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Thursday, January 29, 2009

EPF vs KLCI - Part 2

I'm continuing from where I left last year regarding this topic .....links. No doubt, EPF is the safest bet for our retirement besides FD, which is why it is necessary for us to save some money in EPF. So this means that EPF is necessary.....only as retirement fund in which I would assume it will not be sufficient as well.

The debate on EPF and KLCI is actually started when our DPM announced that EPF contribution by employee can be reduced to 8% where the extra 3% can be use to spur the economy if the 3% would make a different. Unless your annual income is more than RM75k, reducing to 8% only benefits the government. You only pay more income tax by reducing it to 8%. Take the following scenario:-

Annual income = RM55 000
a) EPF contribution (11%) = RM6 050 (max income tax deductable capped at 6k)
b) EPF contribution (8%) = RM4 400 (RM1 600 extra is taxable)

From the above scenario, by just changing the EPF contribution 3% less, you will have RM1600 extra, which is taxable, though you can invest the balance of the money on stock market.

Back to the topic, EPF vs KLCI. If I'm not mistaken, EPF gave high dividend before, which is about 6%-7%. And that is only for a year. After that, the dividend rate has been going down. So, we can have the assurance that given the best scenario, the EPF payout will be about 5%-7%, which will be almost the same as dividend counters at KLCI (this, provided you choose the correct counter). But with dividend counters, you can earn from two things....the dividend yield annually and the capital appreciation. So, in this case, which one is better? EPF or KLCI?

One might say that stocks will fluctuate according to the market environment. When the market is bearish, it will go down. The same actually applies to EPF. Where do you really think EPF make money from? The stock market actually. Think of EPF as a very very big capital unit trust or funds, then you'll get the picture. Which one would you prefer? Funds or stocks? For most, funds will yield better return due to lack of knowledge in the stock market, but for some, it will be like...."Why pay others when you can do it on your own?".

The conclusion is there is no right or wrong in this debate. EPF can yield more for those who do not really understand stock market, while for some, it will be KLCI getting better yield. It all boils down to own personal risk management. But given the current situation where we can reduce our EPF contribution to 8%, my advice is unless you are earning more than RM75k per annum, it will be wiser for you to stick with the current 11% plan as most of your additional 3% 'disposable income' will be taxed.

Monday, January 12, 2009

Boycott American goods to save Palestine? Think again

Malaysia former PM, Tun Dr. M urge the Malaysian to boycott US goods (source) in order to save Palestine. So what is your take for this? Well, it is always very easy to such call.....and with his influence as the PM in Malaysia for the past 20 years before the current PM, Abdullah Badawi, I'm sure some will follow suit.

There are those two face bloggers or internet users who might have call for the same action via blogging, Facebook. Little do they know that Google, Facebook also from the States. And we will actually see some of them at Starbucks, McD etc. If Dr. M call for the boycott action, is he going to lead by example first? Will he stop using Google? Is he going to stop blogging? Because if he voice it out, he should lead by example. Don't use laptop or PC. Those CPUs are American products. Google also from the States. Next, if he has a Facebook account, he should stop using it totally.

For those who are wondering whether to follow or not.....think again. First of all, go ahead and check, whether Dr. M or those who answer the call to boycott the American goods really boycott the American goods. This includes not using google, PC (they should not have use it in the first place), Facebook etc. If those promoting this boycott via Facebook or msn, we can totally ignore them. Cause they don't walk the talk.

Then, we have to know....most franchise chain like KFC actually owned by Malaysian, and most of their staff are also Malaysian. Since KFC Holdings is a listed company, the bumiputras definitely have 30% stake in it. If we actually boycott the like of KFC or McD, who will actually suffer? Do you think the Americans? is us, Malaysian who will suffer the most. Less staff are required because of low business output, KFC Holdings share will drop like no tomorrow because they cannot produce decent earnings to attract investors....more and more KFC or McD restaurants will have to close down due to no business and this translates to more jobless Malaysian and more bankruptcies.

We can continue to say that we want to boycott US goods such as CPUs, chipsets, search engines. But who will suffer in the end. Malaysian. Intel CPUs or chipsets were manufactured in VFs in many countries including Malaysia. Granted, we boycott it, so Intel and AMD need to layoff their employees. Who do you think will suffer? Those working in VF, of course. And where do this lead us? More jobless Malaysians.

To those who think boycott American goods will be able to save Palestine....think again. It is us, Malaysian who will suffer the most. Jobless, bankruptcies etc. In fact, with jobless and bankrupcies rising, it also means that Malaysian who wanna donate to Palestine, are unable to do so. What does this lead us to? Less donation and contributions from Malaysia. So, is this going to help Palestine? Think again.

I, for one will not answer the call to boycott the American goods. I also urge others especially those belongs to the working class like me to think over it carefully. Recession is at the doorstep and if we are still so childish to boycott this and boycott that, suddenly the Americans pull out their investment from Malaysia, who is the biggest loser? So, think again. There are many ways to help Palestine. Boycott American goods definitely not the way.

Saturday, January 3, 2009

Year 2009 - To Spend Or To Save

It's been about a month since I last update this blog as I was busy with my work, my other blogs as well as planning ahead for Year 2009. Year 2008 ended with stock markets all over the globe almost collapse (I'm using the word almost since we never really know whether we have reached the bottom or there's still downside risk). Then the word RECESSION, STAGFLATION, INFLATION, VSS, etc started to creep out and people have FEAR in them. Why FEAR?

We do not know how long this financial turmoil will last and how long it takes for the business to see the bottom or recover. We can never know. No one in the world will know about it except, well, GOD, of course.

Domino effects will be seen as one business will cost another business to collapse or successful. Once a business is affected, it will affects others as retrenchment and major cost cutting will take place in other business. And this will continue to go in a loop until an equilibrium is achieved, that is when the global economy will recover. However, we do not know when this will happen.

People will start to worry about tomorrow, whether they are still hired, or whether they are not with the company or even worse, the company goes out of business. So, this will triggered people to save.

When people started to save almost all of their money, this is equals to close to zero spending, which is bad bad news for economy. We have to understand this.....economy is made up of money.....and money means spending. So, without spending, more and more company will go out of business.

The question now is whether we are to save or to spend? I'll post more on this in the future, but let us look at the situation and think......Is it best to save or to spend.