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 Hi KC,

I have been reading your articles in i3investor regarding value investing and found they are interesting and make sense. I am going to retire soon, and I hope you can assist me to make some money in the stock market so that I can have a better retirement life.

After working for 40 years, we have brought up three children and provided them with education which they are able to stand on their feet now and having their own families to take care of. Fortunately, we bought a house long time ago and we have finished the mortgage payment. I figure that we need about a monthly income of RM8k in retirement for our basic needs which include occasional overseas trips but to cheaper destinations in Asia, a small car, and occasional eating out in good restaurants which we love to indulge in.

We have only left with RM200k saving. We have RM1.8m money in our EPF, and we are contemplating to take out the money and invest in the stock market to get better return, and hence a better retirement life, a bigger car, more frequent dinner at good restaurants, and travelling overseas for holidays at least once a year, and buying some presents for our grandchildren every now and then.

Would you able to help me KC?

John



Hi John,

Congratulation for your retirement and the total amount of money you have of RM2m for your retirement. After working for so many years, I guess you are ready to enjoy a happy retirement life. We all do, after all, life is short.

A recent survey by global insurance group AIA revealed that the average amount middle-class Malaysians desire to have in their savings for when they retire comes to RM1.9 million. However, according to recent figures from the Employees Provident Fund (EPF), the approximately 70,000 active 54-year-old contributors have an average savings of just 167000 in 2013, below the recommended minimum savings level of RM196800. The situation is made more alarming by the revelation that 69 per cent of all EPF contributors of the same age have less than RM50000 in their accounts.

So, with a total saving you have of RM2m, you should be living quite comfortably in your retirement. But that is provided that you don’t lose this money you have carelessly during your retirement. That includes taking out your money from EPF and invest in the stock market.

The stock market is filled with volatility. It is a good place for young working people, who has regular income, to invest in it for better return over a long period of time, so that when they retire, they have more money to enjoy their retirement life, like what you wish for now.

However, for retirees, most wish for a reasonable retirement life without outliving the money they have saved, not so much of yearning for a luxurious retirement life. They do not have the time on their side, and without any regular income if things don’t work out. There will be times when things don’t work out for sure.

Let say you start to invest all your retirement money in the stock market now. For whatever reason the market tanks and say you lose 50%, or RM1m. It will take you about 9 years with 10% return every year just to recover your capital. How many 9-years do you have? What will be your lifestyle like for the next 20 years in retirement with RM1m, instead of the original RM2m?



Think about the likelihood of losses first before thinking about the potential gain, especially if you are investing your retirement money.

So, sorry, I have to admit that I do not have the confidence to help you to make more money from the stock market. If someone comes along and confidently tells you he sure can, think twice.

Not everyone thinks the same though. Putting myself in your shoes, I will leave the total RM1.8m you have in EPF, as EPF is the safest place to keep the retirement money. Furthermore, EPF has been providing good dividend higher than the bank interest rates too. For retirement expenses, I would give instruction to EPF to provide me a monthly income lasting for 20 years, adjusted to inflation, like an inflation adjusted annuity, but free of tax and other costs; unlike most annuities sold by insurance companies with much lower return due to fees. With this you would be able to get about RM8300 a month, in today’s money every month for the next twenty years, assuming the average of 5% dividend rate. This monthly inflation adjusted amount of RM8300 will enable you to enjoy your retirement life.

However, if you still wish to invest in the stock market, either with the hope of earning more money for even a better retirement life, or just for some fun with the spare time you have in retirement, you still have RM200k in your saving which you can utilize. With a better return from the stock market as compared to bank interest rates, hopefully, you may be able to indulge in some luxuries in retirement life, such as a bigger car, overseas trips to more places, more frequent wine and dine, etc., or just have some fun with good outcomes. Although you won’t be travelling overseas that often when you get older, that amount of money could be used for higher medical costs and care when you get older.

The saving of RM200k is still hard-earned money. Before you start to dabble in the stock market, I would suggest you learn about the market and the fundamentals of investing in order to have a higher probability of success in your investment journey. Never try speculating in the stock market from stock tips, rumours, hypes and fads. It is fun like gambling, but no fun also when your money evaporates.

This I may be able to help you. Not only me, there are plenty of resources out there, some free and some have to pay some money, some a lot of money, and some just a little to shorten your learning curve in a structured manner. It is fun to learn this stuff and you have plenty of time to do it.

I have written an eBook on personal finance and investment. It is free. If you wish to get a copy to provide you with some guidance in personal finance and investing, you may email me at,

ckci3invest@gmail.com

Best of luck.

KC

https://klse.i3investor.com/blogs/kcchongnz/208130.jsp
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