The Novice » Investment

Fixed Deposit (FD) rates of banks in Malaysia (August 09)

Alvin Lim — Mon, 24 Aug 2009 01:00:58 +0000

In March, I wrote a post on the Fixed Deposit rates of the major banks in Malaysia HERE. Not much change since then. Here’s the update for the month of August 2009.

Bank	1 month	3 months	6 months	9 months	12 months
Affin Bank	2.00	2.10	2.20	2.30	2.50
Alliance Bank	2.00	2.00	2.00	2.00	2.50
AmBank	2.00	2.10	2.20	2.20	2.50
Bangkok Bank	2.00	2.05	2.10	2.20	2.50
CIMB Bank	2.00	2.10	2.10	2.10	2.50
Citibank	2.00	2.00	2.00	2.00	2.50
EON Bank	2.00	2.00	2.00	2.00	2.50
Hong Leong Bank	2.00	2.00	2.00	2.00	2.50
HSBC Bank Malaysia	2.00	2.00	2.00	2.00	2.50
Maybank	2.00	2.10	2.10	2.10	2.50
OCBC Bank (M)	2.00	2.00	2.00	2.00	2.50
Public Bank	2.00	2.10	2.10	2.10	2.50
RHB Bank	2.00	2.00	2.00	2.00	2.50
Standard Chartered Bank (M)	2.00	2.00	2.00	2.00	2.50
The Bank of Nova Scotia	2.00	2.00	2.00	2.00	2.50
The Royal Bank of Scotland	2.00	2.00	2.00	2.00	2.50
United Overseas Bank (M)	2.00	2.00	2.00	2.00	2.50

There’s not much change to the interest rates of most banks. Most of them have the standard 2.0% for 1-11 months, and 2.50% for 12 months FD. The good thing is major banks like CIMB, Maybank, Public Bank and Ambank are giving pretty good FD rates as compared to the international banks. Most of our accounts are in there anyway. And if you are looking to invest for anything less than a year, I guess the best is Affin even though it is not as accessible as other local banks (not as many branches around).

Hope it helps.

Why I don’t like 5/95 housing plan?

Alvin Lim — Mon, 29 Jun 2009 01:00:36 +0000

I notice that there are several property developers providing this 5/95 housing plan nowadays, especially during recession period like this. I won’t mention which developer, but normally, you’ll be able see a lot of advertisements by such developers.

Before I continue, let me explain briefly what does it mean by 5/95 plan. Normally when you purchase a property, you need to pay at least 10% of downpayment in order to “buy”. Then after a certain period of time, you will start paying the bank for the housing loan and the interest charges. The problem here is that, you will need to ensure you have the enough fund to pay the 10% and also the progressive payments after that. The bank will penalize you if you’re not able to pay them back on time.

And 10% is not a small amount during times like this. A 300k property means you have to fork out 30k before you can start talking.

So some developers think of another way to attract more buyers during recession period and came out with the 5/95 plan. You pay 5% as downpayment, and nothing else UNTIL your property is completed. For a landed property, it normally takes 24 months and for highrise like condominiums, it’ll take 36 months but everything will be stated in your S & P. So, this does sound like a good deal right? You only pay 5%, which is as low as 15k for a 300k property, and then nothing else until the property is completed. This also means that if you don’t have money now, you can still buy a property. You don’t need to pay until 2 or 3 years later!

If it’s so good, why do I dislike it so much? I’m never a big fan of the 5/95 plan actually and this is due to 2 simple reasons.

More expensive – if you calculate properly, the total price of the property is more expensive using the 5/95 plan due to the hidden charges and accumulated interest rates. I did not do a proper calculation and the examples I’ve seen before this are rough figures. I’ve read it somewhere in the papers actually. Do correct me if I’m wrong. But yeah, if you compare 5/95 plan to the old progressive payment plan, 5/95 will make you pay more for the same property.
Speculation – in 5/95 plan, you don’t need to pay anything between your 5% downpayment and your property completion date, which is maybe 2 years or 3 years later. So if you are saying you opt for 5/95 because you don’t have the money to pay now (due to recession), then what makes you think you will have a stable income or enough money to pay for an even bigger amount 3 years down the road? You are actually speculating things here. What if the economy gets worse 3 years later? In my opinion, if you really want to buy a house, you need to be able to afford it NOW and in the future. So progressive payment vs 5/95 are still the same. If you can’t afford paying the progressive payments now, don’t assume you can afford it 3 years later.

