Where to Stash Your Money For Property Purchase?

Where should you keep your capital for property purchase?

If you are keeping them in your saving account, I can imagine your money crying for better home.

Yes! Your need a better place than saving account, for it offers very tiny amount of interest. Your money can work harder, run faster for you.

Let’s assume that your goal is to prepare RM 70,000 to buy a property in 3 years time.

Goal : Save up to RM 70,000

Current saving : RM 30,000

Duration : 3 years

Therefore, you need to save RM 40,000 in 3 years time.

Using simple calculation (without taking compound interest), you will need to save RM 1111 per month.

Imagine, this property is your promise to your beloved life partner to start own little family.

Can you afford to lose your money?

Mostly, you can’t.

You need investments which preserve your money.

Preservation means that you put in RM 1111, you get back RM 1111 plus some interest.

Also, you must be able to liquidate your money in 3 years time/ whenever good deals come to you. Liquidity is crucial here.

Investments with high capital preservation and high liquidity are generally lower risk & lower return in nature.

Your investment for your capital (property purchase) should come with capital preservation, high liquidity & low risk.

Yes, saving account serves the purpose as above.
But, there are better places for your money to sit in.

1. Money Market Fund

  • Generally this fund invest in cash and/or bonds.
  • No lock in period for this investment. Can do deposit and withdrawal anytime.
  • It is very liquid that you even earn interest with one day placement.
  • There are fixed price/ variable price funds, choose the one with fixed price. Remember, we need to preserve your money.
  • The return ranges from 3.0 – 3.7% p.a. depending on funds, it fluctuates with Bank Negara’s OPR (overnight policy rate)

2. Bank Fixed Deposit

  • There is lock in period for your money (1 month, 3 months, 6 months, 1 year, etc)
  • Capital is guaranteed by PIDM.
  • If you withdraw money before tenure ends, you will lose your interest.
  • Return ranges from 3% – 3.85% p.a., it fluctuates with Bank Negara’s OPR (overnight policy rate)

3. Amanah Saham Malaysia

  • This fund generally gives consistent & high dividend rate
  • No lock in period for this investment. Can buy & sell based on supply & demand.
  • There are fixed price/ variable price funds, choose the one with fixed price. Remember, we need to preserve your money.
  • Current dividend rate ~5 – 6% p.a.

Next Question.

How should you allocate your money?

100% into fixed deposit/ amanah saham malaysia/ money market?

For myself I would prefer to take money market due to its high liquidity & decent interest.

 “I will prepare and some day my chance will come.” 

Abraham Lincoln

So, I want to be ready! I would not want my money to be stuck somewhere when I encounter great deal on property!

This is just my preference.

If you have firm plan that you will ONLY buy house, let say, after 3 years.

You can may be allocate 40% into money market fund, 30% into fixed deposit, 30% into Amanah Saham Malaysia based on your own preference.

Most importantly, before you commit into any investment, do your homework.

Ensure you understand what you are committing into & make sure the investment is in line with your financial goals.

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