Friday, November 20, 2009

You can use Your EPF money to invest in stocks ?

If you have enough money in your EPF, you can withdraw some of them into a stock trading account and invest for yourself. This may interest those who think they are more market savvy than EPF investment. ie. you were NOT happy with EPF past year performances or you think you can do better than them in future.

First of all, depends on what your age is, there is a certain amount of money you have to leave in account 1. After minus out this amount, you can withdraw up to 20% of whatever left in Account 1. However, the fund receiving party may not simply accept any small amount. A common minimum amount to be withdrawn is MYR 30,000.

Together with Amara, Jupiter Online recently has an offer where the minimum amount is lowered to MYR 25,000. This way, more EPF account holder can use their money for this purpose.

Fees being charged are
  • One time 3% drawn down fee. ( by Amara )
  • 0.1% or MYR 10 brokerage fee ( by Jupiter )
The following table shows how much you need in your Account 1 in your EPF so that you are eligible for this. If you have never withdrawn from your EPF before, Account 1 is 70% of your total EPF.

My advice ? Financially one shouldn't simply withdraw money from his Automatic Saving System. Statistically MOST people do not earn consistently from stock investment. Although many may think they did great but almost certainly they have miss calculated the power of compound saving. Not to mention most investors DO NO even have a systematic trading strategy and plans.

Assume foregoing EPF payout is 5% in average. Withdrawing would minus out 3% from the fund. So you can out perform EPF if you consistently gain 8.1% return. ( where does the extra 0.1% come from ?)

A good stock investor can get 6% to 12% so its still a viable option, especially if you agree with these ...
and perhaps some tools that can help you
  • see how the world moves before your market opens @ stock.malpf.com (the story)
  • use this tool to calculate price to buy with historical EPS and projected PE
Be reminded that the best investment gurus like Buffet and Benjamin only out perform market by 6.46%, full story here.

Those are just recommendation base on finance and statistic. If you personally hate EPF or simply don't trust them with your money, you probably just want to take all out despite everything else. Keeping your money in the stock broker account usually gives you a slightly lower than Fix Deposit interest anyway.

3 comments:

Anonymous said...

just want to confirm, is this legal? I mean I'm katak bawah tempurung, I have not heard we can withdraw our $ to invest directly to stock markets, as only common way is to invest in unit trusts only....is there KWSP url that states this out clearly? Thanks..

Michael Tsen said...

actually I have the same doubts and still in the midst of checking, haven't really confirmed either way yet. But it is surely NOT illegal. The worst it can get is its playing within the grey area and the worst it can happen is KWSP stops them from doing this in future. All your money will still be in the stock broker accounts, minus the 3% fee.

Best CD Rates said...

I never thought in this way for investments. This is a brilliant idea to invest from EPF money.