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We’re back with Certified Financial Planners Hann and Sani!

Our most recent discussion focuses on investing in 2024 and what sort of strategies investors could employ to maximize profits, plus insights on how the markets will perform next year.

We also touched on a more pressing matter: the new 10% sales tax, which will be imposed on Low-Value Goods below RM500 starting January 1, 2024.

If you missed the insightful session, listen to full replay on Spotify.

Scroll down for a written summary of the session (and more).

ASB paid a 5.25% dividend for 2023. Here’s what you need to know.

The payout consists of a standard income distribution of 4.25 sen/unit and bonus of 1.00 sen/unit.

The bonus applies to all units, which makes the effective return of ASB 5.25% for YA2023.

If you invested since January, you’ll earn:

• RM52.50 with RM1,000

• RM525.00 with RM10,000

• RM2,625.00 with RM50,000

• RM5,250.00 with RM100,000

• RM10,500.00 with RM200,000

This is assuming that you do not withdraw or add any funds throughout the entire year.

But what if I withdrew/added funds?

ASB dividends are calculated based on the lowest balance in your account every month.

To get your total dividend, add up the monthly minimum balance, multiply it with the income distribution, then divide by 12.

Here's an example:

You started the year with RM22,000 and withdrew RM2k in March, then added RM1k in May.

You added RM1k in May, but ASB dividends are based on the lowest monthly balance, so it will only be calculated next month.

2023 dividend = 251,000 units * 5.25 sen / 12 = RM1,098.13

Can non-bumis invest in ASB?

Unfortunately, as the name suggests, ASB is for Bumiputeras only.

For non-bumis, the closest alternatives are ASM, ASM2, and ASM3.

Their investment strategies are pretty similar to ASB, and dividends are calculated the same way, but with no bonuses.

For more examples, click on this link.

New 10% Sales Tax to be imposed on 1 January.

Last week, the government announced a 10% sales tax to be imposed on imported low value goods costing below RM500.

• The tax is only applicable to online purchases.

• Local products will not be affected.

• Purpose is to “enhance competitiveness” of local products.

• Charged individually to sellers on each item, not the total sum.

Since the tax will be imposed on January 1st next year, if you bought any imported LVGs before this period, you will not be taxed, even if the delivery is after January 1.

Vouchers work differently compared to discounts. If you used an RM50 shopping voucher, the 10% sales tax will be levied on the original selling price, before the voucher is applied.

 However, if the seller gives a discount, the sales tax will be based on the discounted selling price.

Will the new Sales Tax make local goods more competitive?

Hann and Sani: On paper, yes. The purpose of the 10% sales tax is to “level the playing field” for local sellers.

Currently, overseas merchants are not taxed when selling imported low value goods, but Malaysian sellers have to pay a 5-10% sales tax.

This gives an unfair advantage to overseas merchants, allowing them to price their goods much cheaper compared to local sellers, even if the products are in a similar category.

Is this new policy likely to increase prices?

Hann and Sani: Most certainly. Sellers who are reluctant to absorb the additional cost will transfer the burden to citizens.

We may see a surge in prices, which should readjust itself once supply and demand have stabilized (ie. new competitors enter the market offering cheaper items).

This also depends on the elasticity of the item itself. In a highly competitive market with many alternatives, sellers can’t afford to raise their prices significantly, or it will drive away customers.

The US Federal Reserve and how it drives the global market

The Federal Reserve’s decisions are more important than you think.

The US is the largest economy in the world, and the dollar makes up 59% of world trade. Any decision made by the US central bank will have ripple effects felt across the world.

EPF and unit trusts like ASB & ASM invest a notable share of their portfolios in the US market.

Therefore, the performance of these funds are partly driven by the US stock market, which are in turn, dependent on the Federal Reserve’s decisions and forecasts.

How will 2024 be for the US market?

Hann and Sani: The Federal Reserve has kept interest rates steady in its final FOMC meeting of 2023. In fact, the committee is looking to reduce them earlier than expected next year.

During the meeting, chairman J. Powell also said that the Fed is pretty much done hiking interest rates, and that a recession is no longer for the committee to reduce rates.

The result was a massive jump in the markets. The S&P, in the past week rallied 3.16%, while back at home, the FBMKLCI recovered 1.50%.

With the committee looking to reduce interest rates earlier than expected, markets are looking to take off in 2024.

However as investors, we must remain cautious. The two wars (Ukraine and the Middle East) are currently still ongoing and the outcomes are unpredictable.

It's best to determine your own risk profile and stick to it.

Leave some dry-powder (or cash) to capitalize on unfortunate events.

How can I maximize our profits and minimize losses next year?

Hann and Sani: to position your investments in 2024,

1. Determine why you are investing (long/short term? And for what?)

2. Adjust your risk profile according to your time horizon. If you’re planning to save for a down payment for a house in the next 5 years, your risk preference should be lower and closer to that of a retiree.

3. Allocate your cash into the assets, and never get greedy and go overboard. If your plan is to have 70% equities in your portfolio, stick to it, even if you believe that the S&P will rally 30% next year.

Here are the returns that you should aim for:

Conservative: 3.50-4.50% pa (ASB, ASM, FDs, Money Market Funds, Bonds, etc.)

Moderate: 4.50-7% pa (Blue chip stocks, ETFs, Mutual funds + mix of conservative)

Aggressive: >7% pa (tech stocks, crypto + mix of moderate and conservative)

Listen to the full discussion on Spotify.

That’s all for this week’s newsletter! Merry Christmas and Happy New Year everyone!

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DISCLAIMER: The information contained in this newsletter is for informational and educational purposes only. Nothing herein shall be construed to be financial, legal, or tax advice.