SAVING and investing for the future can help the low-and middle income groups get out of the poverty trap, especially in the sluggish economic environment, said Jupiter Securities Sdn Bhd vice-president Nazarry Rosli.
“Saving money and investing will serve as a balancing act in overcoming financial problems and difficulties.
“Things are getting tougher with the rising cost of living, especially for the low-income group.
“By building up savings, one can handle unanticipated expenses without going into debt and putting oneself in a difficult situation.
“Investing also helps one to accumulate wealth. So, save and invest to escape poverty.”
Nazarry said the saving and investment culture was, however, poor among the low-and middle-income earners and Bumiputeras.
“We should instill the saving culture in low-income households and alter the attitudes of low-income earners.
“Public and private sectors should collaborate to educate these people on the need to save.
“Developed countries have very high savings rate,” he said.
Statistics from last year’s Amanah Saham Bumiputera (ASB) annual report showed that about 70 per cent of eight million ASB depositors had less than RM5,000 worth of investment.
These statistics indicated a low awareness on the importance of investing among Bumiputeras.
Nazarry said the lack of financial understanding was why people failed to save and invest in the right product.
He said putting money or savings in safer hands, such as in Permodalan Nasional Bhd (PNB), Malaysia’s biggest fund management company, was a smart option.
“Investing in PNB’s unit trust products relieves investors from worries as it goes hand in hand with savings,” he said.
The idea of investing, such as in stock market or buying a house, may be daunting to some people.
Investing in this category is different from saving, because it involves a greater level of risk and there is no guarantee that you will get your money back.
As investing comes with the risk of losing out on initial capital outlay generated from savings or debts, it requires effective strategies to make profits.
Good investments are backed by detailed research and analysis to minimise risks. Therefore, investing is an active pursuit, requiring an investment of work and time.
Nazarry brought up the term “forced savings”, which means taking the savings out before one gets the chance to spend them.
“Insurance can be a form of forced savings, but it is more for protection rather than savings. Investing in PNB’s products is one example of good forced
savings.
“The theory behind these automatic savings is you will not miss what you will not see. And your savings will build up despite your best efforts at self sabotage,” he said.
Other than forced savings, Nazarry said investment in the products could also provide passive income — income received on a regular basis, with little work required to maintain it. It is closely related to the concept of “unearned income”.
PNB pools funds to obtain a wider spread of investments, which enables greater returns with diversified risks.
As a fund manager, it makes decisions and invests on investors’ behalf in a variety of investment strategies.
The fund manager invests in fundamentally strong companies, including those in the FTSE Bursa Malaysia KLCI (FBM KLCI), FBM70 and/or FBM100.
Amanah Saham Nasional Bhd (ASNB), a wholly-owned subsidiary of PNB, manages a number of unit trust schemes, such as Amanah Saham 1Malaysia, Amanah Saham Bumiputera (ASB) and Amanah Saham Wawasan.
ASB schemes have other features like fixed-price units. The schemes have been giving good returns and an average annual bonus of eight per cent since they were launched in the 1990s.
By parking their money in ASB, those with limited knowledge in investing can be assured of returns in a low-risk environment .
Nazarry said the right way to invest with ASB loans was to have a long-term goal without withdrawing the dividends to make monthly payments.
“Investors only have to invest over a longer period of time, and the power of compounding interest will grow their money to generate solid savings,” he
said.
With affordable loans offered by Maybank, CIMB Bank, RHB Bank and Bank Simpanan Nasional to invest in ASB, more Bumiputeras who do not have capital can start investing and build discipline in repaying the loans.
Bumiputeras can grab the attractive opportunities provided by ASB’s unique investment schemes, which costs only RM10, for starters.