Financial literacy plan a good move

Many dabble in the stock and forex market without having the knowledge, end up losing money


THERE was a story in a financial daily yesterday of a retiree complaining he has lost a lot of money investing in an oil palm grower scheme.

He and many others had invested in the scheme hoping to make about 6% return annually in the first phase over a six-year period and then see the amount increase as the yield on the acreage rise as the oil palm trees production levels rise.

Things have not worked out as planned. He and other investors are now seeking the court’s help to wind up the scheme and their money returned.

He is not the only one who has had his expectations of making good returns ruined. You only have to ask some of the people who took out money from the Employees Provident Fund’s (EPF) accounts to invest in unit trusts with the intention to reap higher returns.

Many are regretting it as the 10% return promised turned to a 20% or 30% loss in investment value. They would have been told the timing wasn’t right as the market has had a poor 12 months due to poor earnings growth and volatile global markets with issues like US-China trade tensions.

If the trade tensions brew on and the global economy weakens, the investors will have to wait a few years to see the recover the initial capital.

You can blame greed and lack of knowledge for the problem. Many dabble in the stock and foreign-exchange (forex) market without having the knowledge and end up losing money.

EPF has warned that many retirees spend their savings within two years, while reports indicate civil servants are mired in debts.

Hence, the move by the government to launch its National Strategy for Financial Literacy 2019-2023, which seeks to equip Malaysians with the knowledge to make informed financial decisions and to nurture healthy attitudes in financial management, is timely and most welcome.

The strategy was formulated by the Financial Education Network, an interagency group co-chaired by Bank Negara Malaysia and the Securities Commission Malaysia.

Its founding members consist of the Ministry of Education, Malaysia Deposit Insurance Corp, EPF, Credit Counselling and Debt Management Agency (AKPK) and Permodalan Nasional Bhd.

The literacy programme will focus on empowering individuals to manage their money wisely, to plan ahead and invest for their future, and protect themselves from financial fraud and abuse.

With rising costs of everything from food to healthcare, the core issue the programme must address is to make the public understand the need to balance risk and return with age and one’s financial means.

People who are about to retire must be taught, most if not all, of their money should be put into instruments that generate sustainable income like bonds or fixed deposits, and not in high risk instruments like forex or cryptocurrency.

Retirement should be a period of rest and relaxation, and not spent in courts trying to get one’s money back.

Bhupinder Singh is the corporate desk editor of The Malaysian Reserve.