Why you need to diversify your retirement savings

This article is contributed by CompareHero.my

The number one cardinal rule of investments is to diversify, don’t place all your funds into any single investment vehicle. Diversify and increase your chances of returns. The same can be said with your retirement savings, though we have the Employees Provident Fund (EPF), it is also a good idea to diversify your retirement savings in other investment options.

If you’re deciding between the convention or Simpanan Shariah scheme for EPF, here’s a table to help you.

Key Differences Between the Conventional and Simpanan Shariah EPF Scheme


  Conventional Scheme Simpanan Shariah
Asset allocation profile Balanced fund Balanced fund
Asset portfolio ESG-compliant, including shariah-compliant assets Only shariah-compliant assets
Major difference Exposure to conventional banking No exposure to conventional banking
Targeted return (*) 2% above inflation 2% above inflation
Guaranteed minimum return 2.50% Nil
Trend of returns More volatile More stable
Short-to-medium term performance To outperform in high-growth economic cycle To outperform in troubled and uncertain economic times
Long-term performance Relatively similar (Expected variance +/-0.5%)

*: Rolling over three year period

Source: The Star

Diversify Your Investments with These 3 Options

1. Private Retirement Scheme (PRS)
PRS is a voluntary long-term investment scheme designed to help individuals accumulate savings for retirement. Made available for all Malaysians, whether employed or self-employed, to voluntarily supplement their retirement savings under a well-structured and regulated environment.

Currently, there are eight providers in the local market consisting of Affin Hwang Asset Management Bhd, AIA Pension and Asset Management Sdn Bhd, AmFunds Management Bhd, CIMB-Principal Asset Management Bhd, Kenanga Investors Bhd, Manulife Asset Management Services Bhd, Public Mutual Bhd and also RHB Asset Management Sdn Bhd.

Each PRS offers a choice of retirement funds from which individuals may choose to invest in based on own retirement needs, goals and risk appetite including shariah-compliant or conventional fund type.


2. Real Estate Investment Estate (REIT)
A Real Estate Investment Trust (REIT) is a company that owns or finances income-producing real estate.

Malaysia’s stock market has a total of 14 listed REITs and it is made up of a diversified portfolio in various properties such as malls, office buildings, hotels, factories and also medical institutions. So far, the dividend yield offered by these players to its investors range is between 4% to 7.5% and it is considered a more stable long term investment.

It is a regulation by the authority that at least 90% of REITs’ net income must be distributed in the form of a dividend to its unit holders (shareholders). Thus, those that wish to invest in property but face barriers due to the high capital involved may opt to invest in REITs as it is a combination of long-term stock and also property investment.

To start trading stocks or REITs, you can contact the investment banks available in the market such as RHB OSK Investment Bank, Kenanga Investment Bank, to name a few. The representative broker or remisier will be assigned to assist you to open an investment account and start trading.


3. Unit Trust
Unit trusts allows investors with similar investment objectives to pool their funds to be invested in a portfolio of securities or other assets. Charged at a fixed commission rate or management fee, anyone can invest in more than 200 unit trusts managed by investment banks and financial institutions in the country.

The return on investment of unit holders is usually in the form of income distribution and capital appreciation, derived from the pool of assets supporting the unit trust fund. Each unit earns an equal return, determined by the level of distribution and/or capital appreciation in any one period.

CompareHero.my is Malaysia’s trusted financial comparison portal dedicated to saving you time and money by comparing all credit cards, broadband plans and personal loans in Malaysia.

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