That’s all. These 2 reasons are enough to make me stay away from 5/95 plan. I’m sure there are still a lot of other affordable housing plans out there and different people will have different opinions. But for me, I would prefer to go the traditional progressive payment way.

Feel free to comment or even correct me if you find my information here is not correct.

Is Dollar Cost Averaging useful for stocks?

Alvin Lim — Mon, 18 May 2009 01:40:21 +0000

Referring to my friend’s post on “Dollar Cost Averaging is Stupid?“, one question that came across my mind – is dollar cost averaging or DCA also applicable for stock investing?

We all know that most mutual funds/unit trusts are based on DCA concept since they encourage you to pump in money every month. So if the market goes down, you will use the money to buy the units at a lower price and when it goes up, you can sell them for profit. Remember the standard “buy low, sell high” concept and DCA is based on it.

The important thing is to be able to hold it for long. Otherwise, DCA will not work.

What about stock investing? Can DCA work? The answer: it depends on 2 questions:

How long are you willing to hold? DCA does not work most of the time for contra-based or short-term investors.
Are you sure you are buying into something worthwhile? DCA can bring you down if you are using it on something useless.

By answering these 2 questions, you will be able to know if DCA can work for you or not. Always remember that in investing…be it stocks or mutual funds, it pays to be patient. If you are sure the company you are investing has good prospects and healthy cashflow, and if you are willing to hold for 3-5 years, then you really have nothing to fear even if the current stock market plunges (*touch wood*).

Is it still worth it to put your money into Fixed Deposits?

Alvin Lim — Tue, 10 Mar 2009 01:11:49 +0000

In my recent post about Fixed Deposit (FD) rates in Malaysia, I couldn’t help but noticed that the rates are pretty similar from one bank to the other. All of them have very very low rates ranging from 2% to 2.5%.

So for example, you put in RM 5000, which is the minimum required for a 1 month FD placement. At an interest rate of 2%, you will only get RM 8.33 ( RM 100 / 12 ) per month. Quite pathetic. One can easily generate that much income if he or she is hardworking enough to write online articles.

Our FD interest rates are looking like this nowadays

That is why I don’t suggest people to invest in FD unless it’s their emergency fund (which you can withdraw easily and without penalty). For those who have extra money on their hands, try look into unit trusts since most of them are very cheap now but I would suggest you to look into bond and not equity. The equity market will only recover towards the end of 2009 or 2010 (my prediction), and that is quite a longggg time from now.

If you’re not interested in that, take a look at some defensive stocks such as Public Bank, F & N, Telekom Malaysia (TM) and others. These companies give a steady dividend yield to the shareholders and most of them are at a very attractive price now (TM is trading at a PE ratio of 4 – 5 while Public Bank’s PE is around 7 – . However, as with most investments nowadays, you must be willing to hold on for at least 1 year.

To conclude, if given a choice, I will not put my extra money into FD anymore due to the extremely pathetic interest rate. It’ll be better to put into unit trusts or defensive stocks. Or if you know about government bonds, then try to invest in those.

Hope it helps.

Fixed Deposit (FD) rates of banks in Malaysia (March 09)

Alvin Lim — Mon, 02 Mar 2009 01:54:13 +0000

In January, I posted a post on the Fixed Deposit rates of the major banks in Malaysia HERE. Since then, our Bank Negara (Central Bank) has reduced the interest rates twice. Thus the changes are quite major.

