Hey guys, I'm currently planning my mum's financials and would like the opinion of my Lowyat friends.

My mum was diagnosed with cancer earlier this year so we would like to keep this fund a little more liquid compared to if it was locked in EPF until the age of 65.

My mum currently has >RM700,000 to be placed in a retirement fund and investment horizon will be around 15 years or more. Vanguard's Target Retirement 2035 Fund $VTTHX has a expense ratio of only 0.14%.

In comparison, mutual funds like PB Mixed Asset Conservative Fund $PUBMXCF has an expense ratio of 1.29% and a management fee of 1.25% and a few other hidden costs such as sales charge, repurchase charge, annual trustee fees and brokerage expenses.

If it weren't for the 30% capital gains tax on $VTTHX upon withdrawal I would have definitely gone with this investment.

I feel that it'll be more convenient for my mum to access information of the PB mutual fund at a bank branch as well.

$VTTHX is definitely convenient (tech-wise) and will be invested through TD Ameritrade.

Let me know what you guys think long-term. My decision is skewed towards Vanguard's retirement fund.

Many thanks.

How old is your mom currently?
Risk appetite?
Will fund be used for cancer treatment or she is already covered under insurance?

Also, why is there a 30% capital gains tax?

Sorry, not 30% capital gains tax but 15% dividend withholding tax. Risk appetite is conservative as my mum is 47 y.o. this year and not working. My dad just passed away recently too. Cancer treatment emergency fund will be 20cash/ 40FD/ 40bonds, treatment partially covered by insurance too.

I don't think there's a capital gain tax on your capital. Rather there's a 30% withholding tax on your dividend received.

You can look for Ireland domiciled ETFs with same target / index rather than US domiciled ETFs, to save on WHTs since you will only get 15% WHT on dividends.

You already know the answer yourself. Forget about unit trusts.

Heck if you want local, just go StashAway tho you cannot pick your ETFs but rely on risk index. Note the 0.8% management fee (on top of your etf expense ratios)

This post has been edited by polarzbearz: Dec 4 2020, 07:57 PM

Isn't that Vanguard fund a bit risky considering your mums situation? The fund is structured for those who are planning to retire in 2030-35. It carries a higher risk in the earlier years and will progressively get less risky as it nears 2035.

Meaning, if u don't stick to it to the end and u exit early (say to pay medical bills) , you might not get good results.

The PB Balanced Fund is less risky, but of course, the fees are high.

But these are not the only 2 options. You might want to consider robo advisors such as Stashaway or do your own DIY balanced fund.

This post has been edited by Cubalagi: Dec 4 2020, 08:26 PM

Thanks for your reply. This retirement fund is separate from our emergency fund/ education fund etc. and it's to prepare for if my mum beats her cancer. The amount stated are funds that aren't required and can be locked in until 2035.

it dipped about 30% earlier this year. what if another bear market comes and down 40%? Is this within your risk level?
I briefly look at the avg annual gain, it's about 8% or 56k return on a 700k investment, while max draw down is 210k.

perhaps you can consider putting portion of the funds into high risk ETFs with proven record, then the rest in FDs under promo rate.
for example put 150k into high risk ETFs that yield 25% p.a = 37.5k
balance 550k in FDs at 3% p.a = 16.5k

From there you can get avg 54k p.a. worse case if total loss (which is almost impossible if you diversify into few ETFs), ur loss only 150k.

Hey mate, thanks for your suggestion. Where'd you find a FD yielding 3% p.a.? Most FDs are hovering around 2%. An aggressive ETF you say. I personally have got ARKK in my personal portfolio. VTTHX consists of the total stock market (similar to VTI), total international stock market (similar to VXUS), total bond and international bond funds which I believe which adds up to provide similar risk portfolio as what you've suggested. Bonds would definitely be riskier than FD's but with what FDs are yielding now with respect to inflation, I don't think it's worth it? Returns from FDs might even go to negative territory with the inflation in Malaysia. The equity portion of VTTHX would be less riskier compared to that of if I just went with ARKK as it covers the world market. Over a long term period (15 years), the dips should smooth out. Let me know what you think. I'll be calling a few banks to inquire about Amanah Saham too. If that's available I'll probably just put all the funds in there. Any tips on attaining Amanah Saham (fixed priced fund non-bumi ASM) shares would be much appreciated.

you need to do your own work man, we can only share views and let you know some of the possibilities, but can't not give you A to Z step by step, such services you need to seek for professional consultant or wealth planner, the good ones charge by hour just for consultation alone, the rate is higher than specialist doctors in hospital.

with all due respect, personally i dont consider those in banks that sell you mutual funds or investment plans as good wealth planner, they are just sales people with limited knowledge in investment markets. also its conflict of interest, most of the time, their priority is how much can get from commission instead of your needs.

think long term and average out, we were having over 4% just 2 years ago.

https://forum.lowyat.net/topic/4154481/+9980

btw, well done on ARKK, I had some in the past as well, hope catherine can sort out the company take over issue soon.

