Is it wise to take money from EPF and invest in Stock Market?
Not long ago, a client post to me a question, "Since EPF (Employee Penson Fund, or know as KWSP) only give us about 5%+ dividend one year, is it wise to take out some money and invest into stock market?" I told him, if you can consistently earn more than 25% of return in stock market, then just go ahead. He seem quite happy with it as he think he can do it.
Few years ago, I have the similar thinking when an agent approach me to withdraw my EPF fund to invest into stock market. Initially, I follow his advice and withdraw the money every 6 months to invest in stock market and just ignore about market cycle. After 2 to 3 years, I noticed something very important which the agent not really telling the truth, it is the charges that eat up our earning.
When the very first time, when we withdraw money from EPF, the company will deduct 2%, meaning if you withdraw RM10,000, end up only have RM9,900 in your investment account. Also, on quarterly basic, they will charge a custodian fee, custodian charges and management fee, which about 2% every year. Every time, when you buy a stock, they will charge another brokerage and custodian fee again. Net net, you will pay them nearly 4% of your total amount as fee to them.
If you earn 10% return per year, after deducted all the charges, the return is about 6%. What's the point to do all these unnecessary thing, since the money put in EPF will earn dividend of about 5 to 6% every year as well. However, someone may say he can earn 25% profit in stock market, then why bother the 4% charges?
The question is, it is easier say than done, especially when you experience the market down trend. On quarterly basic, they will mail you quarterly statement, if you notice the money invested now decrease by 30%, you may wonder if your decision is correct to not... as compare to if you do nothing and let the money park in EPF, you will earn the 5% interest compare to having the losing holding. Especially when you say the money in EPF is for your retirement purpose, how many time you dare to continue withdraw fund out from your EPF and invest in stock market?
Due to all these "problems", after 5 years, I decided to close the account and put back the money into the EPF again. Guess what, they deducted another 2% of fee again before release the money into your EPF. Net net I earn about 15% of profit, but divided by 5 years, then only about 3% per year! Is it better just park your money in EPF and wait to retirement?
http://bursastory.blogspot.com/
Not long ago, a client post to me a question, "Since EPF (Employee Penson Fund, or know as KWSP) only give us about 5%+ dividend one year, is it wise to take out some money and invest into stock market?" I told him, if you can consistently earn more than 25% of return in stock market, then just go ahead. He seem quite happy with it as he think he can do it.
Few years ago, I have the similar thinking when an agent approach me to withdraw my EPF fund to invest into stock market. Initially, I follow his advice and withdraw the money every 6 months to invest in stock market and just ignore about market cycle. After 2 to 3 years, I noticed something very important which the agent not really telling the truth, it is the charges that eat up our earning.
When the very first time, when we withdraw money from EPF, the company will deduct 2%, meaning if you withdraw RM10,000, end up only have RM9,900 in your investment account. Also, on quarterly basic, they will charge a custodian fee, custodian charges and management fee, which about 2% every year. Every time, when you buy a stock, they will charge another brokerage and custodian fee again. Net net, you will pay them nearly 4% of your total amount as fee to them.
If you earn 10% return per year, after deducted all the charges, the return is about 6%. What's the point to do all these unnecessary thing, since the money put in EPF will earn dividend of about 5 to 6% every year as well. However, someone may say he can earn 25% profit in stock market, then why bother the 4% charges?
The question is, it is easier say than done, especially when you experience the market down trend. On quarterly basic, they will mail you quarterly statement, if you notice the money invested now decrease by 30%, you may wonder if your decision is correct to not... as compare to if you do nothing and let the money park in EPF, you will earn the 5% interest compare to having the losing holding. Especially when you say the money in EPF is for your retirement purpose, how many time you dare to continue withdraw fund out from your EPF and invest in stock market?
Due to all these "problems", after 5 years, I decided to close the account and put back the money into the EPF again. Guess what, they deducted another 2% of fee again before release the money into your EPF. Net net I earn about 15% of profit, but divided by 5 years, then only about 3% per year! Is it better just park your money in EPF and wait to retirement?
http://bursastory.blogspot.com/
