Wednesday, January 30, 2013

Mortgage - Fixed Rate vs. Floating Rate

What is a Floating-Rate Mortgage?
All commercial banks in Malaysia offering Floating-Rate mortgage, i.e. BLR - 2.2% or BLR-2.4% (depends the loan size and promotion packages).

What is a Fixed-Rate Mortgage?
In Malaysia, only AIA and ING (both Insurance companies) offering Fixed-Rate mortgage. (you are welcome to correct if I'm not so updated)

Fixed-rate, as its name, fix the rate over the term, says 30 years at 4.85% (current promotion rate) while 3 years ago it was about 5.7%.

Below are the "Advantage" of Fixed-Rate extracted from AIA's official website:-

Fixed Rate Loan offers stability by locking in at a fixed rate so your monthly installments are constant throughout the duration of the loan. Otherwise, fluctuating interest rates may exhaust your financial resources as an increase in monthly installments can be a burden especially when other costs of living are on the rise too. Although some financial institutions do not increase your installments, when the interest rate rises, the duration of the loan is extended as your installments are insufficient to cover the increased monthly interest which will eventually increase your principal loan outstanding. In AIA HOME LOAN you are in absolute control of the interest rate and installment. So, personal financial planning can be charted for a clearer financial future for you and your family.

Is it true Fixed-Rate Mortgage is better?
If you believe the BLR (Based-Lending Rate, currently at 6.60%p.a.) will eventually rises, then a fixed-rate is better.

Let's compare

Current Floating Rate, says BLR-2.2% (i.e. 6.6%- 2.2%=4.4%) vs. AIA's 4.85%.

For fixed-rate, you are paying 0.45% higher.

Unless BLR up to 7.05%, it is cheaper (rather, lower interest cost) to have a floating rate mortgage.

So, the key questions is.......will BLR up to 7.05% and higher?

AIA and ING will tell you history where BLR was up to historical high of 11%-12% (but they may not tell you that history may not and unlikely repeat itself because the financial market is very much different than those day)

Let's look at the World's Interest Trend

Countries where interest rate (fixed deposit or equivalents) is 1% or less
- Canada
- Europe
- Hong Kong
- Japan
- Singapore
- Switzerland
- United Kingdom
- United States

Countries where interest is between 1% to 3.0%
- Australia
- Denmark
- Korea
- Malaysia
- New Zealand
- Norway
- Sweden
- Taiwan
- Thailand

Ok, finally, which countries are above 3.0%?
- Brazil
- China
- Egypt
- Hungary
- Iceland
- India
- Indonesia
- Mexico
- Poland
- South America
- Turkey

Will our interest rate increases from 3% to 5% (thus BLR also increase from 6.6% to 7%~8%?)

I don't think so....


Friday, January 25, 2013

RPGT - Determine Date of Acquisition/Disposal

“I bought a landed property at Selangor. The agreement was dated 15.07.2007, and it was subject to the government consent. The consent was obtained at 01.02.2008. So, what was the date of acquisition, for the purpose of calculation of real property gains tax?”

The Paragraph 15, Schedule 2 of the Act provides us the guidelines.
For the unconditional contract, (i.e. the sale of property which is not subject to the government consent), the date of acquisition is the date of the agreement.
However, for conditional contract, like the mentioned above, the date of acquisition is the date of approval given by government.
Therefore, the date of acquisition is 01.02.2008, and if the property sold on or before 31.01.2013, the gain obtained is subject to the real property gains tax.
Same principle applies to date of disposal.
If the above property is going to be sold, which is also subject to government consent, and the government consent obtained on or before 31.01.2013, the transaction is subjected to real property gains tax, regardless when the agreement is dated.


Tuesday, January 22, 2013

Insurance Policy + Trust Deed = Insurance Trust

It is a General Misconception that Trust is for Super Rich and Famous.

TRUST is not only for rich and famous, an Insurance Trust will allow you to create a Trust and fund it easily.

Why using Trust (instead of writing a Will)?
Trust can do things that the Will cannot:-
- Distribute immediately
- Protect against creditors in bankruptcy
- Provide confidentiality etc

What are the advantages for an Insurance Trust?
- Overcome the Section 166 Nomination limitations
- You still benefit from your policy
- Trustee will claim for your TPD and use the $$ for your benefit
- Fund will be available immediately for Education, Medical and Maintenance etc
- Prevent hardship on the child's guardian
- It is revocable by you, flexible to  meet changing circumstances

You buy Insurance to protect your loved ones, but who protects your insurance money (when you are not available)?

Invest Unit Trust with Insurance Policy

Unit Trust Investment has been proven an important tool for many people, whom prefer to outsource the job to expert or have no time and capability to actively manage a portfolio on their own.

However, for those who invest in Unit Trust, I believe over 90% do not understand one important, if not vital fact that, Unit Trust Fund is almost certainly is Open-Ended Fund, except for the which is listed on the Bursa Malaysia and the fund managed by Warren Buffet.