Bank	1 month	3 months	6 months	9 months	12 months
Affin Bank	2.00	2.10	2.20	2.30	2.50
Alliance Bank	2.00	2.00	1.90	1.90	2.50
AmBank	2.00	2.10	2.20	2.25	2.50
Bangkok Bank	2.50	2.55	2.60	2.70	3.00
Bank of China (M)	3.00	3.00	3.05	3.05	3.50
Bank of Tokyo-Mitsubishi (M)	3.00	3.00	3.00	3.00	3.70
CIMB Bank	2.00	2.00	2.00	2.00	2.50
Citibank	2.00	2.00	2.00	2.00	2.50
Deutsche Bank (M)	3.00	3.00	3.00	3.00	3.50
EON Bank	2.50	2.50	2.50	2.50	3.00
Hong Leong Bank	2.00	2.00	2.00	2.00	2.50
HSBC Bank Malaysia	2.00	2.00	2.00	2.00	2.50
Maybank	2.00	2.10	2.10	2.10	2.50
OCBC Bank (M)	2.00	2.00	2.00	2.00	2.50
Public Bank	2.00	2.10	2.10	2.10	2.50
RHB Bank	2.00	2.00	2.00	2.00	2.50
Standard Chartered Bank (M)	2.00	2.00	2.00	2.00	2.50
The Bank of Nova Scotia	2.00	2.00	2.00	2.00	2.50
The Royal Bank of Scotland	2.00	2.00	2.00	2.00	2.50
United Overseas Bank (M)	2.00	2.00	2.00	2.00	2.50

NOTE: Those highlighted in BLUE might not be the latest rates since there’s no update since the last BLR cut. As for those in RED, I couldn’t find out about the rates at all from the Internet. If you’re interested in those banks, it’s better for you to call them up and ask.

As you can see here, the interest rates are really really really low. It’s no longer worth it to keep our money in FD and I think that is exactly what are government is trying to do – to prevent us from saving up, and encourage us to spend. This is quite a risky move and it might backfire.

For me, I will only keep my emergency fund in FD while majority of my investments will be in unit trust and stock market. The % is just too low to be kept in FD. Our inflation rate is actually higher than that.

Changing your Public Mutual Fund agent

Alvin Lim — Thu, 05 Feb 2009 00:55:44 +0000

In December 2008, I’ve said that I wanted to change my Public Mutual Fund agent since my agent basically disappeared. She’s not contactable, and she did not do the things I’ve told her to do – stop the auto-debit, and also to move my equity to bond (that was in May or June 2008). She did not do both of those. And that’s why I become very frustrated and wanted to change.

But I didn’t have the time to change since the Public Mutual office only opens during office hours (close on weekends). This makes the office inaccessible to working people like me. Maybe they do this on purpose? I’m not sure.

So during the Chinese New Year break, I finally managed to go to the Public Mutual office in my hometown and requested to change my agent. Here’s the conversation between me and the customer service officer.

Me : Hi, I would like to change my Public Mutual agent. Do you have a form or something which I can fill up?

Officer : Sorry sir, we don’t have such a form.

Me : Huh? Then how can I change?

Officer : I’m afraid you can’t do that sir. You need the agent to write in a formal letter to the head office.

Me : What?! But that person is not reachable!

Officer : I don’t think there’s anything you can do.

Me : What nonsense is this? I’m the customer, and I can’t do what I want? It seems like I’ve been held hostage by the agent!

Officer : That’s our policy…we are merely following the orders from HQ.

At that moment, another customer service officer stepped in.

Officer B : You can actually write in a formal letter by youself, sign it and write down your IC number, then post the letter to the HQ. They will change it for you.

Seriously speaking, I’m not happy at all with such policies. It seems like Public Mutual is trying to avoid such “transition” taking place and this is making things difficult for the investors especially when those agents are not reachable. And I really don’t like the feeling of being held hostage by the agents.

Anyway, I’m going to call up my friend to see if such a policy does exist.

So for those of you who are trying to go into Public Mutual, be sure to get a good agent who will never go disappear.

