What Other Ways Can You Start Saving For Retirement?

It’s never too late to start saving for retirement right? Wrong!

Studies by EPF Malaysia have shown that 50% of retirees run out of savings after five years of retirement, and only 23% of EPF members had the minimum amount of RM196,000 in EPF savings to sustain them till 75. (That’s equivalent to RM800/month for those of you who are curious or just love numbers.)

But don’t panic just yet. Because while we may have exaggerated a little in the beginning… it’s still crucial for you to start planning for retirement right now! Here are some basic financial products and services you can look out for:

Employees Provident Fund – EPF Malaysia

This is the most basic possible means of saving for retirement for most Malaysians. Trust us, it won’t be enough if you want to live comfortably without penny-pinching in your golden years. For those who want a Shariah-compliant option, EPF Malaysia will be launching its Simpanan Shariah fund in 2017.

Tip: This is a must-have and you should let the money grow so you can pursue other means of growing your retirement savings.

Private Retirement Schemes – Private Pension Administrator

Launched as an alternative retirement savings plan for Malaysians, PRS are voluntary long-term investments that are designed to complement your EPF savings. Plus there’s the added bonus of RM3,000 tax relief every year for your PRS contribution.

Tip: If you are aged between 20 -30, don’t miss out on the RM500 PRS Youth Incentive before 2018.

Fixed Deposits – Various Banks

Ever heard of the power of compound interest? Well that’s exactly what fixed deposits (FD) are meant to be used for. Some might say the interest earned is too low or it takes too long, but slow and steady wins the race.

Tip: ‘Roll over’ any interest you earn directly back into your FDs and savings account so you keep earning more interest every year.

Unit Trusts – Various Financial Service Providers

Do consider taking up Unit Trust as a great option for you to grow your savings, as they are professionally managed investment schemes which trade in a diversified portfolio of securities or assets.

Tip: Do your homework and speak to licensed financial planners to find out how to include a Unit Trust into your retirement savings plan as well as to gain expert advice. (The advice should be completely FREE until you engage their services. Don’t get taken for a ride.)

There are many ways for you to diversify your retirement savings and there is no ‘right’ or ‘wrong’ way to go about it. Let’s put it this way, the WORST financial mistake you’ll ever make is to not even save for retirement.

This article is contributed by CompareHero.my.

Rights, warrants, buybacks, dividends 101

Seriously, what does one expect from stocks investments? Capital appreciation, dividends, excitement - win or lose, learning experience?

Investment is a serious game. Unless, you are into it as a replacement for your weekly casino frequency, one should study the behaviour of the management, owner, company besides their financials which is equally important.

In studying the company's management, one should look at the behavioral trend of the company with their financials, which is why how these companies do their capital repayment, dividends, rights, warrants are important.

Think of companies as like running a family's expenses - whenever you need money, you borrow or ask from other members of family maybe in the form of capital investment. If you have more than enough, you will give more to your siblings, parents. You do not take in more debt if you do not need them. You do not mislead your family members that you need more money when you do not need them in order for you to buy a bigger car or a bigger house.

Similarly, rights, warrants, dividends and even buybacks are the same conceptually.

Dividends - Dividends are important when the company feels that it has more than enough money to be used for a period say more than a year and it is willing to share with you, the shareholders the extras beyond its need for operations. If it does not have enough or feel that it needs to use the money for further expansion or in anticipation of future needs, it should not be ditching out more than it should. If you follow my blog, I am wary of companies that issues dividends and yet over the short term, requesting for more money through rights.

Of course dividend is important to most shareholders, as this is a gesture that the company is showing to its shareholders that it is willing to share its extra cashflows - which is why sometimes, dividend policy is useful.

Equally useful to the shareholders is share buybacks. The flipside of buybacks is only that when the management or controlling shareholder uses it for their advantage. It is when they uses the company's financial resources to buy the shares from the market but at the same time, selling their own shares. Buybacks are good when it is used as a tool to provide support for its share price especially during high volatility and even more so, when the prices of the shares are undervalued. One should not underestimate the confidence that the management can create towards its share price especially during high volatility by doing buybacks.

On the other side to sharing their additional funds through dividends or capital repayment, is rights issue. Rights issue is when the company is asking you for more money due to their needs. As a shareholder, we always entrust the controlling shareholders to manage the money carefully - which is why one would probably wonder why I am writing an article on a company which I do not intend to invest in anyway - on its rights issuance.

In my mind, that company does not need the fund - it uses it for its controlling shareholders benefits - which you, as shareholder or potential shareholder have to be careful of. You do not give money to one who will probably misuse your money. Worse still in that case, it is not beneficial to the shareholder to not pick up the rights and it is not beneficial either to pick up the rights as the money may not be used in the right manner. The shareholders of Bright are caught in between a rock and a hard place.

Almost all companies need to reinvest or do investment. Anyone who underinvest, may lose out in the future as competition will always take opportunity on any conservative companies that do not take the more aggressive or continuous investment approach. in this case, rights are not always wrong. On that note, quite a lot of companies - Gamuda, IJM, WCT etc.- that do rights in their early days would go on to be successful as they have acted upon the rights correctly and carefully and by sharing that piece of investment needs with their shareholders. We as shareholders, can only hope their decisions are the right one.

What about warrants? Warrant is an option to pick up more shares of the company in the future. As for the company, it is a way for the company to raise more funds in the future. Warrants should not be used as a tool for the controlling holders to cash out, as that action is almost like misleading the investors - many of whom may be ignorant. Worse still if one is to buy the warrants from the market, and they end up out of the money. The warrants are worthless.

And even if it is in the money, one should think twice of exercising the warrant as putting more money into the management that you do not trust, is something which you should not do.