Things I Wish I Knew About Money
1) Cash apps are the easiest way to grow your savings.
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Apps that I am currently using:
1) Versa Cash & Cash-i (4% pa) — For my emergency savings >3 months.
Still my favourite cash app so far. The layout is simple, sleek, and built to enhance your experience in growing your savings.
In case you didn’t know, Versa has two products that allow you to earn 4% pa on the first RM30,000.
If you have RM60,000, you can split them equally between Versa Cash and Versa Cash-i and you’ll earn 4% pa for the entire sum.
2) Rize (3.8% pa) — For my daily spending/savings.
Though their customer service is horrendous, 3.8% pa with zero-lock in period is really hard to ignore.
Since this is a banking app, your savings in Rize are flexible and are protected by PIDM up to RM250,000.
3) StashAway Simple (3.6% pa PROJECTED) — To diversify my holdings.
Yes, the earnings rate compared to Rize and Versa is slightly lower, so there is no urgent motive for you to opt for StashAway unless you’re looking to invest in their portfolios or build one on your own.
Personally, I’m just using StashAway to spread and diversify my savings. Storing all of your funds in one basket is generally not a good idea.
4) TnG GO+ (~3.53% pa) — For my daily spending/savings.
It’s 2024 and (almost) everyone is paying for stuff using e-wallet. If you’re using TnG and have not activated the GO+ feature, then you’ve wasted another avenue to grow your savings.
You’ll earn roughly 90–92 cents a day if you max out the RM9,500 in GO+.
It will not affect your ability to make payments or transfers. The funds will automatically be deducted/added from your GO+ account whenever you make a transaction.
5) ASB & ASM (4–6% pa) — For long-term savings >1 year.
Both unit trust funds have paid out consistent dividends in the past decade (~6.92% ASB, 5.60% ASM).
There are also no sales charges or upfront costs to begin investing. The units in ASB and ASM are always fixed at RM1.00, giving you the flexibility to plan your investments without worrying about price swings.
The only drawback is that if you’re not a bumi, investing in ASM can be quite difficult, as the units are not always available.
For more information on each of these products, click on this link.
2) Never underestimate the power of Compound Interest.
Many severely underestimate it due to our human limitations on comprehending exponential growth.
At a mere 5% compound growth rate, here’s how much you’ll have after 30 years if you consistently invest every month:
- RM100/month = RM83,549.49
- RM500/month = RM417,747.44
- RM1,000/month = RM835,494.89
- RM1,500/month = RM1,253,242.33
In fact, on the 30th year, your capital will more than double and the interest earned will greatly exceed your total contributions.
The lesson: start saving as soon as possible, no matter how small the amount.
Assuming that you contribute RM1,500 every month in an asset that generates 5% pa
3) Use The Rule of 72 to estimate future returns.
If you invest RM5,000 today, you may wonder how long it will take before it doubles in value.
With the Rule of 72, you’ll have a good estimate on how many years it takes for your funds to duplicate itself.
The Rule of 72 also applies to inflation! You can find out how long it takes for the value of your ringgit to be slashed in half.
At a mere 2% inflation rate, it will take 36 years for your money to be worth 50% less.
That said, there are flaws with this rule. It can only measure the doubling time of a single investment, assuming that you do not add additional contributions in the future.
4) RM1 million will be required for retirement in the next 20–30 years.
This article published by The Star in 2022 is terrifyingly accurate.
Why RM1 mil? Well, let’s have a look at Malaysia’s inflation in the past two decades.
From 2002 to 2022, Malaysia’s annual inflation averaged at 2.15%, which may seem small if we’re looking at it on the surface.
But if we project it forward 25 years, RM1 million is equivalent to RM587,544 in today’s money.
Assuming EPF pays 5% pa, you’ll receive RM4,166 in dividends with a capital of RM1 mil.
However, in 25 years, the monthly dividend of RM4,166 will be worth 41% less, at RM2,447.70 today.
That’s eerily accurate if we look into the Belanjawanku Study, which estimates that retirees require RM2,520 per month to survive in the Klang Valley right now.
But how do I know if I’m on track to achieve RM1 mil? I’m so far away now…
Here’s a table of the average EPF savings of members in each age group.
Say you’re 27 this year and your EPF has ~RM16k, you’ll need to contribute somewhere between RM996 to RM1.3k to achieve RM1 mil by 55.
But if your current EPF balance is higher than the average, good news! You’re well on track to achieving RM1 mil for retirement.
The calculations also include mandatory contributions from you and your employer. So, to hit RM1 mil by 55, you would only need to top up the difference.
Use the Compound Interest Calculator to simulate different scenarios.
5) If your investments are not earning above 3% pa, you need to reassess your strategy.
Why 3% pa?
Because this is the benchmark set by Bank Negara Malaysia (BNM) through the Overnight Policy Rate (OPR).
Local banks refer to this level constantly to set rates on loans and deposits.
Currently, low risk investments are offering way higher than 3.0%. Fixed deposits range between 3.60–3.90% pa, ASB & ASM average 4–6% annually, and cash apps provide up to 4.0% pa.
Therefore, if you’re not earning above BNM’s OPR, you not only fall behind inflation (2.15% pa) but you’re also not taking advantage of higher deposit rates.
To position your investments in 2024,
- Define your investment goals by considering the duration and purpose.
- Is it for long/short term? Why or what are you investing for?
- Align your risk tolerance with your time horizon.
- If you’re planning to save for a down payment for a house in the next 5 years, your risk preference should be lower and closer to that of a retiree.
- Distribute your funds across assets and avoid excessive risk. Never get greedy and go overboard.
- If your plan is to have 70% equities in your portfolio, stick to it, even if you believe that the S&P will rally 30% this year.
Returns that you should aim for:
Conservative: 3.50–4.50% pa (ASB & ASM, FDs, Money Market Funds, Bonds, etc.)
Moderate: 4.50–7% pa (Blue chip stocks, ETFs, Mutual funds + mix of conservative)
Aggressive: >7% pa (tech stocks, crypto + mix of moderate and conservative)
You can save up to 100% on a Tradingview subscription with my refer-a-friend link. When you get there, click on the Tradingview icon on the top-left of the page to get to the free plan if that’s what you want.
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