Is it SAFE to Invest in Private Retirement Scheme (PRS) ?

This is one of the common question asked by potential PRS contributors. First, I want to emphasis that PRS is a long-term investment for the purpose of retirement planning. In investment case, long-term means you already using the most powerful method to reap a good return. Anyway, many contributors still want to treat PRS as some kind of short-term investment. I got the answer for you.

Basically, PRS is very similar to unit trust investment. The underlying structure and investment philosophy were the same actually. No wonder many people perceived PRS is another unit trust scheme. Yes, you're correct to a certain extent.

Under the guidelines, each PRS providers must at least launched their core funds for investors to select, namely Growth, Moderate and Conservative. To make things simple, we only discussed these core funds because I believe most of us only invest in core funds. From these core funds, growth fund is the most aggressive one. In other words, the most risky one, with the aim of getting better return than the other two.

Asset Allocation of Core Funds under the guideline by Securities Commission of Malaysia

Is it really so risky?

Let's us examine even deeper now. Again, under the guideline for PRS growth fund, only maximum of 70% of NAV can be allocated to equities, while the balance was in fixed income/money market instruments. If you're an unit trust investor, you will know that this is almost like a balance fund type of asset allocation. For your information, for normal unit trust equity fund, equities exposure was between 70% - 98%. Meaning, the maximum equities exposure for PRS Growth fund equals to the minimum of an equity fund. Not so risky, right?

Of course, if you want higher equity exposure for your PRS portfolio, you can opt for those non-core funds, which can go as high as 98% in equity exposure. Then, the next question was "Is it risky to invest now?"...

It all depends on your perception. If you think that Malaysia market is too expensive now, you may opt for those funds with foreign exposure. Currently, from the 4 PRS providers whom already launched their schemes, some can invest into foreign countries. Some are fund-of-funds, some are foreign funds. Coming soon, more variety of PRS funds will be offered, such as property fund, commodities fund...

This is a guest post by Alex Yeoh in the series of Private Retirement Scheme. For more PRS info, you may contact Alex Yeoh (email: alexyeoh@vka.com.my), a licensed financial planner, whom representing multiple PRS providers. Thank you.

The Ghost of Christmas Past: Merry films of Lehman's Fall

I have no family in the UK, so I always exhibit strange behaviour on Christmas day. Last year I wondered around the City of London and took photos of empty bank offices, after which I attended a wedding of two Occupy protesters on the steps of St. Paul's cathedral. This year I wandered around Brixton and took photos, including one of the Space Invader mosaic above the chicken & chips shop on Coldharbour Lane, before going home to watch THREE whole films on the fall of Lehman Brothers.

GANDALF VISITS MORDOR

Lehman has always held a special place in my heart because I had two interviews there in 2008, mere weeks before it collapsed. I sat up on the 36th floor and was questioned by men whose job it was to ascertain the robustness of my character. One of them said "you may have heard things in the press about us being in the shit, but these are the exaggerations of melodramatic journalists". A week later I was having another interview there, but little did I know that they were in the midst of negotiations with the Korea Development Bank, trying to convince them to inject much-needed capital in the bank. The MD interviewing me was a little distracted, though in my naive state, I wrote it off as normal MD-like behaviour, rather than the product of him being at a bank on the verge of crumbling.

The action behind the scenes leading up to final Lehman implosion is fascinating. Perhaps most striking is just how arbitrary the process was. In one dramatic weekend the US treasury secretary Hank Paulson hauled the CEOs of America's top banks into the New York Fed, and said, in a nutshell, "I bailed out Bear Stearns, now you guys must bail out Lehman". The negotiations hinged on whether Goldman, JP Morgan, Citigroup, Morgan Stanley, and a few other banks could agree to take on Lehman's bad assets in order to induce Bank of America or Barclays to buy the rest of Lehman. The famous twist in the tale comes when Merrill Lynch's John Thain cuts a private deal with Bank of America to save Merrill instead of Lehman. This leaves Barclays as the only possible suitor, but the deal runs into trouble with the UK regulators, leaving Lehman to collapse, only to be picked up by Barclays anyway at a much cheaper price. These are the basic events focused on by the three films I watched. To help you take your pick, I've given each film a rating below:

