Posted by - September 18, 2024

Plan to Increase Retirement Funds in EPF Account 1 Through Private Mandate

 

Boosting retirement funds is a crucial step in ensuring financial stability for the future. In Malaysia, the Employees Provident Fund (EPF) serves as a primary savings instrument for post-retirement planning. For those looking to grow their funds more aggressively and in a customized manner, investing through a Private Mandate using a portion of EPF Account 1 is a smart option.

Here is a guide and the steps to plan a Private Mandate investment to enhance your retirement funds.

1. Understanding the Private Mandate Concept

A Private Mandate is an investment approach offering customized portfolio management tailored to the needs and objectives of the investor. In the context of EPF investments, a Private Mandate allows licensed fund managers to manage your funds in a more specific way, taking into account your risk tolerance, investment duration, and financial goals.

This type of investment differs from unit trusts because it provides more control and flexibility in determining investment strategies, asset selection, and portfolio allocation.

2. Defining Your Retirement Goals

The first step in planning a Private Mandate investment is to set clear retirement goals. These goals include:

  • The amount of funds you need for retirement
  • The time frame before you retire
  • The lifestyle you want after retirement

With clear goals, the Private Mandate fund manager can plan an appropriate investment strategy to achieve your target retirement funds.

3. Check Eligibility for Investment via EPF

EPF allows members with savings exceeding the minimum balance in Account 1 to invest part of their savings in Private Mandate through the Members Investment Scheme (MIS). You can check your investment eligibility through the EPF portal.

  • Investment Limit: EPF allows up to 30% of your savings in Account 1 (above the minimum amount set) to be invested in a Private Mandate.
  • Investment Flexibility: You can choose a Private Mandate that offers flexibility in asset investment and a variety of asset classes, such as equities, bonds, or real estate.

4. Choosing the Right Private Mandate Fund Manager

Selecting an experienced and qualified Private Mandate fund manager is crucial for the success of your investment. Some criteria to consider when choosing a fund manager include:

  • Reputation and Performance: Check the fund manager’s track record in managing long-term investments.
  • Expertise in Asset Classes: Ensure the fund manager has expertise in the asset classes you wish to invest in, such as stocks, bonds, or real estate.
  • Level of Service and Communication: A good fund manager will provide regular performance reports and communicate with you about any changes in the investment strategy.

5. Determining Investment Strategy Based on Risk Profile

Private Mandate offers flexibility in determining an investment strategy based on your risk profile and investment time frame. Some strategies you can consider include:

  • Aggressive Investment: Suitable for younger investors with a longer investment horizon before retirement. This strategy involves investing in equities or stocks, which offer high return potential but come with higher risk.
  • Moderate Investment: A balanced strategy between equities and bonds. Suitable for investors approaching retirement and seeking stability with controlled risk.
  • Conservative Investment: Focuses on bonds and fixed-income instruments that provide stable returns with lower risk, ideal for investors nearing retirement.

6. Monitor and Adjust Your Investment

One of the advantages of a Private Mandate is the ability to customize and adjust your investment portfolio according to changes in the market or your financial goals. Your fund manager will regularly monitor the portfolio’s performance and make necessary adjustments to ensure consistent growth of your retirement funds.

7. Benefits of Investing in Private Mandate Through EPF

  • Professional Management: You benefit from professional fund managers who will manage your portfolio based on your specific goals.
  • Higher Returns: Compared to leaving your savings in EPF, which provides stable but limited annual dividends, a Private Mandate offers the opportunity to achieve higher returns through capital market investments.
  • Flexibility and Customization: Private Mandate gives investors the freedom to choose investment strategies and asset classes according to individual needs.

8. Risks of Private Mandate Investment

While Private Mandate offers higher return potential, there are also risks involved:

  • Market Volatility: Investments in equities or stocks are subject to market fluctuations, which can affect the value of the investment in the short term.
  • Management Costs: The management fees for Private Mandate might be higher compared to unit trusts, and this should be considered in your investment planning.

Conclusion

Investing through a Private Mandate using EPF Account 1 is an effective strategy for increasing retirement funds. With the potential for higher returns, professional management, and flexibility in investment strategies, Private Mandate offers the opportunity to tailor investments to your individual financial goals.

However, it’s important to understand the associated risks and work closely with an experienced fund manager to ensure your investment strategy remains consistent and aligned with your retirement goals. With careful planning, a Private Mandate can help you achieve a more comfortable and secure retirement.

© DKF