Over the weekend, a friend asked me why he should invest in gold when he has Amanah Saham Bumiputera (ASB). Just to recap, ASB aims to generate long term, consistent and competitive returns for investors while ensuring the preservation of capital at minimal risk tolerance level. As such, ASB was designed as a fixed price equity income fund where the price per unit of the fund is fixed at RM1.00. What does this mean? The value of each unit stays at RM1 no matter how well the fund does. Whereas in normal unit trusts, the unit price changes as the value of investments rise and fall.
Since its launch in 1990, ASB has remained one of the country’s most popular funds with RM170+b in assets under management and 10m unit holders. More importantly, with a minimum initial investment of RM10 and a minimum additional investment size of RM1, its nearly 8m unit holders with less than RM5,000 in their account is testimony to its affordability. And in spite of the clear long term downward trend ever since the fund began in 1990, ASB continues to deliver a distribution that is above the returns from fixed deposits from banks (see graph below). For those who do not have sufficient savings to invest in ASB, you can even get a loan for up to 100% of the investment. The attractive financing essentially means that you are essentially getting money-for-nothing provided the distribution remains above the cost of your loan – which is currently about 3.5%. However, the long term downward trend poses a key question – will ASB manage to keep its distribution above the cost of the loan? In 2020, it paid out 5% in total.
Source: ASNB, macrotrends, fxempire
So with such an attractive proposition in ASB, why would you even consider gold? For me, the single most important reason is diversification. In 2020, 94% of the ASB portfolio was Malaysian-based investments. The ramification of a portfolio that is essentially Malaysian is best illustrated by the 2020 returns of Malaysia’s KLCI (2.4%) against MSCI All-Country World Equity (12.8%). Simply put, if you want an easy way to diversify your hard earned savings beyond Malaysia, a little gold in your portfolio will do just that.
As you can see, over the life of ASB, gold’s performance has generally been good.
Assumption: ASB distributions reinvested
At HelloGold, we offer you two ways to diversify your portfolio in gold. You can either monitor and buy gold when the price suits you or enrol in our SmartSaver plan and sit back while we buy gold for you at the lowest price every working day. The choice is yours. Get saving today!