Film 1: The Last days of Lehman (2009)

A crap made-for-TV film if ever there was, but worth a brief watch to see the awesome James Cromwell playing Hank Paulson. Cromwell incidentally plays the Nazi eugenics doctor in the incredible series American Horror Story, and seems equally at home with both characters. It's debatable whether Hank Paulson can be compared to a genocidal scientist, but he certainly has helped to create financial monsters. In the final analysis, Cromwell saves an otherwise dismal cast of buffoon-like characters, and drags the film's rating up to 5.5/10.

Film 2: Too Big to Fail (2011)
This film portrays the same events as the Last Days of Lehman, only it does with much more style. William Hurt pulls a great performance of Hank Paulson, but the highlight of the film for me was Paul Giametti playing Ben Bernanke. The guy who plays Goldman Sach's CEO Lloyd Blankfein is also very entertaining. It's based on the book of the same name by Andrew Ross Sorkin, who himself appears as a journalist in the film. It's light on technical detail of what was going on, but is overall pretty well acted and scripted, giving a reasonably realistic human face to the key players. I give this one 7/10.

Film 3: The Love of Money - The Bank that Bust the World (2009)

A quality BBC documentary with some heavy hitters being interviewed, including Bob Diamond and Gordon Brown, plus several of the main players during the fall of the bank. It's the traditional talking-heads style, so no great prizes for innovation, but it gives a solid account of the chaotic Lehman balls-up. I reckon it earns 7.5/10, maybe even 8 if you've had a few whiskeys.

Suitpossum does Youtube

In conclusion, I've decided to launch a little Youtube Channel to showcase some of these videos. I'm thinking of calling it Suitpossum's Guide to Global Finance channel. It doesn't have much on it yet, but I'll be making useful playlists, and maybe even creating my own videos. Exciting times.

Exclusive Interview: YUMI WONG

Malaysia's upcoming popular model, Yumi Wong is the name you can't forget in the near future. She is pretty, famous and most important is very young. At the age of 23 only currently, she already features in many tv commercial, magazines, one of the most sought after model in town, and as an ambassador of many companies. Read to know more about Yumi:

1. When were you started to join the modelling/entertainment industry? And, how?
   Still remember that when I am still in school, one of my friend got a freelance job and she needed someone to accompany her. She asked few of our friends on trying to get the job, while I'm like no harm, just try. But, in the end, only I myself got the job. This is how I started by becoming a freelancer and keep doing it until making it as my career.
   
   
2. What's your BEST achievement so far?
   Best achievement? Hmmm, I won't say that I had any great achievement so far because I think that although I have been in this industry for few years, it was only recently it became a career for me. This is just the beginning for me actually. So, I would say that the best achievement is the support and trust from the people, clients and sponsors.
   
   
   
3. We believe your fans would like to know your plans for 2013. Can tell us abit?
   My plans in 2013 is... stop gaining weight! Lol ~ and of course in 2013, other than getting better for whatever I'm doing, I would love to do more acting, learn better acting skills, and show my fans the different side of Yumi. Stay tune ya...
   
   
4. It's awesome that you have so many followers via Facebook, Twitter, Instagram... Any words to them over here?
   Yes! My words to them is: "Thank you so much for supporting me all this while. Without you guys, Yumi will never be able to make it until here today. I will work harder, learn more new things and never let you guys down. Love you all ~ XOXO"
   
   
5. Since your schedule was so tight, how do you juggle between your time and work?
   Arrg ~ this is very hard! But right now, most of the time I will spend on my work. For whatever activities, work come first for me because I think that I'm still young, still able to work more, as long as I got enough time to rest. Yup, I will spend my day just for working. Anyway, my job is quite fun after all.
   