This post has been edited by lamode: Dec 5 2020, 12:59 PM

Will have a look mate. Thanks. I've consulted a financial planner as well but he's skewed to promoting his products too so I'm just taking it with a grain of salt. Hard to find a good financial planner here in Malaysia especially where I'm from. Wouldn't mind paying by the hour even if it was legitimate.

You can either:
1. DIY with irish funds and roughly mimic vanguard's allocation (starting about 80/20 equity/bond for 5 years, then gliding yearly for next 10 years to achieve 30/70 equity/bond)
2. If you're going with a local shop/advisor, go with one with access to multiple fund houses. Oh and avoid structured investments by banks

Thanks for your solid suggestion.

I'm an Australian resident so was wondering what are some reputable online investment platforms available to Malaysians?

I know of Interactive Brokers, TDAmeritrade and robo-advisor Stashaway. My friend in Australia uses IB and I personally use an Australian platform. Appreciate any suggestions of reputable platforms including ones that offer Irish SP500 ETFs etc.

Also, regarding access to multiple fund houses. Are you referring to platforms such as Fundsupermart?

The main reason why I'm skewed towards investment funds provided by banks is that my mum is traditional thinking and would mostly likely trust banks. So I'm doing my research through Morningstar to garner the best possible equity/ bond funds provided by banks.

Was the reason you suggested 'multiple fund houses' because they charge lower fees/ expense ratio compared to banks?

Cheers.

As long as u r very confident that u won't withdraw in the next 10 years then go ahead.

Im about the same age as your mum and I DIY my retirement portfolio using mostly ETF, some stocks and savings (I prefer flexi loan acc than FD).

Btw EPF withdrawal is currently still at 50 and 55. Not as u said in your first post (65).

This post has been edited by Cubalagi: Dec 6 2020, 08:33 AM

Thanks for the reply and info on EPF.

Will reweigh my options.

Really keen on getting Amanah Saham shares at the moment and will call up a few banks to inquire.

local funds annual management fees/expenses is generally too expensive, more suitable for uninitiated.

This post has been edited by icemanfx: Dec 6 2020, 11:24 AM

Quite a number of us here uses Interactive Brokers as well, as it has one of the widest reach with lower fees / spot exchange rates. Though we usually open via tradestation global with slightly higher commissions but at least there's no $10 monthly fees with measly $1000 usd portfolio holdings (compared to direct IBKR's account which requires 100k USD to be eligible for monthly fees waiver)

If you're interested you can check out this lowyat thread where most have shared their experiences. I've also written a guide on
Step-by-step to getting started via TradeStation Global (Interactive Brokers)

AUD is one of the accepted currency / bank transfer (local to local) via interactive brokers AU account so you can also save on forex (I assume your main currency is AUD being AU tax resident)

Many thanks for the TradeStation guide. Will check it out.

Currency and estate will be in MYR where 30% dividend tax will be withheld as we are investing in US stocks etc.

Anyways, before I apply to open an account with either IBKR or TradeStation, do you know if Malaysians can buy Irish-domiciled S&P500 ETFs such as VUSA and IUSA on the platform?

Since buying a Irish-domiciled ETF would reduce the tax withholding to only 15% and there were some positive implications on estate tax if my mother doesn't make it and the account is under her name (planning on making a joint account); but more to research on this aspect.

Knowing if IBKR has the option to buy VTTHX would be great too.

TIA.

Definitely agree that local managed funds etc. are not as good.

However, my mum would most likely go with these funds as she'd trust banks more compared to platforms like IBKR.

There is a convenience side to it as well where she could just go to the bank to get the latest info on her portfolio (she isn't tech-savvy) and minimized currency risk.

Bank managed funds might have an edge during estate planning as the tax implications on investing in US/ Ireland ETFs are unclear (if my mum passes away).

Will bring this up for discussion soon.

Was about to go there (Irish domiciled vs. US domiciled) but you beat me to it Personally I went with CSP1 as well since it means 15% WHT (Ireland domiciled funds) rather than 30% WHT (US domiciled funds) being a Malaysian Tax Resident.

London Stock Exchange is one of their coverage. Just make sure to request "London" stock market access during your account opening (i selected US, HK, London, Singapore). Both VUSA/IUSA are there (well it's London Stock Exchange ).

Many thanks.

Will decide whether to go with Irish or US soon depending on estate tax implications.

Much to read up on.

Then possibly create an IB account and selecting London Stock Exchange.