ASB Loan Vs Traditional Deposit to ASB Account

How to Calculate Dividend 

Before I go further to explain pros and cons of ASB loan, let me clarify how the dividend is calculated. As some of you are aware, the dividend is computed monthly based on the minimum amount of the month but distributed annually. 

Example

Assumptions : 

• You have had RM500 since the 1st January 2012
• 7% dividend declared by PNB for the year of 2012
• no bonus is given

Dividend for January:  0.07/12 months *  RM500 =  RM 2.92 

Let say you put additional RM 400 in Feb: 

 

Dividend for Feb: 0.07/12 months * RM (500 + 400) = RM 5.25

In March, you forget to add money, so : 

Dividend for March: 0.07/12 months * RM (500+400+0) = RM 5.25

And the Calculation goes on for the next months. Thus the annual dividend for the year of 2012 would be: 

Dividend for 2012: RM 2.92 (Jan) + RM 5.25 (Feb) + RM 5.25 (March) + ............

Hope you guys could understand the above calculation. It is simple, yet many people get confused. Now lets go to the next issue which is ASB Loan 

ASB Loan 

At this stage, I'll just point out reasoning only based on  numerical advantage. Using the above formula, I've calculated the traditional way of saving money into ASB vs using loan; 

Assumption: 

• 7% dividend + 1% bonus every year for the next 25 years
• Rm600 payment monthly till reach quota RM 200k (for traditional way)
• RM600 payment monthly to loan (RM100k) for 25 years (for ASB Loan). Rate BLR-1.65

After 25 years: 

Traditional: RM 456K

ASB Loan: RM 675K

You may wish to note that I didn't deduct the total amount of money at the end of the 25 years for the ASB Loan with the total payment to the bank in which in this case is RM 600 * 12 months * 25 years =  RM180K. Some people may argue that we have to deduct it because we pay it to the bank ( other words is enrich the bank). Well, I beg to differ. You may notice that in the assumption above, I put some italic and bold on the 'payment' word. Yes, we pay to the bank for the loan. However, we also pay to the ASB to invest our money. See, it is the same thing! We PAY, so why is there a need to deduct the RM180K? 

However, in my calculation for the traditional way, I stopped putting money into the ASB account in my 15th years because it has reached the quota of RM200k. So that means, for another 10 years, I didn't pay any money which is equivalent to RM 600 * 12 months * 10 years = RM 72K. 

So yea, we have to deduct that 72K if we want to compare with the end amount of using ASB Loan; 

so the end amount of using ASB loan = RM 675k  -72K = RM 603K, which is still RM150k higher than the traditional way. 

Thank you, 

Yours Sincerely, 

Nama Saya Amad. 

Edit: Found the ASB dividend calculator at irwan.biz. Click Traditional way for calculation using ASB calculator for traditional way and ABS Loan for calculation using ASB Calculator using ASB Loan. 

ASB = Skim Cepat Kaya?

My case study today will be covering one of the low-risk investment methods called Amanah Saham, specifically the  Amanah Saham Bumiputra (ASB) since it's the oldest compared to ASN, ASW and etc . Why did I mention it is a low risk? Because these types of investment are backed by the Malaysia government, and will guarantee return of investment more or less 6%-7% per year. Well, it's not much, at least better than fixed deposit and could safeguard your hard-earned money from becoming the victim of inflation.

Ladies and gentlemen, let's look at the past performance of ASB (as our benchmark) and do some background check on it. 

ASB Performance in term of Divident and Bonus from 1990 - 2010 

YEAR	ASB PERFORMANCE		BLR
	DIVIDEND	BONUS
2010	7.50	1.25	6.30
2009	7.30	1.25	5.55
2008	7.00	1.75	6.00
2007	8.00	1.00	6.75
2006	7.30	1.25	6.00
2005	7.25	1.75	6.00
2004	7.25	2.00	6.00
2003	7.25	2.00	6.50
2002	7.00	2.00	6.50
2001	7.00	3.00	6.75
2000	9.75	2.00	6.75
1999	8.50	1.50 + 2.00	8.00
1998	8.00	2.50	10.5 – 12.27
1997	10.25	1.25	9.25
1996	10.25	3.00	8.50
1995	10.00	3.00	6.60
1994	9.50	4.50	8.25
1993	9.00	4.50	9.50
1992	7.50	5.00	9.00
1991	8.50	4.00	7.50
1990	8.00	6.00	7.00

I got the ASB performance table as stated above from here  Of course the author of the blog didn't quote the source of the information, but I do double check with some forums and blogs, and it's pretty much the same thing. For the sake of our discussion, I would not question the accuracy of the number given but what more important is the trend of the performance. The dividend for the year of 2011 was 7.65% + 1.15 bonus  

Based on the data given, from the past 20 years, the dividend paid by PNB to the investors never fail to reach below 7%. I can't recall any other avenues of investment such as unit trust, forex, property or stock that that can perform as consistent as ASB. Without taking into account the bonus, in which it has a different way of calculations, we can safely assume that our return is pretty much guaranteed!.

My next writing would be about ASB loan vs traditional deposit into ASB Account. Stay tune