   
6. Finally, how are you going to manage your personal financial matters? Are you a shopaholic?
   Well, shopping is what every girls' activities all the time! It was like breathing, and we can't stop or change it!!! But, I myself will only shop for what I need, I don't like wasting stuffs. As long as it still can be use, I will not buy a new one to replace it. So, my answer is YES I did shopping sometime, but not a shopaholic at all. And, I am quite a good money saver (I think).

Finance Malaysia blog hereby thanks Yumi for the interview and sincerely wishes her to be the next TOP international model from Malaysia, and successful in whatever things she venture into. If you want to know more about Yumi and her latest updates, you may "Like" Yumi Wong Facebook fan page.

What are the TAX benefits from Private Retirement Scheme (PRS)?

According to Securities Commission of Malaysia, tax incentives are provided to both employers and individuals for the first 10 years from assessment year 2012; in addition to the tax deduction permitted for EPF contributions:

Amount of Tax Savings by individuals for PRS contributions

For Individual:

Tax relief of up to RM3,000 per year will be given for contributions made within that year. This is on top of existing tax relief already enjoyed by taxpayers. How much can you save from tax? Let's look at the table above which illustrates the amount of tax saving an individual get after personal tax relief and RM6,000 EPF + Life Insurance tax relief. Assuming maximum RM3,000 PRS relief, the amount of tax saving depends on your level of income. For high tax bracket individual, you can save up to RM780 annually!!!

For Employer:

Tax deduction on contributions to PRS made on behalf of their employees above the statutory rate of up to 19% of employees' remuneration was granted. Example, if an employer already making 12% EPF contributions to his employees, the employer may choose to reward their employees by contributing into employees PRS account for up to another 7%.

Vesting Schedule to Retain Employees?

Yes, employer can use PRS as a tool to retain employees by adding a "vesting schedule" clause. Currently, there are a few available vesting methods: by length of service, job rank, or by age. Unlike EPF, if an employee leaves before vesting, the employer can access to the un-vested portion of contribution already made. Likewise, for EPF, employee take the full amount when they left. With PRS vesting schedule, employee may think twice before switching jobs.

In conclusion, there are tax incentives for every tax payer, employee or employer. Ultimately, enough retirement funds was the key objective of PRS. On top of that, a tax exemption is also provided on income received by the funds under the PRS.

This is a guest post by Alex Yeoh in the series of Private Retirement Scheme. For more PRS info, you may contact Alex Yeoh (alexyeoh@vka.com.my), a licensed financial planner, whom can distributes products from multiple PRS providers. Thank you.

How Private Retirement Scheme (PRS) works actually?

Many people are still in the dark on how actually Private Retirement Scheme (PRS) works. In order to clear everyone's mind, we hope this post was timely for those who may want to entitle for extra tax relief of up to RM 3,000 given by PRS before 31st December 2012. To further explain the whole scheme, Finance Malaysia Blog was glad that Alex Yeoh, a licensed financial planner is able to share with us on this matter.

By Alex Yeoh,

First we must know that PRS is a voluntary scheme for the purpose of retirement saving. For ease of understanding, let us look at the picture above which explain the process into two parts. Initially, contributions were made by us into the PRS fund that we select. It was as flexible as  normal unit trust investments (shown in upper part). Contribute anytime any amount as you like, without any specific intervals. As simple as that.

When can I withdraw the money?

Each time, your contributions were split and maintained in sub-accounts A and B similar to EPF way (shown in lower part). 70% of contributions will go to Account A, which can be withdrawn upon reaching retirement age, which is currently at 55.

Meanwhile, the balance 30% into Account B, which can be withdrawn after one year, subject to 8% tax penalty. Take note that you can withdrawn from Account B for whatever reason. Although lump sum withdrawal are permitted, contributors are encouraged to retain their savings for continuous investment under the respective schemes.

Why 8% tax penalty?

The said 8% tax penalty was to discourage contributors to withdrawn their money prior to retirement age. We must understand that PRS is meant for retirement savings. Moreover, the 8% tax penalty was deducted from withdrawal amount to pay back Inland Revenue Board (IRB). Why? Because IRB is the one who gave you tax relief on contributions made initially. Otherwise, loop-hole was existed with everyone just want to take advantage of the tax relief and  withdrawn their money after that. Agree?

