Invest Made Easy

Author: Shane My   |   Latest post: Wed, 21 Aug 2019, 12:02 AM


Using EPF to Invest into Unit Trust Funds (Analysis - Part 1)

Author:   |    Publish date:   |  >> Read article in Blog website

News that EPF will be releasing e-MIS to allow Malaysians to conveniently invest into unit trust using their EPF (KWSP) savings online has been a subject of heavy discussion within the unit trust consultants community. Majority of unit trust consultants whom have been serving clients via investment advisory as well as manual submissions of EPF investment form in exchange of a 3% sales charge fee stand to lose out most in this latest shift in convenience of investing unit trust through EPF's e-MIS. 

It has been been stated in a local publication that Malaysians whom utilized the online platform to withdraw their EPF savings to invest into unit trust will only be charged a fees of 0.5%. The risk of doing so is that Malaysians will not have the privilege or receiving investment advisory from a dedicated unit trust consultant. 

We may all get excited about saving on sales charge of EPF investment but I truly believe we should be educated on the very basic pros and cons of withdrawing your EPF savings to invest into Unit Trust funds. First, let's go through the fundamental benefits that you will always hear from your unit trust consultant when it comes to withdrawing your EPF savings to invest unit trust!

Pro Reason 1: Unit Trust returns tend to outperform EPF annual dividend rate!
If you look at the historical dividend rates of EPF, it has always been a steady SINGLE DIGIT (%) dividend as shown here. There is nothing sexy about the dividend payout of EPF which has been consistently hovering between 5% - 7% over the past 10 years. Unit Trust Consultants over the years have always compared the returns of Unit Trust fund on a yearly basis versus that of EPF dividend, and in most cases when unit trust funds are generating double digit returns for a particular year, the potential of clients withdrawing EPF to invest into unit trust funds are higher. 

This scenario of double digit returns of unit trust funds were true especially during the bullish years of the Malaysia stock market between 2009 to 2015. Shown below is a historical data of the Top 5 Malaysia Equity Fund as of Feb 2015 where notice that the 5 Year Annualised (%) Returns of these funds range between 15% to 22% per year!!!

Malaysia Equity Funds Annualised % Returns as of Feb 2015
It was certainly a great time for Malaysians to regularly withdraw their EPF savings to invest into these funds! Forget bout the single digit dividends of EPF which will take forever to grow your retirement savings, so they say.

Pro Reason 2: Negative Returns of Unit Trust Funds is a good opportunity to Dollar Cost Average using your EPF savings
This has always been the reason unit trust consultants give when a fund performs poorly. A negative return is an opportunity for the investor to invest more and acquire more units at lower prices as how many long term successful passive unit trust investing has been shown to work. The concept of Dollar Cost Averaging (DCA) strategy has always been proven to work if you are into long term passive investing albeit with one caveat to this. In order for the DCA strategy to work, the unit trust fund that an investor chooses to invest into is also pivotal to the success.

Having a good investment strategy such as DCA yet choosing a poor performing unit trust fund will most likely also reap poor results as the unit trust fund could potentially incur major losses (during a bear market) as well as unable to take advantage of reaping big returns in a bull market. 

This is why over the years, I have written articles that encourage investors to invest passively yet aggressively pursue your rights to good advisory as well as proper investment recommendations from your financial advisor/consultant to ensure he or she is always taking care of your investment interest. This is your investor right as an investor to be given such advisory in return of the sales charges that you are already paying your advisor or consultant.

Pro Reason 3: Invest into other specific country/sector markets that are not covered by EPF investment
This is least used reason given by Unit Trust consultants yet is the most logical reason why an investor would decide to withdraw part of their EPF savings to invest into. I'll give you very strong reason example on why this strategy can be beneficial given the right selection of sector of country to invest in.

