Step Up Your Investment Game: ASB Loan vs ASB Savings - A full breakdown for youth (especially you!)

Hello youth!

Have you ever dreamed of building a strong nest egg with ASB (Amanah Saham Bumiputera) but felt limited by your current savings?

You are not alone.

Many of us want a piece of that sweet ASB dividend pie, but getting to a significant investment amount can take years of diligent saving.

This is where ASB loans come in, offering an attractive shortcut.

But are they really all they seem?

Let's break it down, kedai kopi style, so you can make an informed decision. ☕

The Nitty Gritty of ASB Loans

First, ASB loans are only for Bumiputera investors.

Here's how they work: banks lend you money to invest in ASB shares, and you pay it back with interest over a period of time.

Think of it as a start to your ASB journey.

Here's a quick summary:

Who can get it? Malaysian Bumiputera, 18-60 years old, good credit rating.

Minimum loan amount: Usually RM10,000 depending on the Bank.

Interest rate: variable, based on base lending rate (BLR).

Lock-in period: Usually 2 years or more, which means that during this time you cannot redeem the units purchased with the loan.

The Big Showdown: ASB Loan vs. ASB Savings

Okay, now for the main event.

Let's see how traditional ASB Savings compares to using an ASB Loan:

ASB Savings

Minimum Investment: RM10

Investment: Pace Gradual, based on savings

Returns: Not leveraged

Cost: None

Interest Rate Risk: None

Lock-in Period: No

ASB Loan

Minimum Investment: RM10,000 (depending on bank)

Investment Pace: Faster, leverage loan amount

Returns: Leveraged returns

Cost: Interest on loan

Interest Rate Risk: Affected by BLR fluctuations

Lock-in Period: Yes (usually 2 years+)

Decision: to borrow or not?

From the table, ASB loans look like a clear winner, right?

Not so fast.

Here's the thing:

ASB loans have interest, but regular savings don't.

Therefore, the most important thing is to make sure that the ASB dividend outweighs the loan interest so that you see a real profit.

To illustrate this, we did a small experiment (see the example below).

Let's say John has RM10,000 in savings every year and is eligible for an ASB loan of RM200,000.

This is what his finances would look like in 20 years:

1. scenario: ASB savings (RM10,000 invested per year)

Total invested capital: RM200,000

Total profit (dividends): RM115500

2. Scenario: ASB loan (borrowed RM200,000, interest 5.5%)

Total equity invested: RM200,000

Total loan interest paid: RM82,378

Total profit (dividends): RM 117,622

Net profit: RM117,622 - RM82,378 = RM35,244

As you can see, Johan is still slightly ahead of ASB loan even with loan interest rates because the dividend rate (5.5% in this example) is higher than the loan interest (4.5%).

But here's the catch:

ASB's dividend rate is not fixed.

It's different every year.

If the dividend falls below the loan interest for a given year, your loan may not be as profitable.

Therefore, ASB loans are a good choice if:

You have a stable income to comfortably manage the loan repayments.

You are sure that the ASB dividend rate will remain stable over time higher than the loan interest rate.

You want to accelerate the growth of your ASB investments.

Remember:

This is not one size fits all.

Fits-every situation.

Do your research, consider your financial goals and risk tolerance before taking the plunge.

ASB Loan vs ASB Savings: Youth, this guide is for YOU!

Building your ASB dream but stuck with slow savings? ASB loans offer a tempting shortcut, but are they worth it? We break it down kedai kopi style to help you decide! ⭐ Unlock the secrets, calculate your returns, and boost your investment game now! #ASB #Malaysia #Investments