Fixed Deposit (FD) rates of banks in Malaysia (Jan 09)

Alvin Lim — Mon, 12 Jan 2009 01:09:39 +0000

I’ve posted 2 articles on the Fixed Deposit (FD) rates of the banks in Malaysia before – Fixed Deposit rates of different local banks and List of Fixed Deposit rates for foreign banks.

I figure that this topic is quite important so I’ve decided to continue posting updates on the FD rates of the banks in Malaysia. From now onwards, I will come out with an update of list of FD rates at least once in every 2 months. I will also post an update if there’s any significant changes made by Bank Negara such as lowering the Base Lending Rate (BLR).

Bank	1 month	3 months	6 months	9 months	12 months
Affin Bank	3.00	3.05	3.15	3.20	3.50
Alliance Bank	3.10	3.15	3.15	3.20	3.50
AmBank	3.00	3.15	3.25	3.30	3.50
Bangkok Bank	3.20	3.30	3.40	3.50	3.75
Bank of China (M)	3.00	3.00	3.05	3.05	3.50
Bank of Tokyo-Mitsubishi (M)	3.00	3.00	3.00	3.00	3.70
CIMB Bank	3.00	3.10	3.30	3.30	3.50
Citibank	3.00	3.00	3.10	3.15	3.50
Deutsche Bank (M)	3.00	3.00	3.00	3.00	3.50
EON Bank	3.00	3.00	3.15	3.20	3.50
Hong Leong Bank	3.00	3.00	3.10	3.40	3.50
HSBC Bank Malaysia	3.00	3.00	3.00	3.00	3.50
Maybank	3.00	3.20	3.40	3.50	3.70
OCBC Bank (M)	3.00	3.05	3.10	3.10	3.50
Public Bank	3.00	3.00	3.10	3.10	3.50
RHB Bank	3.10	3.10	3.15	3.15	3.50
Standard Chartered Bank (M)	3.00	3.00	3.00	3.00	3.50
The Bank of Nova Scotia	3.00	3.00	3.10	3.10	3.50
The Royal Bank of Scotland	3.00	3.00	3.00	3.00	3.50
United Overseas Bank (M)	3.00	3.00	3.00	3.00	3.50

NOTE: Those highlighted in BLUE might not be the latest rates because I’m not able to access their web sites properly. The above interest rates have been obtained from other sources. Also, the rates above might change anytime so if you want to know the actual interest rates, it is better to consult the respective banks directly.

Hope it helps. I’ll come out with an updated list 2 months later.

Tips for buying foreclosed properties

Alvin Lim — Fri, 26 Dec 2008 01:10:36 +0000

First of all, what is a foreclosure? According to Wikipedia, it means a legal and professional proceeding in which a mortgagee, or other lienholder, usually a lender, obtains a court ordered termination of a mortgagor’s equitable right of redemption. In other words, foreclosed properties are normally sold at a price much lower than the market value. And in our current economy, there will be plenty of foreclosed properties for you to choose from. The thing here is, you need to be well prepared at that time in order to be able to acquire such properties.

Here are some of the tips given by CNN Money.

Consider paying cash – time might not be enough for you to get a house loan.
Perform due diligence - always check out the property before you buy. You will need to ensure the property is in an OKAY state.
Hire a licensed appraiser - no point buying a foreclosed property at a lower price, if the property actually worth nothing much. Get a professional to tell you the value of the property before you buy.
Buy short – it is still better to settle this out of the official way, as in before the property is foreclosed. You will have more time to arrange your things (money, loans, etc) and maybe can get a better discount.

These are very important tips to remember before you actually go for a foreclosed property. We’ve heard ugly stories about foreclosures but there are also a lot of successful stories. Just be sure to check everything properly before you commit your money. Good luck and hope it helps.

If you’re interested to read the full article from CNN Money, please proceed to “4 tips for buying foreclosed properties“.

What is Real Estate Investment Trust or REIT?