Let's take the sector based shariah compliant Precious Metal Securities fund as an example. This fund which is under AmFunds Management Bhd is an EPF approved unit trust fund that invest specifically into Gold Mining stocks. Say for example an investor whom sees an opportunity in gold decides to invest into this fund using his or her EPF savings in Sept 2018, he or she would have made +34.92% in less than a year as shown below:

On a longer horizon example, if the investor has been diligently investing into Precious Metal Securities via the same amount on a quarterly withdrawal from of his/her EPF savings, the total investment return between Jan 2017 to July 2019 for the investor would be +17.3%!

Summary of Part 1 of "Using EPF to Invest into Unit Trust Funds"
In Part 1 of the "Using EPF to Invest into Unit Trust Funds" series of blog post, I have explained the basic benefits of why investors are attracted to withdrawing their EPF savings to invest into unit trust funds.

In the coming future parts of the series of "Using EPF to Invest into Unit Trust Funds", I hope to cover the cons as well as the current state of approved unit trust funds versus that of EPF dividend returns. I also intend to release an in-depth analysis of how the funds in each category are performing versus that of EPF dividend returns.

So stay tune and do follow Invest Made Easy Facebook page for future updates!! 
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  2 people like this.
lizi my collegue's investment in unit trust using epf is still under water...losing money...he quite regretted it...
21/07/2019 10:04 PM
paperplane hehe....6% isnt it beating half fund mgrs outside there alredi?? kaka.somemore u no need to pay anything.

3% fees for what advise?? got advise meh
21/07/2019 11:26 PM
Shinyi Tai @Paperplane yes .. I do look at my clients' portfolio regularly, updating and suggestion on movement of their funds when necessary.
22/07/2019 9:16 AM
speakup most ppl i know use their epf for unit trust is losing! no need to bull-shit
22/07/2019 9:41 AM
Reena Kong Unit trust investors must understand the concept of investment and have the right mindset. There is no magic and do not expect to invest one time a few thousand to make millions. Investors must also commit to invest/save regularly in the unit trust for at least 3-5 years to achieve positive results. Unit trust investors have to understand the power of compounding and the average cost per unit strategy.
22/07/2019 10:55 AM
tradezignals buy when the underlying stocks of the UT funds are undervalue and sell when it is overvalue...dont know how...ask me..i have been in the fund management business and stock picking for the last 10 years. Some of the UT funds cannot use EPF scheme..so be aware..
22/07/2019 11:05 AM
News38 Just pull out from unit trust after invest for 5 year.
Didnt earn money.keep money in Epf the best and unbeatable
22/07/2019 11:58 AM
geraldt9 paperplane hehe....6% isnt it beating half fund mgrs outside there alredi?? kaka.somemore u no need to pay anything.

3% fees for what advise?? got advise meh
21/07/2019 11:26 PM

Agree with paperplane totally !
22/07/2019 12:47 PM
ktsk88 Afterall it depends on which funds you're invested. I regret i didn't kept my unit trust investment from Prudential at 0.515sen more than 10 years ago........now the funds already at 4.xx which is 8 times worth it was 10 years ago. Imagine 5k become 40k.

So go for the right funds and not any funds that don't show good returns.
22/07/2019 12:48 PM
RainT DCA will be effective and good in making profit if the unit trust fund you bought price go up
22/07/2019 6:52 PM
RainT how about if the unit trust fund continue to fall and fall and you buy and buy

u will get more deeper into loss
22/07/2019 6:53 PM
Sahamtrooper EPF all the way... My returns were negative in unit trust
22/07/2019 9:55 PM
Elaine Liew Please find out the difference between “whom” and “who” and the proper way to use these two words.
23/07/2019 5:38 AM
samk EPF giving above 5.5-6.9% these few years...pls dont mislead the retiree ..its their hard earn money...u have to pay fees for unit trust...3-5 percent !!!!
17/08/2019 1:17 PM
samk u can have a peace of mind putting all your money in EPF... thats the best part for retiree to enjoy life without worrying too much...
17/08/2019 1:19 PM
samk for those who have assets like condo or shoplot...u can get a loan from bank and put more money into EPF .. cos property yield is not good and have a lot of hidden expenses in malaysia.. i really pity those retiree who lost money in unit trust ..
17/08/2019 1:23 PM


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