For more PRS info, you may contact Alex Yeoh (email: alexyeoh@vka.com.my), a licensed financial planner, whom can distributes products from multiple PRS providers. Thank you.

The Heretic's Guide to Global Finance: Hacking the Future of Money

[Note: An up to date blogpost about the book appears here, and the book's page is here]

This blog has been on the down low over the last few months because I've been writing a book. The book is now finished, 78 579 words aimed at  providing a gateway for an individual to gain access to the matrix of global finance. It's called The Heretic's Guide To Global Finance: Hacking the Future of Money. 

It will be published in May 2013 by Pluto Press, a fantastic independent publisher based in Highgate, London, who have published such societal shitstirrers as Noam Chomsky, Edward Said, Vandana Shiva, Susan George, and John Holloway, amongst others.

I've often found that I'll read an interesting book providing a critique of the financial system, but then I'll put it down and that's kind of the end of it. I store the info away somewhere and pull it out during a conversation maybe, but I don't really act on it. Thus, when Pluto approached me to write a book on finance, I decided it would be good to create something that stays with the reader after they put it down, a manuscript that sets in motion certain heretical processes within that individual, perhaps a self-reinforcing critical impulse that culminates in them becoming a subversive financial ninja or sorts, or a Shaolin fighting monk of finance, disrupting capital flows around the world in the cause of social and ecological justice.

To do that, The Heretic's Guide sets out a framework for approaching the financial system based on anthropology, gonzo exploration, the Hacker ethos, DIY culture, activist entrepreneurialism, drag queens, rogue magicians, guerilla gardening, bats, dolphins, OpenSource culture, network disruption, circuitbending, and you.  In essence it's about jamming systems of power in the cause of democratic openness. Pretty simple actually. It's going into production now, and more publicity will start to come out early next year.

In the mean time, I'm going to try recover. If you've ever wondered what it's like to write a book in six months, the picture below says it all, ha ha. I've come some way since I started this blog, and now I need a week of sleep. Over and out.

THE PATIENT WAS ADMITTED ON TUESDAY, SHOWING SIGNS OF DISORIENTATION

Köpkraft i Sverige de sista 30 åren

Inflation är en bedräglig storhet. Den smyger sig obemärkt på och om den inte hålls på en låg ensiffrig nivå hotar den både välstånd och social ordning. De sista tio åren har inflationen varit låg och det är något det stora flertalet av oss kan vara mycket tacksamma för. Nedan har jag listat några siffror som jag tror kan vara användbara att memorera. Eller att känna till att man kan hitta här på bloggen. Om ni vill till ursprungskällan för siffrorna så hittar ni dem på SCB.

• 30 år, en faktor 3: KPI (köpkraftsindex) är idag ungefär 300 och 1980 var det 100. Det gör att man behöver ungefär tre ggr så mkt pengar idag som 1980, d.v.s. innan finanssektorns avreglering och snabba tillväxt, för att klara sig.

• 25 år, en faktor 2: KPI (köpkraftsindex) är idag ungefär 300 och 1985 var det ungefär 150. Det gör att den typiske studenten som tar examen idag behöver en dubbelt så hög lön som sina föräldrar behövde när de tog examen för att klara sig.

• 20 år, en faktor 1.5: KPI (köpkraftsindex) är idag ungefär 300 och 1990 var det ungefär 200. En bra siffra att komma ihåg för dem som, likt mig själv, började placera pengar i början av 90-talet. Om ditt mål 1990 var att bli miljonär så tycker jag du ska känna att du nått ditt mål först om du sparat ihop 1.5 miljoner idag. Notera också att detta visar att medan prisnivån i Sverige fördubblades under 80-talet har den bara ökat med hälften så mycket under den dubbelt så långa perioden 1990 till idag.

