ASB Financing In 2021: Still Worth It?

In this video, we’ll be talking about ASB investing, and whether ASB financing is still worth it in 2021.

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ASB just announced their dividends for 2020, paying it out to all investors on the 4th of January 2021.

For those of you who missed out, they paid a base dividend of 4.25%, and a special dividend of 0.75% for the first RM30k in your portfolio.

This means that if you have RM100k in there, you’ll get 5% * 30k and 4.25% * 70k, for a total dividend of RM4,475. Your effective dividend yield here then, is 4.48%.

Idk how you guys feel about this, but it seems pretty low doesn’t it?

It’s actually the lowest pay out they’ve had in their entire history. We’ve actually seen a gradual decline since inception, but 2019 and 2020 has really seen sharp decreases in ASB dividends.

So before even going into ASB financing, is it still worth it to invest normally into ASB? The short answer is it depends, but probably yes.

The thing about Amanah Saham is that as an investment, it can’t be compared to the likes of stocks, ETF’s, or cryptocurrency.

We need to remember that it’s almost a risk-free investment, and should be compared to saving account interest rates, fixed deposits, and money market funds. And ASB’s returns have trounced them all in 2020.

At the peak of the stock market crash in March, an RM100k investment in the S&P 500 would be worth around RM65k. If you put it into ASB instead, it would still be worth RM100k. That’s the difference.

This is why I still keep a portion of my investment portfolio in Amanah Saham. There’s no other asset class available to the average Joe that can compare to its risk/reward.

I did some quick calculations on Google Sheets to find out how much money we’d make from ASB Financing in 2021.

ASB Financing 2021 Calculations ⬇

https://docs.google.com/spreadsheets/d/19ed9vhjRnw3ZUInDYB9fOxeU8izs6IDNf0Y6TsUhtsY/edit?usp=sharing

Maybank monthly instalment repayment schedule ⬇

https://www.maybank2u.com.my/iwov-resources/pdf/personal/loans/investment/ASB_Repayment_Table.pdf

Pulling off the product from Maybank, we see that their ASB loans currently have an interest rate of IBR, or Islamic Base rate + 1.8%. At the current IBR of 1.75%, this means that the total interest you’re paying on the loan is about 3.55%. Deduct this from ASB’s 4.25% return and you’ll get a spread of 0.7%. Sounds bad right?

Well its not that straightforward. We need to remember that with ASB financing, we’re utilizing leverage cleverly so your returns are actually higher than that. Based on my assumptions of an RM100k investment, ASB dividends in 2020, and the monthly repayment scheme by Maybank, we’d have an effective return of nearly 14.65%, which is insane.

For those of you who don’t know, investors can usually expect to see a 6-8% annual return and be happy about it. So, getting more than 10% with a product you know has minimal risk could be a no brainer.

ASB FUNDAMENTALS

Overall, they seem to have the objective of diversifying their holdings better. Being a Malaysian fund, I guess its not surprising that over 70% of their investments are in the domestic market. Its probably one of the reasons for their returns as the KLCI didn’t do well in 2020.

Even though its good that they’re supporting the Malaysian stock market, there comes a point where the fund is just managing too much money and has to invest elsewhere.

However in 2020 we do see an increased exposure to international equity. They’ve benefited a lot from this growth in exposure to international investments, as its delivering a larger contribution to gross income.

In 2019, only 10.6% of the funds income came from international investments, seeing an almost 3x increase to 27.3% in 2020. Its quite obvious that this is outperforming their domestic investments, so increasing the exposure will help with future returns.

A final thing to note on their press conference is that they’ve seen an increase in overall Assets Under Management, which means Malaysians have actually invested more in 2020 despite what’s going on, so kudos to us!

Resources & calculations:

Timecodes:

00:00 ASB Financing In 2021: Still Worth It?
0:30 ASB 2020 Dividends
1:50 Is ASB worth it in 2021?
2:10 ASB vs Fixed Deposits vs Stock Market
3:37 My 2020 ASB Financing journey
4:15 Is ASB Financing worth it in 2021?
6:04 What affects ASB Financing returns?
6:58 ASB fundamentals
9:22 Will you take on ASB Financing in 2021?

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Видео ASB Financing In 2021: Still Worth It? канала Millennial Finance