WHO SUFFERED THE MOST DURING A RECESSION? THE RICH OR THE POOR?

Let’s look at some situations people face during this recession, which is affecting more and more people nowadays:

· Individual insolvencies increased

· Interest rates cut

· Falling housing sales and reduced equity values

· Companies are downsizing, rightsizing, and filing for bankruptcy

· No job security

· Unemployment rate continues to get worse

Interest Rates Cut

It is expected that interest rates will be cut by the federal banks to reduce the cost of borrowing. Hopefully this will help some businesses to get through their cash flow problem. At the same time, it may “encourage” people to take the money out of their saving accounts, and use it at other areas such as investment, or just simply spend it to help drive consumer spending.

The lower interest rate affect the return of the poor since most of them don’t know what to do with their money except keeping it in the fixed deposit. How about borrowing money to invest (buying properties etc)? The poor don’t know where to invest. Moreover, banks are reluctant to lend money to them, especially during a recession.

How about the rich? They can borrow money at lower cost because the banks know that the rich are capable of making more money out of the loan.

Falling housing sales and reduced equity values

In the subprime incident, poor people borrow more money on their own inflated residence. When house price drops, they owe bank more money than the value of their home, causing negative equity.

You may say that the rich has more real estates, and mostly acquired for investment purposes. Yes, in fact the rich lose more value in their properties holding. But don’t forget that the rich buy properties for the rental income yield. For the worst case, they may have to sell a few properties at a significant loss. Yet, they are still rich. For instance, they make $50k per month from rental properties during good time, but only make $30k during this recession. Anyway, they still make more money than the poor.

Companies are downsizing

The rich own the companies. They downsize by firing the poor, so that they can keep their money and companies.

Inevitably, their companies’ valuations tumble. Let’s say from $100million to $50million. They are still multi-millionaire. They still drive a big car. They still stay at their comfortable home. They still go for vacation.

But the poor has lost their job, in deep debt, and find themselves very difficult to find jobs elsewhere.

Who suffered the most?

The poor or the rich? Being rich doesn’t make you recession-proof. But the poor will definitely be suffering more than anybody else,

THE RICH INVEST IN RECESSION TIME!

Call me with no obligation;

ANUAR BIN ASPURI

UNIT TRUST CONSULTANT

+6019764 6651

MENGAPA CHINA?

PUBLIC CHINA ITTIKAL

1) MENGAPA CHINA DILIHAT SEBAGAI TEMPAT PELABURAN YANG MENARIK?

GROSS DOMESTIC SAVING

CHINA 50%

SINGAPORE 48.3%

MALAYSIA 43.4%

NEGARA NEGARA ASIA DAPAT MENANGANI KESAN EKONOMI KERANA KADAR SIMPANAN YANG TINGGI MEMBOLEHKAN KEUPAYAAN BERBELANJA SETERUSNYA MENJANA EKONOMI.

2) COUNTRY RESERVES

CHINA 1.9 TRILLION USD 47%

JAPAN 995 BILLION 24.5%

MALAYSIA 109.7 BILLION 2.7%

THAILAND 102.1 BILLION 2.5%

INDONESIA 56.5 BILLION 1.4%

3) KDNK – KELUARAN DALAM NEGARA KASAR (GDP)

SUKU AWAL 2009

CHINA - 6.6%

NEGARA DISELURUH DUNIA BERADA PADA PARAS NEGATIF.

LANGKAH-LANGKAH YANG DIAMBIL;

1) SUNTIKAN USD 586B PAKEJ RANGSANGAN EKONOMI OLEH KERAJAAN CHINA

2) PENURUNAN KADAR FAEDAH

JANGAN LEPASKAN PELUANG PELABURAN YANG HEBAT DENGAN HARGA SEUNIT YANG SANGAT-SANGAT RENDAH!

HUBUNGI SAYA,

ANUAR BIN ASPURI

UNIT TRUST CONSULTANT

+6019764 6651

EPF INVESTMENT INCOME DOWN ON LOWER RETURNS

Starbiz, Friday 12 June 2009

EPF INVESTMENT INCOME DOWN ON LOWER RETURNS

“ THE EPF INVESTMENT DROP BY 10.47% FOR THE FIRST QUARTER, DUE TO LOWER INVESTMENT RETURNS FROM FIXED INCOME INSTRUMENT & EQUITIES.”

Komen saya:

Polisi pelaburan KWSP adalah 80% ke dalam instrumen pelaburan pendapatan tetap, oleh yang demikian kadar pulangan akan semakin berkurangan untuk masa hadapan berikutan pulangan instrumen pendapatan tetap bergantung kepada BLR semasa yang semakin rendah pada waktu ini.

