Hi,

How old are you? Are these all of your assets and liabilities in total (in addition of perhaps EPF)? Not married nor have any children yet? Do you have any medium term goals such as running your own business (if you havent already), thus requiring capital? or are you planning to stay the way it is until retirement? Any short term goals like getting married and children then? Are all your insurances in order, do you know if you are over OR under paying, are the the right kind of insurance that you need or the one your agent told you to get, were you spelled out with the entirety of the terms?

In terms of total financial planning, it is important for one to ask oneself about the objectives, term (time period), and the risks you are willing to take. It goes without saying that an older person would have a harder and riskier parth to prepare for their retirement than a younger person. I have stacks of forms and surveys for you to fill up for those who engage me professionally, details-details-details are the most important source for a good financial planning 

As for testing the waters in the stock market, you should be able to do it since your asset/liability is healthy, you may make some profit and the worst case scenario is that you would lost the entirety of the RM10k, which you may chalk it up as a lesson.. However, beyond that... what? Is this going to continue with another RM10k or will you start investing in other schemes? Without proper planning, you would lack a clear division of your wealth; and optimizing your returns to match your objectives are more important than looking for a quick buck. Do you know why gamblers always lose to the house? Because when they win they always think it is their lucky day and roll another dice.

rm10k can't do much. Just settle the loan first and prepare enough bullet for property market crash.
For me, instead of wasting money to "seek" advise from so-called financial gurus, I'll go to coffee shops and seek advise from those 60-70 years old uncles on how they gain their wealth.
And I met with 1 coffee shop owner(just open it 3 years ago) that never dump money in any of funds, shares but yet his asset are > rm3M. He only mention 1 statement : you need to have right money in the right time.

1. Family within 5 years is a medium term goal, that is fine. I assume your wife would already have her own basic financial needs like insurance met, so let's end it there. Keep note that most couple have the husband take care of the 1st child's insurance. It shouldn't be much, a medical card for the child for less than RM200 should be good enough, any more that that would be a waste and you should invest directly and not through insurance. In addition, the child's education funding will have to be set aside in the future.

2. Now that we have the soon-to-be family out of the way: Seeing that you are all set for the time being, it would be a very smart choice to start preparing for your retirement. Remember, it is never too soon because the longer you wait, the more difficult it would be as you grow closer to retirement age. Now, everyone's retirement age is different, but you mentioned 20 years, that's an ok number of years to start with. Since you are not looking into starting a business, let's just start with something more long term.

3. In general, it is good to diversify your investments into multiple vehicles. You mentioned you have a house, I assume you are staying in it, so that wouldn't be considered as an investment, because are you going to sell it one day and not live in a house? FD has horrible returns, and it is semi liquid being that it is withdraw able within a year. It has but one purpose, read below:

4. Prepare about 3 to 8 months of emergency funds and spread the funds into multiple asset classes - savings vs FD. Don't touch these, but don't add them more than for about 8 months. Anything more than required would just go to waste.

5. If you are not ready for owning equities directly, don't. Take the next 1 year to train yourself, use the trading simulators instead, you would simply be pissing away your money.

6. For the rest, and I am sure you are already doing it, you can invest in managed funds that allow you to transfer between equity - balanced - bond - money-market funds. The lower risk funds like bonds and mm can be used as a hedge during a downturn. Diversify and time your investments, but do not daily-trade, these are not the funds for that due to the fees. Use these investment vehicles to park your money while you get a grasp of the equity market.

7. As part of your diversification process, you could also purchase a property with a mortgage; get a flexi account so the whole process could be used as a hedge during a downturn.

.... continue from previous post.

Correction: the installment on the 500k loan should be about 23k, not 22k.

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Cost of Interest

Before continuing how John will get the same total cost of interest, first, allow me to explain why cost of interest is important.

As most of us are salaried employee, whether highly-paid or otherwise, we can more or less extrapolate how much earnings one would made in his/her life - the X amount. How much of this X amount remain is dependent on how much is the expenditure.

If we view money matters as a game plan, then there is 'defensive moves' and 'attacking moves' in managing our money.

Defensive moves would be protecting the wealth we have generated; and it is mostly on ways of spending wisely. Simple logic: spend wisely, saved more ... more X amount remains.

Cost of interest is a cost and expenditure. So less spending on interest and 'defend the wealth' whenever possible.

So, if John incurred a specific amount of interest if he will to take the 1st loan option, we will based and concluded it whether or not it is a better 'defensive' move if he selected the 2nd option.

If the 1st option is the less costly than the 2nd option, then selecting the 2nd option is not a better defensive move.
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How would John get the same total cost of interest when he selected the 2nd option?

The interest on a housing loan is calculated on the balance outstanding amount. So the maths logic is pretty straight forward.

1. The lesser loan amount and shorter tenure is less costly. So option A is less costly.

2. To have the same total cost of interest on the flexi loan of 500k, 35-year tenure as the 400k, 15-year tenure, John would have to emulate the amount of outstanding balance as in the 400k loan.

(Remember that interest is on monthly rest basis.)

The easiest way to have the same outstanding balance as in the 400k loan is:
a) put in 100k into the flexi loan, and reducing the 500k to 400k.
b) pay the same monthly installment (about 3k) as in the 400k, 15-year tenure.
c) pay the same monthly installment (about 3k), every month in the first 15 years.

Other variations of paying the various amount of installment, like less installment this month, and then more next month can give the same result. But above same monthly amount is the easiest steps to emulate.

As interest is on monthly rest basis, interest once it is incurred is already set.

Any lesser amount paid in the beginning of the loan, a much higher amount will be needed to reduce the monthly interest, such that the total cost of interest can be capped and be the same as in the 400k loan.

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The half-empty, half-full glass perspective

So, as explained above, to have the same cost of interest on both loans, John would have to do the same whether it is option A or option B.

But in option B, John has an extra 100k at his disposal. Is this good or bad, an advantage or disadvantage? It depends... how John views it.

Will it change his monthly spending? Will he be enticed to withdraw part of the 100k for another purpose?

It can be safely said that John will incurred more interest with option B... unless he will be very strict in his monthly budget and follow strictly to the 400k loan payment schedule.

What ground-breaking revelation were you expecting?

P.S. Fairy tale on John was more or less developed based on your situation - 100k in a flexi loan.

Another point to ponder : how do average joe can get rm100k cash?

HLA? 3% of interest? Sure or not? I calculated are about 0.1-0.5% wor.

Nothing personal, it was just a general observation of the way things are. I wasn't reffering to anyone in particular and of course not you. I was just glad that there are those who can see the benefits of a different viewpoint, thus producing a healthy discussion and exchange of opinions, like the one you posted earlier.

If you haven't noticed, in the past few posts there's been an argument to finish paying up your loans early. As a mortgage broker I argued that having a flexi account and the flexibility to schedule your payments the way you like is a definitely plus because partly you could have a better cash flow and invest accordingly just like you mentioned. What you would do with the increased cash flow would entirely depend on your situation and needs, there is no one fix-all solution.

But I noticed the elderly didn't take too nicely to my argument and started to call delaying your loan repayments is a stupid thing to do, without even accepting opinion and arguments that there may be better ways to invest the money instead of repaying the loans.

My observation, which may or may not be inaccurate was that the elderly are more inclined and stubborn about they way they see things, without any consideration of other people's situation or needs. A younger person's risk criteria is definitely different than an older one, thus their methods of money management cannot be the same.

If you havent noticed by now, it wasn't a jab at you or anything, I apologize for the misunderstanding