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Issue No.3

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This article is reproduced with permission from
Normandy Advisory Services Sdn. Bhd (Licensed Investment Advisor)
15th Floor Menara Multi-Purpose, No 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur
Tel : 03 - 469 5560 Fax : 03 - 294 5561


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For those who already have some savings, their concern should be to ensure that the capital is preserved and at the same time it is generating sufficient growth to counter the effects of inflation. We have seen that saving RM100 for 20 years at 8% gives a yield of RM59,295 but if the compounded rate of interest were 12% the yield would be RM99,915 an additional savings of RM40,620 achieved just by investing smartly. It is necessary to ensure you select a portfolio that best suits your profile. Not everyone will have the same objectives or the same degree of risk tolerance. If you are retired or about to retire your objectives will differ from that of a person who has another 10 to 20 years to retirement.



For an investor who has already retired or about to retire the amount of savings is very much fixed. The emphasis would be capital preservation - the savings now should last the rest of your life time.

Retired or about to retire investor
  • Conservative to balance portfolio
  • Greater emphasis on security and capital preservation
  • High / regular income requirement
  • Investments must be easy to liquidate
  • Preferably with regular draw-down program


A conservative investment plan would comprise of at least 50-60% holdings in fixed interest securities such as fixed deposits, bonds or retain a portion of your EPF savings with EPF which has been giving average annual dividends of about 8%.

Interest and dividend payments would provide you with the regular income you need while your capital remains intact. If you require regular draw-down on your capital, your investments should be flexible enough to liquidate or withdrawn periodically over a period of time to suit your requirements.

Not due to retire
  • Balanced to aggressive portfolio
  • Able to tolerate much higher risk in return for capital growth
  • Low income requirement, dividends to be reinvested for higher growth
  • Long term investment period
  • No capital requirements


For younger investors, time is on their side. They have time to accumulate enough savings to match the desired level of financial comfort required on retirement. They can afford to be aggressive and take on more risks. They have time and the earning capacity to increase their savings and "top-up" their investments should the growth in savings be insufficient. The investment plan should include property investment and some equity linked investments such as unit trusts which can give a higher return than fixed interest securities. The investments should be skewed towards capital growth rather than income or dividends.

 

Also part of the planning is providing for your family in the event of your demise. If you don't want your family face unnecessary hardship or your investments falling into the wrong hands upon your death, a simple will can alleviate potential problems. To supplement your investments, one should consider added protection in the form of insurance cover. The insurance plan could be formulated to pay out to your family in the event of death.

It can be concluded that once an investor has decided to plan for his/her retirement, he/she has to set his/her investment objective. The investor's investment objective will determine the portfolio's investment strategy in terms of asset allocation and the types of securities the funds/savings are invested in. In this aspect, the investor may require professional advice which will greatly improve his/her chances of achieving the investor's retirement goals.

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