Untuk itu, pihak KWSP telah membenarkan pencarum melabur dalam instrumen yang lebih mendatangkan keuntungan atas risiko yang difahami oleh pencarum.

Untuk maklumat lebih lanjut;

HUBUNGI SAYA,

ANUAR BIN ASPURI

UNIT TRUST CONSULTANT

+6019764 6651

Would you like the money to work for you?

As at Dec 2006, there are RM224 Billion in EPF while average contribution amount for a 55 years old contributor is RM110K. If this EPF contributor expected to live for 75 years old, he can only spend RM475 per month. And he is categorised as ‘poor’ resident so long the monthly income does not exit RM530 in Malaysia. A survey by the EPF found that a contributor on average, exhausted his EPF money within three years of withdrawing the lump sum. Thus we can often see many old folks continue to work even reaching 60 years old. I know what you think; you should have much bigger amount than RM110K when you approaching retirement age, but bear in mind, the amount may not be a lot, say RM500K if we continue to make use of it for housing, education and medical. And who knows, the RM500K after 10-20 years, because of the inflation, could be as valuable as the RM110K today.
People forget about the inflation. Things has change generally, from one working father to support 7 kids, to 1 working couple to support 3 kids. The FD rate in Malaysia hit the highest of 9.06% in 1997, and drop ever since that to as low as 3.2% in 2002. And after another 7 years, FD rate drop to 2.5%. Whereas the inflation hit high of 8% in last June and now at more than 6%. As no body can avoid the inflation, there is no other way than investing to overcome the inflation. According to ‘Investopedia’, the definition of ‘investing’ is : you can’t create a dupicate of yourself to increase your working time, so instead, you need to send an extension of yourself - your money to work for you. Quite simply, making your money work for you maximizes your earning potential whether or not you receive a raise, decide to work overtime or look for a higher paying job.

According to financial planner, as long as there is an emergency fund backed up for 3-6 months of our expenses, one should consider to start investment. Putting too much money in the bank will not help to grow our wealth. It is advised to allocate 10% - 20% of our income for investment. With current expenses of RM32K per annum, which is about RM2.7K per month, assumming no additional expenses during the retirement age, because of 4% inflation, we will have to spend for RM85,307 per annum, which is not less than RM7K per month after 25 years. In other words, if you are spending RM2.7K a month, and you are now 33 years old, please make sure you have RM1.5M when retire at 58 years old with 75 years life expectancy. The number could be more with higher inflation, higher medical expenses and travel expenses. Personally i do not wish to just stay at home in my golden years.

At 4% inflation, RM100K will be worth only RM67,566 after 10 years. For a new born child, a local private university education which cost RM73,500 today, will cost RM235,935 in 20 years with 6% inflation. If we target to have half a million at the age of 55, look at the below table to see the consequences of delaying the saving.


Start at Monthly Saving Times
Age 20 RM 216 -
Age 30 RM 522 1 times
Age 40 RM 1,435 6 times
Age 50 RM 6,759 31 times



This is simple mathematic calculation base on 8% compounding return. So, if we are doing the saving in the bank with the very low interest, the monthly saving requirement would be 3-4 times higher. Don’t think that you will have better saving in future with the increase of your income because commitment will increase in tendem. I have friends who are working as management level, earning 20K income per month buying big house and luxury cars and sending their kids to overseas for study, will face financial challenge if they are not working for a year. In nowadays, the definition of ‘rich’ interpreted from how long one can sustain his/her life if not working, disregard how much saving he/she have. Of course their saving can be one of the passive income generator if this saving is put in any investment instrument.

Some investors of mine like the monthly investment in Public Mutual Fund simply because that is the most effective way to displine themselve to save. EPF contribution is just taking up 11% of our salary(ooppss, now only 8%), without the monthly investment plan, normally we could not answer where have the remaining 92% of our salary gone. Just imagine with a monthly investment of RM300, we will most probably accumulate to a fund of RM50K after 10 years. If this is not affordable, please try to increase your income instead of delaying the saving, because there is cost to delay the saving as stated in the above table. Nobody says we must retire at old age. You have your choice. But one thing for sure is, you can only retire when your money work for you!

THINKING TO FIND A PLACE TO SAVE FOR YOUR RETIREMENT?


CALL ME WITH NO OBLIGATION,
ANUAR BIN ASPURI
UNIT TRUST CONSULTANT
+6019764 6651