For this post, I am going to share on reasons why I invested my EPF in the unit trust.
I believe, most of us know that EPF members are allowed to invest a certain portion of their EPF in selected unit trust funds. But, not many of us are taking the action to start investing in unit trust using our EPF savings.
As for me, at first, I was quite reluctant to invest my EPF in the unit trust. But, after some investigation and further considerations, I decided to invest part of my EPF in selected unit trust funds.
Read more: Unit Trust Investment: 11 concerns the novice should know
5 reasons why I invested my EPF in the unit trust
As such, I listed below 5 reasons why I invested my EPF in the unit trust.
1. Higher return of investment
This is the main reason why I invested my EPF in the unit trust.
Based on the average performance of my existing unit trust funds, the return of investment is much higher compared to the 5.65% dividend rate given by EPF for the year ending 2009.
2. Lower sales charge
For most unit trust investments, the common service charge range between 5% to 6%. But, for investment from EPF savings, the maximum service charge is only 3%.
For long term investment, the difference between 2% to 3% can make a big difference.
Thus, this is another strong reason why I invested my EPF in the unit trust.
3. Take control of my own EPF savings
Perhaps I can’t take control of all of my EFP savings, but at least I have control of a small portion of it. Over the long run, I hope this small portion can grow into something significant.
What I meant here is at least I can choose where to invest my EPF to maximize returns.
4. It’s not the money from my own pocket
Sometimes it is quite painful to transfer some of our hard-earned money from our own pocket into unit trust investment.
Because there are risks in unit trust investment. So, EPF savings is another alternative.
After all, I can’t withdraw my EPF savings until I reach 55 years old. So, why not take some risk with a small portion of my EPF savings?
On a side note, if you wish to know how much you can withdraw from your EPF savings to invest in the unit trust, you can refer to the EPF member’s investment scheme website.
Alternatively, you can log in to your i-Akaun to know the available EPF savings for unit trust investment.
5. Free Takaful coverage
There are some EPF approved funds that come with free Takaful coverage.
So, this is something really worth it. That is, investments come with insurance coverage. But, of course, there are terms and conditions to enjoy these benefits.
If you wish to know the list of approved unit trust funds for EPF members’ investment scheme, you can refer to the list of appointed Fund Management Institution on the EPF website.
Do take note, the list of approved unit trust funds may change from time to time.
Read more: 7 factors to consider before investing in the unit trust
Final words
In summary, the above 5 reasons are solid enough for me to start investing my EPF savings in selected unit trust funds.
Any more reasons which I missed out? Do feel free to share with me.
However, one must always bear in mind, all investments come with risks. We always hope to get higher and better returns from our investment.
But, must be aware that there are also some risks that the investment might not be able to give us the type of returns we wish for.
As such, prepare ourselves with these possibilities. And make sure we can accept these possibilities.
Lastly, all the best in your investment! Let’s hope to grow our retirement fund.
Read more: EPF Self Contribution: Everything you need to know
1) Higher return of investment
– This depends on the entry point. If you withdraw money from KWSP to invest equity fund, now most of the approved equity funds are reach year high. If there is 'crash' at peak, you might not able to get "just 5.65% dividend". Withdraw to invest while equity funds reach 'bottom'.
2) Lower sales charge
– KWSP encourages members to invest their retirement money, but there are still having management charge annually, "1.5% per annum of the NAV"
3) Take control of my own EPF@KWSP savings
– You still out of control of your money. It seems your withdraw your money from one pool (KWSP) to another 'approved' pool. 'Approved' is another mean of 'Controlled'.
4) It's not the money from my own pocket
– Anyway, it is still your money unless you won't feel sad while you lost it.
5) Free Takaful Coverage
– It is included under Management Fees. But I never hear anyone claim from this.
Please think twice if you want to act now.
Wah..雷門, sounds like all negative 😛 But, I am prepared to take the risk for my unit trust investment from my EPF savings. It's a long term investment. For the management charges, I dont mind because the unit trust companies have to employ a group of people to make more money from my money. For the Free Takaful Coverage, I have heard of the claims from investors. Anyway, thanks for your comments. We all should think twice before do any kind of investment 🙂
Hi,
How and when 'they' deduct the yearly service charge from the unit trust investment?
Rgrds
Vincent
Hi Vince, for the management charges and any other charges (if any), you can refer to the annual report and statement of the fund manager for that particular fund. Investors should received their annual report and statement either by hardcopy, CD or e-reports. You'll see all the calculations, details and activities of that particular fund in the report.
People say that we cannot time the market. However for mutual fund: There are 2 ways to do this
1. Wait for the market to crash to buy.
2. Dollar cost averaging.
Mutual funds are considered "expensive" because of the management fees and the loading fees compared to stocks. But the risks are lower.
Less popular in Msia is the use of ETF, which has low entry fee and consists of a basket of stocks. Thus, diversification is ensure.
Hi Kris, thanks for your comment.You meant ETF or EPF?
5.65% EPF dividen + 3% sales charge = 8.65%, u hv to make sure that your ut investment can beat this % in 1st year , but if for long term (normally ut talking about 3 to 5 years investment)3% divide by 5years = 0.6%, 5.65%+0.6%=6.25%…. if the fund is perform, 6.25% can easily get…we can not touch the $ in epf until age 55, y not take out for long term investment? btw, gov. should lower down the 3% sales charge for epf investment…. from vivien
Hi Vivien, wow.. thanks for the calculations! My long term is more than 5 years 🙂 I don't think our goverment will further lower the sales charges for EPF investment… but, we hope for that k!
I like to take control of my money but beware about mutual fund. It seem what happens in US is repeating here as well. Only handful of fund is beating EPF on the long run. Any of your trust fund giving CAGR of above 10%?
Hi Ariza, yes, we must always be aware of our investment. Yes, currently, I have 2 funds with return rate more than 10% 🙂