EPF Investment Advise – Personal Financial Planning

EPF investment fund rules are changing again

  • What impact does this have on members and the industry?
  • Are the new developments good?
  •  How do EPF members strategise their EPF monies for investment purposes – telling them what they can and cannot invest, ways to manage and monitor their EPF investment?
  • This is to provide them an update on the EPF withdrawal scheme for investment and an educational piece.


1.   What are your recommendations for EPF member who want to invest their EPF monies into unit trust investments – should they go conservative or aggressive? If they were conservative, wouldn’t their monies benefit more by staying put in their EPF account (4-5% as a risk free rate (net commission) pretty good)? Would this mean that taking out from EPF to invest is for those with higher risk profile only?

Answer:  If we look at latest EPF portfolio, EPF investment is a very conservative portfolio.  To obtain higher return than EPF, investor should go for higher risk UT fund to get higher return i.e. Balanced fund, Equity and properties for longer term.

 The EPF’s total asset allocation as at 31 March 2010 is as follows:

Types of Investments RM Billion Asset Allocation (%)
Malaysian GovernmentSecurities 96.46 23.98
Loans and Bonds 152.21 37.84
Equities 130.44 32.43
Money Market Instruments 21.55 5.36
Property 1.56 0.39
Total 402.22 100

a. Since 2008, younger EPF members are allowed to start investing using EPF monies. Does this do good or bad for the investors? Should they start investing into unit trust with EPF monies even though they are allowed to do so? Because they are young, does it necessary mean that they can assume higher risk? 

We always believe that investors should start investing when they are young because they can assume higher risk and equity normally outperform F.D and EPF.  The new EPF guideline basically is good for younger EPF members. Investing longer term eventually will reduce the volatility of the fund

b.   What is the advice for young investors, middle-age, those approaching retirement â should they invest their EPF monies into unit trust?

      Yes, investor need to diversified their investment portfolio

c.   Can you recommend specific funds?

Our planners will train to recommend funds based on the investors need and risk profile. Then we select the suitable funds for investors with the following criteria:

1. Track records of the fund managers. 2. Investment mandate of the funds 3. How the fund performs during market downturn and upturn 4.  Investment strategy of the fund 5. Any good fund manager leaving the investment team from the UTMC 6. Current asset allocation of the fund, i.e. if market is very bullish

2.   When managing unit trust investment using EPF monies, how would the investor’s decision vary compared to if using cash to invest, given that there are certain restrictions to investment using EPF monies?

a.   Based on your experience, do you observe that there is psychological difference to using cash and EPF monies for unit trust investment?

Yes…using EPF money, investors able to make decision faster.

b.   What are the kinds of funds available for EPF investors? Why are certain funds not available to the EPF investors?

Funds with less than three years track record and newly launched ones would not be sold to EPF members.

1. How would the screening of unit trust funds (three year performance track record) for the EPF members help the investors? Would it actually reduce the number of funds available to the EPF members – reducing the investment choice?

Yes, really help investors to gain confidence and invest more money.  Reduce the number of funds available is not a problem because VKA wont sell funds that consistently underperformed its benchmark.  VKA only look at funds that have higher consistent returns for at least three years.

2. With the recent announcement that 30% foreign portfolio will be made available for sale to EPF members, does it really make a difference to the pool of unit trust funds available to the EPF members? Yes….

The move would further instill trust and confidence in unit trust investment and enhance investment options. Before this, only 100% local AUM funds only can sell to investors.

c.   What are the other things that the EPF investor can do to manage the EPF unit trust investment other than adding more investment monies and divesting the investment?

  1. When the EPF investors are satisfied with their EPF Investments returns (in unit trust), what can they do with the monies? Can they switch to other funds? Or, do they have to divest, “send back” their monies to EPF and start investing again (with new sales charge)? Would this do good or bad to their EPF monies?

EPF investors can do the following:

 1. Park the money in money market fund first and wait for investment opportunities.

 2. Redeem the fund and back to EPF.

Start investing again (with new sales charge) is depending on the individual’s investment decision – opportunity cost. If the EPF investors wanted to select a new UTMC to manage all their redeemed EPF monies, then the investors need to pay the sales charge.

d.   Can each quarterly EPF investment withdrawal directed to more than one fund house? Can’t.

Given that the EPF investors could have different funds from different companies (invested using EPF monies), what if have few funds from different fund houses which they need to cost average at the same time, how do they decide which to invest/ cost average first?

Good question.

VKA always look at the current investment conditions and valuation of the underlying assets: for example…

 If big cap fund (investing in big cap companies) valuation is high and mid cap is attractive and cheap valuation, then we will advise investors do DCA on mid cap fund first.  VKA has a team of investment advisers that conduct market research and analysis on monthly basic and VKA really look at the true value that can provide to investors.

e.   Given that some investors could have unit trust investments using cash and EPF monies, should they lump all these investments together when reviewing their portfolio or should they be separated? Why?

Should be separated due to different sales charge and investment objectives.

  1. Given that the sales charge for EPF and Cash Investments are different, will it be advisable if all investments are lumped together ? Would it make a difference whether they are lumped together or not?

We should not lumped together b because of the sales charge and easier reference by investors.

f.    EPF members are limited to invest every three months. When the time for investment withdrawal comes, does it necessary mean that one should withdraw for investment – so as not to miss their regular frequency of withdrawals? What should they take note when deciding on whether to withdraw their investment each point of time?

Each withdrawal should base on the client’s asset allocation strategies, objective and risk profile.  VKA adopt mutual agreement with our clients because our clients should be able to sleep peacefully at night when making their investment.

g.  For the EPF Investors, what are the ways to monitor their EPF Investments? How do they keep track on the amount withdrawn (and plough back) using EPF monies?

      To monitor EPF investments should done by UTC.  UTC earns commission from the UT transaction and should perform the fiduciary duties to their investors.

3.   How would the frequency of withdrawal helps the EPF investors over the long run? Given the Elektronik-Pilihan Pelaburan Ahli (E-PPA) system where unit trust companies are able to submit online, has it increased efficiency? Has this resulted a faster turn around time, which allows the EPF member to invest more frequently at the end of the day? Does more frequent investment necessary means better for the investor?

Yes…will help on faster turn around time and less rejection by EPF.

More frequent investment is not the main reason for better investment outcome.  VKA believe the quality funds and good investment advise that make the different.

Javern C.H.Lim Founder & Managing Director VKA Wealth Planners Sdn Bhd (A licensed Financial Planning Firm by Securities Commission & Bank Negara) E-7-27 IOI Boulevard, Jalan Kenari 5, Bandar Puchong Jaya, 47170 Puchong, Selangor. Tel: 603-8071 1661   Fax: 603-8071 1699   H/p: 012-380 9883 Website:www.vka.com.my Satellite Map in https://vka.com.my/map.html
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