So, what is Open-Ended Fund and why investor must learn and understand it?

Open-Ended Fund means
A type of mutual fund that does not have restrictions on the amount of unit the fund will issue. If demand is high enough, the fund will continue to issue units no matter how many investors there are. Open-end funds also buy back units when investors wish to sell.
Read more:
The major drawback of an Unit Trust Fund is, the Fund Manager, no matter how good, can not control the buying or selling of Units by the Investors, which were mostly influence by the "Greed and Fear" Cycle and efforts of the Sales People.

Thus, a good fund with good investment, at bad time, will have to sell the investment at loss because the Investors redeem the Units. OR, have to buy expensive Investment when Investors buy the Units when market is good. This is proven a reason why most fund can't perform well over long time.

How can we invest in Unit Trust Fund with less impact from above scenario?

Answer - Buy A Unit-Linked Insurance Policy.

Most people buy Unit-Linked Insurance Policy for the purpose of coverage, either for the Medical Plan or the Life. Therefore, the issue of "Greed and Fear" on investment is of minimum impact for the fund manager, thus the fund performance.

Additional advantage is, you get a 2-in-1 plan, investment with certain form of coverage.

How to maximize investment and minimize the Cost of Insurance?

Well, you just need to commit a minimum target premium, usually RM100 per month and the balance will be the Top Up premium, which effectively 95% goes to your preferred Fund.

With the RM100 target premium, you can have a range of coverage at your choice, e.g.
- Life/TPD benefits RM50,000 AND
- Medical Plan OR
- Personal Accident RM50,000

Tuesday, January 15, 2013


  • 有账可查,不理糊涂账。无论有多少财、怎么理,都要先记账,做到有账可查,这样理财就有了基础,不可以理糊涂财。
  • 坚持理财,不搞突击行动。理财是长期持续的事,可不能像打扫卫生一样,偶尔来个“突击行动”。无论是“突击存钱”还是“突击理财”都是很不可取的,花大力气,效率低下。最好的方式,还是让理财日常化,像上班、吃饭一样,成为有规律的行为。
  • 不断学习,打造“理财达人”。别幻想着有个理财顾问了,把自己打造成“理财达人”才是最好的理财途径。学习的方式很多,网络、书刊、交易所、银行的免费投资讲座,只要做有心人,总能不断提高。




Saturday, January 12, 2013

How to Maximize Your Life Insurance Protection?

Most have bought one or more Life Insurance Policy but many still didn't maximize the benefits and protection out of it.


I believe many still don't know about Insurance Trust. Not all Insurance Agent know about it too.

What is an "Insurance Trust"?
Basically, A Life Insurance Policy/Policies and A Trust.

Advantage of having an Insurance Trust, than merely just having a Life Insurance policy with proper nomination:
- it avoids Probate, enable quick distribution of money.
- no legal process to go thru, because the policy (and the claim) belongs to the Trustee.
- you can specify how and when to use the insurance $$ for your children/loved one, to prevent misuse or being conned or any unforeseen circumstances.

Getting a Probate, with a valid Will, will still take times.

Further, having a Section 166 Nomination may have some limitation that you and/or your agent not aware of, including
- limited to only wife and child or parent
- can not specific substitute beneficiary
- can not specific condition to distribute
- can not have periodical distribution, lump sum only.

In case, the minor (child below 18 years old) is the S166 nominee, the surviving parent of minor (i.e. ex-spouse) can claim and spend the insurance sum.

So, after all, by merely having Nomination is definitely not good enough for many people.

Why using Life Insurance Policy to Fund A "Business Buy-Sell Agreement"

If you are in business with other than immediate family member, chance will be one day, one of the business partner will pass-away or fall sick etc.

How do you buy or sell your "non-listed" share?

Even the surviving partners want to buy or even contracted to buy, how to ensure it is paid for?

The answer to a Business Buy-Sell Agreement is
1) Set up a Business Value Protection Trust (BVPT).
2) Properly plan and fund it with Life Insurance Policy.


  • Cheapest way to fund a purchase.
  • Only requires premium payment for the sum assured to be paid to fund a large purchase amount.
  • Business owners need not pay all the cash from their own's savings.
In a BVPT, the documents will be involved, to ensure a complete and executable plan are
1. Buy-Sell Agreement (sets the pricing and terms and conditions)
2. Life Insurance Policy OR Cash (to fund the purchase)
3. Power of Attorney (to allow the Trustee to transfer the share)
4. Trust Deed (to tell the Trustee how to distribute the proceeds)

How does it works?
  1. Determine the Value of Business
  2. Determine the Pricing and Way to Fund the Purchase
  3. Enter into Buy-Sell Agreement
  4. Execute the Power of Attorney
  5. Execute the Trust Deed

Saturday, January 5, 2013

General Insurance - MSIG


Effective from 2 January 2013, we are now the licensed intermediary for MSIG to serve your General Insurance requirement.