KUALA LUMPUR: BUMIPUTERA investors are encouraged to embark on long-term financial planning for their retirement. This will allow them to have other options besides withdrawing their savings in times of need.
Malaysian Financial Planning Council administration and finance committee chairman Anuar Shuib said one way is to invest in Amanah Saham Bumiputera (ASB), which pays a good annual dividend.
Investors have an option to either invest directly in the fund by putting in their own money or by utilising a financial instrument known as the ASB Loan.
“The ASB Loan provides an opportunity for investors to build up their savings by borrowing from banks.”
Anuar said it is a good point as borrowers are discouraged from spending too much of their income and forced to discipline themselves to make payments.
“Besides that, it helps investors to start with a lump sum amount, which in turn, will bring bigger returns yearly.
“This is better than those who deposit money in small amounts at their convenience as they will not be able to enjoy a higher dividend.”
Those who make consistent monthly payments will have a good credit score, which is a great help when applying for a housing loan.
The ASB Loan repayment period is between five and 30 years. The amount that can be borrowed is up to RM200,000, depending on banks like Maybank, RHB Bank and CIMB Bank.
However, he advises investors who want take up the ASB Loan to make sure that they can afford it, and not use the annual dividend to repay the loan.
“The income distribution is meant for capital growth. If we take it out, the magic of compounding interest cannot work. The investors will end up having a smaller fund at the end of the day compared with those who reinvest their dividend.”
Anuar said investors should also have a long-term objective.
“When an investment is made with a long-term goal, investors will not simply terminate their efforts or withdraw the annual dividend because they know they will not achieve their goals.”
With regard to the dividend paid by ASB, Anuar said the rates may vary from one year to another.
“Based on empirical evidence from previous years, ASB has given annual dividends that are higher than the inflation rates.
“The investors should have a realistic expectation on this, especially when they want to take up the ASB Loan.
“They should know that banks are not allowed to make promises on the income distribution of the fund.”
Anuar advises young adults and those who have just began working to start their financial planning as soon as possible.
He said the amount of money to invest varies from 10 to 30 per cent of their monthly salaries, which are optimal for savings and investments, including ASB.
“Between investing in ASB and buying properties, the former is a liquid asset that can be converted into cash in a short time without losses. This is useful in times of need.
“However, ASB investments are supposed to be taken out in emergencies only or to fulfil financial objectives that have already been decided upon.”
He said in a lifetime, investors may need to use their money at various stages, such when buying a property, paying for their children’s education or getting married.
On top of these, they need to have sufficient funds to support their lifestyle after retirement.
Anuar said young workers who do not have any financial commitments should consider investing in ASB.