A wise person should have money in their head, but not in their heart. –Jonathan Swift
In my previous discussions on investment options, I’ve highlighted the benefits of EPF and ASMs, particularly emphasizing the attractive dividend yields of the Employees Provident Fund (EPF) compared to Amanah Saham Malaysia (ASM) in recent years. Based on this, I strongly encouraged readers to maximize their EPF contributions. For self-employed individuals, this could mean contributing up to the yearly limit of RM100k, if financially feasible. For employed individuals, I suggested going beyond the mandatory employer and employee contributions by making additional voluntary contributions whenever possible. One way to do this is by enrolling in the i-Saraan program, which provides an annual government contribution of RM500 for 10 years ( maximum of MYR 5000).
EPF Millionaires
The appeal of dividends from EPF and ASM lies in their tax-free status, and I was particularly pleased to learn about EPF’s recent announcement of a 6.3% dividend for the 2024 financial year. My belief is that every Malaysian should aim to have at least RM1 million in their EPF account by the age of 55, aligning with Singapore’s “1M65” movement. To achieve this, maximizing EPF contributions is crucial. The primary drawback of EPF is the limited liquidity – funds are generally inaccessible until the age of 55 or under specific circumstances like illness or home purchase. Although the government recently introduced a flexible third account allowing anytime withdrawals, I advise my readers to preserve their funds, including those in the flexible account, within the EPF to leverage the power of compound interest.
Remember, compound interest requires patience to work its magic. The growth from RM10k to RM100k in your EPF account may feel slow and arduous, but the journey from RM100k to RM500k is notably faster. And once you reach the RM500k mark, the leap to RM1 million happens surprisingly quickly. In fact, the growth from RM1 million to RM1.5 million feels almost effortless.
My New Strategy
Despite my strong advocacy for EPF contributions, I invested a considerable sum in ASM when ASM3 became available in November 2024. This decision was driven by the fact that I had maximized my EPF contributions and saw ASM as a viable alternative for my bonds holdings within my asset allocation strategy, instead of opting for IGLO ETFs.
For those familiar with my investment approach, I maintain a three-currency portfolio: USD-denominated ETFs, MYR-denominated investments, and SGD-denominated investments. My USD portfolio initially consisted of VWRD (world index fund), VUSD (S&P 500), and IGLO or VDTY (bonds ETFs), with an asset allocation of 65% VUSD, 20% VWRD, and 15% bonds. However, I later adjusted this to 45% VWRD, 45% VUSD, and 10% bonds.
Recently, I’ve been contemplating the idea of discontinuing my investment in USD-denominated bonds and reallocating that capital into either EPF or ASM. This strategy shift is motivated by the fact that both EPF and ASM offer regular and substantial dividends, which I consider superior to the returns offered by fixed deposits.
Given that I had already reached the maximum limit for my EPF voluntary contributions, I seized the opportunity presented in November 2024 to increase my investment in ASM3. This strategic move is expected to yield significant six-figure dividends from both my EPF and ASM in 2025. This anticipated income further solidifies my confidence in my ability to retire by the end of this year.
Given that I am anticipating each of my three distinct investment portfolios to generate six-figure dividends annually, these dividends will collectively provide me with a comfortable and consistent income stream throughout my retirement years.
As previously mentioned, I do not intend to draw down my USD-denominated portfolio, having chosen distributing ETFs over accumulating ones. Consequently, I expect this portfolio to experience substantial growth over time.
Conclusion
Any Malaysian citizen can adopt a similar approach to building wealth through disciplined and consistent contributions to the Employees Provident Fund (EPF). The EPF stands out as a reliable long-term investment vehicle for Malaysians, outperforming other options like unit trusts, even if those are promoted by agents for their short-term gains.
While unit trusts might show higher returns in some periods, the EPF’s consistent performance and security make it the preferred choice for long-term financial growth. It’s important to remember that investing in the EPF is essentially investing in the Malaysian economy, and unless you’re looking to invest your money outside of the country, the EPF remains the safest and most reliable option for growing your Ringgit over time.