• 10 år, en faktor 1.1: KPI (köpkraftsindex) är idag ungefär 300 och 2002 var det ungefär 270. D.v.s. inte mycket har hänt med prisnivån sedan IT-kraschen. Priserna är bara ynka 10% högre idag än för tio år sedan (egentligen var inflationen lite högre än så (14%) men för att göra det enklare att komma ihåg det hela så nöjer jag mig med denna avrundade siffra).

Hoppas det får fortsätta så här! Jag tror dock inte det är det mest troliga scenariet med tanke på den politisering av marknadsekonomin vi ser runt omkring i världen idag.

New Fund: OSK-UOB Multi Asset Regular Income Fund

As investor continue to seek safe investment havens, i.e. investments that are more stable and/or of lower risk and with regular income, OSK-UOB Investment Management see opportunities in the Asia and Asia Pacific (ex Japan) region. Hence, they are now offering investors a fund that utilizes a multi-asset strategy to generate potential regular income and capital growth in a fund that invests in three yielding assets i.e. bonds, equities and REITs (real estate investment trusts) from the Asia and Asia Pacific (ex Japan) region.

The Fund is suitable for investors who:

1. seek regular income and capital growth over medium to long term;
2. are willing to accept moderate risk in their investments; and
3. wish to benefit from investment exposure in the Asian and Asia Pacific (ex Japan) region.

Tactical Asset Allocation?

Of the fund's investments, the External Investment Manager will initially invest in accordance to the allocation stated in the table below. However, for the purpose of tactical asset allocation, the manager may deviate from the stated allocation by a 10% variance for each asset class depending on the market conditions to achieve medium to long term returns.

Thus, this Fund's portfolio will be structured as follows:

• 65% - 98% of NAV
• Investments in Asian (ex Japan) debt instruments / bonds, Asia Pacific (ex Japan) dividend equities and Asia Pacific (ex Japan) REITs.
• 2% - 35% of NAV
• Investments in liquid assets including money market instruments and deposits with financial institutions.

What's the composite benchmark for this fund?

• 50% JP Morgan Asia Credit Index Total Return Composite (RM);
• 30% MSCI AC Asia Pacific ex Japan Index (RM);
• 20% MSCI AC Asia Pacific ex Japan REITs Index (RM).

Distribution Policy:

Depending on the level of income generated at each relevant period, the fund will declare distributions, if any, to unit holders QUARTERLY.

Click here to read fund's prospectus

Source: OSK-UOB Investment Management

Falling into a Dividend Trap? (Dec 2012)

No doubt, many investors prefer only invest in dividend-based counters. Malaysia is famous and already been recognized as one of the hottest spot for those looking for high dividend yields counters. But, things may changed. Why?

First, how do we calculate dividend yields? It's dividing the one year dividends declared by share price. Normally, yield which is higher than 5% was considered attractive. Just when everyone looking to hide their money from risks, yet aiming for higher returns than putting into fixed deposit (3% p.a), dividend counters seems to be their preferred selection.

Should we follow the "professionals"?

Yet, many investors just follow the winds (fund managers, analysts, consultants...) to invest based on the past 6 months, 1 year or 2 years track records. Yes. It's proven track records. But, where we are heading to is more important, right?

If you read the newspaper which published out-dated yields data, good luck. It's was based on last year dividends divided by average share price for last 365 days. For me, it's totally irrelevant for us to make decisions.

On the other hand, what we noticed was the share prices of dividend counters had moved up a lot since second half of last year. Although they have come down abit lately, we must ask the following questions before bargain hunting.

• Are we jumping in too late now?
• Are we taking more risks now?

Think about it and start to reconsider your decision again.

Personally, I believes this was not the right time to invest in dividend based counters. Nothing to do with their fundamentals or businesses as they are well-manage, profit generating companies. The problem is their share prices have already gone up a lot, which does not justify with the word "attractive yield" currently. Same goes to dividend based local unit trust funds. If really want to search for high dividend investments, you can still find it handy overseas, not Malaysia. Happy Investing!!!