    How and when 'they' deduct the yearly service charge from the unit trust investment?

    Rgrds
    Vincent

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  3. Wah..雷門, sounds like all negative :P But, I am prepared to take the risk for my unit trust investment from my EPF savings. It's a long term investment. For the management charges, I dont mind because the unit trust companies have to employ a group of people to make more money from my money. For the Free Takaful Coverage, I have heard of the claims from investors. Anyway, thanks for your comments. We all should think twice before do any kind of investment :)

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  4. Hi Vince, for the management charges and any other charges (if any), you can refer to the annual report and statement of the fund manager for that particular fund. Investors should received their annual report and statement either by hardcopy, CD or e-reports. You'll see all the calculations, details and activities of that particular fund in the report.

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  5. People say that we cannot time the market. However for mutual fund: There are 2 ways to do this

    1. Wait for the market to crash to buy.
    2. Dollar cost averaging.

    Mutual funds are considered "expensive" because of the management fees and the loading fees compared to stocks. But the risks are lower.

    Less popular in Msia is the use of ETF, which has low entry fee and consists of a basket of stocks. Thus, diversification is ensure.

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  6. Hi Kris, thanks for your comment.You meant ETF or EPF?

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  7. 5.65% EPF dividen + 3% sales charge = 8.65%, u hv to make sure that your ut investment can beat this % in 1st year , but if for long term (normally ut talking about 3 to 5 years investment)3% divide by 5years = 0.6%, 5.65%+0.6%=6.25%.... if the fund is perform, 6.25% can easily get...we can not touch the $ in epf until age 55, y not take out for long term investment? btw, gov. should lower down the 3% sales charge for epf investment.... from vivien

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  8. Hi Vivien, wow.. thanks for the calculations! My long term is more than 5 years :) I don't think our goverment will further lower the sales charges for EPF investment... but, we hope for that k!

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  9. I like to take control of my money but beware about mutual fund. It seem what happens in US is repeating here as well. Only handful of fund is beating EPF on the long run. Any of your trust fund giving CAGR of above 10%?

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  10. Hi Ariza, yes, we must always be aware of our investment. Yes, currently, I have 2 funds with return rate more than 10% :)

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