Frangipani E&O Penang 

It has really been a while since I’ve had time for my own financial paperwork. This weekend I decided to do just that. My Sunday has been spent ankle deep in a sea of bills, bank statements, loan statements and all those other bits of paper that we all hate to have to go through.

Well, after hours of wading through paperwork (and mindless Channel V reality shows in the background), I’ve written up a To Do list for myself as follows (more or less in order of priority):

  1. Withdraw EPF to reduce housing loan
  2. Withdraw EPF for mutual fund investment (including figuring out which funds to invest in)
  3. File my income tax return
  4. Decide what to do with my Singapore unit trust funds
  5. Figure out my stock investment strategy for the next 6-12 months

I love doing both 1. and 2.  Considering that the EPF pays a dividend of around 5% every year, and the alternative of earning 8%-10% on average from taking the funds out to invest in mutual funds, item 2 above is pretty much a “no brainer” for me. Likewise, the interest rate I’m currently paying on my Mortgage One account (from Standard Chartered) is around 7%, so why leave the money in EPF to earn 5% when I can save 7% on my loan. Plus it always makes me feel good whenever I can clear off some of my liabilities! 🙂

The last  time I took out my EPF to reduce my housing loan was 2 years ago when there was still a time restriction for the frequency of withdrawal of once every 3 years. But fortunately the regulations have changed and we can now make a withdrawal yearly. The calculation is also much simpler. We can take out the lower of either the total balance of the housing loan or all the savings in Account II (minimum withdrawal amount of RM500).

To apply, you would have to submit quite a number of documents such as a letter from the bank confirming the loan balance, title deed or deed of assignment for the property and the Sales & Purchase agreement, as well as fill up the correct withdrawal form. But other than getting the paperwork organized, the process is surprisingly easy and quick. The processing officer will go through the documents submitted and you get a letter within two weeks notifying the outcome of the application. The last time I applied, I received the cheque from the EPF within 3-4 weeks. Pretty darn good, don’t you think?

For item 2, I will have to do a bit more homework.  The application process is also very simple. However I’ll have to figure out where I should be investing my money next. Unfortunately my favourite little fund for EPF investment, Pulic Mutual’s Ittikal fund has been closed to the public since the end of 2006. Also, experiments into some of the regional funds launced over the last 6 months have not quite reaped the kind of returns expected, or rather the funds have been more volatile than what I would have liked. Thus my quest begins…!

Income tax — what a nightmare! I tried out the e-filing last year for the first time and it’s fun not having to fill out too many bits of paper and to see (finally!) some progress towards the electronic age for our government departments. However the program was awfully slow and it took me ages to key in all my dividend vouchers…the worst part was that I had it all typed out nicely on Excel but the LHDN’s online form doesn’t allow for cutting and pasting. Needless to say, I’m really not looking forward to it this year..BUT I shall persevere…!

Item 4 is something that I have been wanting to do for a while now but somehow never got around to doing. Once upon a time, I used to work in Singapore and was one of the many Malaysians who diligently contributed to the CPF every month. Fortunately when I left the country, I was happily able to take out my CPF and then, promptly invested it into a number of mutual funds with one of the local Singaporean banks. Being naive and ignorant about mutual funds at the time, I took whatever recommendation given by the bank’s salesperson and put most of it into a bond fund (DBS Shenton Income), and some into regional equities (Schroder Asian Equity), and a very small sum into Singapore equities (Schroder Singapore Trust). Unfortunately for me, bonds have not quite performed to expectations whereas Singaporean equities have soared….so definitely need to do some rebalancing here. Important lesson learnt: always do some research and some comparisons/benchmarking when buying mutual funds.

Item 5 is something which I suppose some of you out there are also trying to work out. With the KLCI so close to 1,300 points today, how long before it runs out of steam or are we going to charge on ahead with the super-bull as predicted by some of my fellow Malaysian bloggers? Is it time to cash out on Genting, KNM and Maybulk…and maybe pick up some tidy second liners? Or should I just hold and do nothing?? I know I talk about buy and hold all thr time and the passive investing philosophy ala Mr Buffett himself. But the market has really seen a spectacular run in recent times…Something to think about. Would love to hear what everyone else’s strategy is going to be 🙂

note: in case some of you don’t know, your EPF is now made up of 2 accounts instead of 3. Generally, the funds in Account I is reserved for your retirement whereas the funds in Account II may be utilized for purchasing/building your house, health and education. 70% of our monthly EPF contributions are towards Account I and 30% towards Account II. For Account I, we have the added option of taking the money out to invest in mutual funds instead of leaving it to the EPF to do the job. However if an investor redeems the mutual fund investment later, all investment proceeds (including gains, if any) will have to be ploughed back into the EPF and kept there until he or she attains 55 years of age.

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