Alvin Lim — Fri, 19 Dec 2008 00:31:58 +0000

I used to read up a lot on real estate investing or so-called REI. But I gave up in the end because I just don’t have the cash to buy another real estate property. The good locations in Klang Valley are not cheap at all and taking extra loans are not going to help too. Fortunately, I did not go for the home loans option because the recession hit few months after that.

If you’re in the same situation as I am, fear not. There’s another option you can consider – Real Estate Investment Trust or REIT. It is just like investing in real estate but without owning the actual real estate properties. You own part of it and the properties are handled by a group of professional real estate investors. That’s the simple way to explain.

From Wikinvest

A real estate investment trust (REIT) is a corporation or trust that pools the capital of many investors to purchase income property (equity REITs) and/or mortgage loans (mortgage REITs). An equity REIT owns and manages property, as opposed to a mortgage REIT which purchases mortgages and may also borrow money from banks to lend again at higher interest rates.

REIT is traded publicly in our Kuala Lumpur Stock Exchange. You can find them in REIT under KLSE’s Main Board. Each REIT actually focuses on few types of real estate properties such as offices or shopping malls, etc. For more information, you can visit this link here which I find is quite helpful – Malaysia REITs: December 2008.

So if you’re a real estate investor wannabe but don’t have the money, you can start by investing in REIT. Hope it helps.

Why you should not invest in high-end real estates for now?

Alvin Lim — Mon, 24 Nov 2008 01:37:51 +0000

Last month, a friend of me asked me whether it is a good idea to invest in high-end real estates in Kuala Lumpur. I told him “No” and explained to him few reasons why he should not invest for now.

Rent it out?

There are just too many high-end real estates in the city of Kuala Lumpur and Mont Kiara areas. With so many real estates, it will not be easy to rent them out. Furthermore, it’s pretty difficult to find people who can actually afford such expensive rentals. Most investors look for expatriates since they are more willing to pay the expensive rents. There are basically 2 categories of expats – those who are already here, and those who are going to come here. For those who are already here, they most likely already have a place to stay. As for the other category, I doubt there will be many new expats coming in (not anytime soon) thanks to the recession. Thus, the market is actually quite stagnant. Try to ask around and you will see a lot of investors failed to rent their units out due to low demand for such high-end real estates.

Flip?

When they cannot rent the units out, investors who do not have the holding power will attempt to sell – for profit. The real estate market’s boom period is just over and most investors are still trying to gain some profit from their investments. The problem is, there are too many investors who want to flip because it’s one of the best ways to earn quick profit. In the end, you will face fierce competition from fellow investors who are trying to flip the real estates and might end up in an unwanted price war. And with the current economy situation, it will be very difficult for you to find buyers. The number of sellers far surpass the number of buyers.

Holding power

When the first 2 failed, you will have no choice but to hold. How long are you willing to hold? True, the economy will sooner or later recover and your real estate price will inevitably goes up – no doubt about that because at the end of the day, there are only limited amount of space left in such strategic locations. The main question will be – how long can you hold? These real estates are not cheap, and repaying the loan might kill some people off. And without any way to leverage the loan, you really need to have a lot of money in order to hold it. Also, remember that such high-end real estates have pretty expensive maintenance cost. If you are okay with all that, then yes, you can hold it and wait for the storm to clear.

Too many projects

In the past 2-4 years, we have seen so many high-end real estate projects in the city and other strategic locations. There are more to come including the luxurious Four Season which is located next to Maxis Tower. The newer the real estate, the better it is. The real estate which was built many years ago, might not sell as good as the latest one. And since the prices are quite stagnant now, why not wait for the newer and better projects? After all, it might be easier for you to flip or rent by the time these new projects have been completed – easier than if you go and acquire one real estate NOW.

That’s why if you are looking to invest in such high-end real estates now, maybe it’s better for you to wait for a few more months. Apparently, there are a lot of investors who are facing serious problems trying to pay off the loans. And if they cannot pay, the banks will have to sell those real estates at very cheap price.

To me, that will be a good time to buy.

Good luck.

NOTE: I’m not a professional real estate investor. The above are based on my opinions and findings.