Re-investing your fund returns can help your wealth grow over the long time period. Investors need to know the advantages of re-investing the fund returns as this is a simple strategy which takes advantage of the power of compounding.
Reinvestment based on the principle of compounding is a powerful strategy as the annual investment returns are reinvested back into the principle to generate additional returns in future. Even the fixed deposit savers who lock in their money normally choose for monthly compound interest to benefit from the compounding effect. For those unit trust investors who automatically reinvest their distributions back into the fund, their investment can be grown at the fund’s compounded rate of return over the years.
However the compounding effect requires time. The longer the time over we reinvest our returns, the greater rewards we will gain as we allow our investments to grow over the time.
Rental income is liable to tax if the property is situated in Malaysia. This is applicable even though you are not residing in Malaysia or may be a non-resident. Rental income is taxable when it is due and payable to the property owner.
For example, your tenant rented your property from Aug 2012 – Dec 2012. He paid the rent for this period. In Jan 2013, you need to declare the rent for Aug – Dec 2012 in year of assessment 2012 as the rent was due and payable to you in 2012.
The rental is taxed on all the joint owners based on their share in the property, regardless which party receives the rent or whether the owners paid for the property.
Costs you incur to place the property in service, manage it and maintain it are usually deductible. Even if your rental property is temporary vacant, the expenses are still deductible while the property is vacant and held out for rent. Deductible expenses include but not limited to the following:
Asset allocation provides investors a powerful investment advantages as it allows investors to achieve financial goals. By creating a proper asset allocation plan on a timely basis, it can help investors to manage investment portfolios with discipline and consistency.
Choosing the Optimal Mix for Asset Allocation
Asset allocation is to allocating an investor’s investment across different asset classes, which is determined based on their investment objectives, time horizon and risk appetite. It plays an important role which affects their investment returns, thus investors should ensure that the asset allocation chosen best meet their needs.
For most Malaysians, debit may be inevitable but advising your clients to manage their finances and arrears effectively, they can move forward towards achieving financial freedom.
Debt is something that many Malaysian cannot avoid whether taking a loan for buying a house, for tertiary education or for buying a car etc. Nevertheless, accumulative debt when left unmanaged could wreak havoc on one’s journey to financial freedom. For instance, it is imperative that your clients consistently make their mortgage payments as failure to do so can lead to losing their home to the bank, as well as being blacklisted for future loans. Now they don’t want that to happen, do they?
To find out if your clients are knee-deep in debt, you can advise them to use the following ratio that compares their monthly income to their fixed housing loan/car loan/credit card repayment.
Basically a safe ratio level of debt is about 35% of one’s income, with 25% comprising one’s housing loan. Anything higher than that is a sign that they may need to reevaluate their finances.
To stay on top of their finances and debt, here are some tips that investors may find useful:
1. Borrow only as much as you can afford to pay
If they need to take loan, borrow only to the extent that they can afford to pay with their current level of income. Calculate additional costs, e.g, if they are planning to buy a car, add in the costs of petrol, maintenance, toll etc.
2. Don’t’ buy what you don’t need
Ask your clients to think it through before impulsively making a purchase. The rule of thumb is don’t buy something that you cannot afford.
I realized nowadays quite many people are financing their house with flexible home loan.If you have a flexible home loan, you can deposit extra money into your account to reduce the interest charges and also make use of your excess payment when needed. Of course, it will be added to the amount available for withdrawal, and will also affect the daily interest amount charged thereafter to be lesser.
I have received email from readers request for my input regarding the flexible home loan account. They faced the problem with the decision whether bank in to home loan account or put into fixed deposit?
Let us assume that you have a housing loan of RM300k and you have a surplus of RM100k. A fixed deposit account will give you 3% interest.
Mortgage outstanding = RM300,000
Mortgage interest = BLR – 2.2%, BLR = 6.6%
Mortgage tenure= 30 years
Monthly repayment = RM1,502
Long term interest charged = RM240,821