Top up your EPF or ASN/ASM?

Many Malaysians especially non-Bumiputras are very excited about the news that the government has increased the ASM fund size by another RM5 billion.

As most Malaysians have known by now, most ASN funds are specially allocated for Bumiputras, non-Bumiputras are allowed to buy a few funds only- one of which is ASM ( Amanah Saham Malaysia).

As a Malaysian investor, should you invest in ASM or use the extra money to top up your EPF ( voluntary contribution)?

Let us look at ASM and EPF and maybe shed some light for those who are still in a dilemma which one to invest.

Past Years Returns

Below are the returns of ASM and EPF ( conventional) for the last 10 years

As you can see from the above table, ASM has a better return compared to EPF in the earlier years but lately EPF has outperformed ASM especially the recent 3 years. Past performances do not gurantee future performances, however, EFP average yearly return is 5.99% as compared to ASM of 5.60%.

Income Tax Rebate

Yes, you can’t claim tax rebate from your ASM investment, but you can claim tax rebate up to RM4000 from EFP contribution. Therefore you should make full use of this tax rebate to invest in EPF.

What do they invest?

According to the EPF website, EPF invests in a range of approved financial instruments which include Malaysian Government Securities and Equivalent; Equities; Loans and Bonds; Money Market Instruments; and Real Estate and Infrastructure. In 2022, the EPF had 42% invested in equities and 47% invested in bonds. Naturally equities contributed a higher percentage of investment income, 55% versus that of bonds, 33%. The remainder of the portfolio is invested in real estate and infrastructure, 7%, for yield and longer-term capital gains and money market instruments, 4%, for short-term liquidity.

About 36% of total EPF funds are invested abroad. Thus 2/3 of total EPF investments are invested domestically and about 1/3 abroad.

As for ASM, according to its prospectus dated 1 June 2023, the investment policy of the Fund is to invest in a portfolio of various asset classes, primarily securities listed on the Bursa Malaysia, unlisted securities, fixed income and money market instruments. Almost all money are invested in Malaysia.

According to ASM 2023 annual report, almost 27.6% of the funds are banking related-and the biggest two investments of the fund are Maybank and CIMB bank. I would say ASM is not a diversified fund because it is country biased and heavily invested in banking counters.

When can you withdraw the money?

Yes, you can withdraw the fund anytime from your ASN/ASM but not EPF. You only can touch your money in EPF when you are 55 years old.

Another special occasion when you can withdraw from your EPF fund is when you reach the MYR 1 million mark. You can withdraw any amount in excess of MYR 1 million if you EPF fund is more than MYR 1 million.

What should you do ?

As I said many times before, Malaysians should max out their EPF contributions, if you are a employee, besides your own and employer’s contributions, you should do self contribution monthly if you have extra money.

All Malaysians should retire a millionaire by the age of 55 if you contribute RM2000 monthly to your EPF and wait for 23 years!

Therefore, I still encourage you to max out your EPF contribution and contribute extra money voluntarily if you can every month. Starting from 1 June 2023, EPF voluntary contribution limit has been increased from MYR 60k to MYR 100k per year.

Conclusion

EPF fund seems to be a better bet in long term compared to ASM due to more diversified portfolio and not country biased.

ASM only invests in local stock market and please be reminded that Malaysian stock market value is just 0.2% of the whole world stock market value. It is an unwise move if you put all your money just in one country more so if the country economy is so small!