ASB Financing

This post is a summary of ASB loans and why I think it’s an awesome investment

I have been scouring far and wide for the secrets of ASB investing in written form, including more than 100 pages on, so here is a distilled summary of what I’ve found.

ASB is Amanah Saham Bumiputera. Essentially it is a Malaysian Unit Trust Fund that is invested into blue chip shares, some of which are listed here. But investing directly in ASB and using ASB Financing (aka ASB loan) are two very different things.

Maximum investment = RM 200,000 per person
Yield = 7% p.a. (Historically up to 10.25% p.a.)
Unlimited fund size (currently RM 155 billion)
As liquid as cash
All the dividends* are reinvested annually by default

ASB2 is the new cousin of ASB, which is very similar except with a limited fund size of RM 10 billion

ASB Financing is an almost guaranteed get-rich-slow scheme, with emphasis being on the get rich part. Banks are permitted to lend up to RM 200,000 over 30 years per individual. The numbers?

  • Save RM 1,110 monthly (RM 13,320 annually)
  • Become an RM millionaire in 25 years
  • Condition: Get approved for a loan of RM 200,000

Dividends after 12 months:

  • Own saving = RM 505 (ie if you saved RM 1,100 monthly starting from zero)
  • ASB financing = RM 14,000 (27x higher)
    This comes in the first week of January every year
    If you saved by yourself and reinvested all your dividends, it would take you 10 years to reach annual dividends of RM 14,000

Some people advocate recycling (or rolling) the dividends to pay for the following year’s loan repayments. If you do this, then you end up with only RM 200,000 after 25 years, but the cashflow commitment is indeed lower. Think about it – leaving the dividends to compound nets you RM 1,000,000 instead – that is a fivefold difference in the total amount. That’s the miracle of compounding interest. If you can afford the monthly repayments, then by all means do that.

Prior to 2015, the leverage potential was even greater, as banks were allowed to give out loans up to RM 400,000, double their current limit. Given that the natural initial limit of an ASB account is RM 200,000, and the average annual growth is 7%, it would take 10 years for a filled-up account to have a limit of RM 400,000.

I have found that there is much confusion surrounding the ASB investment limit. This is what I now know:

  • Every account starts with a limit of RM 200,000.
  • The limit grows on 1st Jan yearly by the amount of dividends you get.
    • e.g. Investing RM 20,000 for the year increases the limit by RM 700 (to RM 200,700) once the dividends are distributed.
  • As the fund size is uncapped, there is no pre-defined limit to how big your account can grow to – it is limited only by the annual dividend rate and the total duration of your investment

Here is a success story by Buggie whose ASB account size has grown to RM 600,000 after 17 years.

An initial investment of RM 200,000 when the fund started 30 years ago, if never withdrawn, could now be worth up to RM 3,359,923** (2020). That’s an annual compound growth rate of 9.86% p.a.

As a side note, it may also be possible to fill up a larger-than-200k account using a loan compression tactic. This frees up your cash for other uses, eg other investment classes or personal use.

ASB2 Financing came into being in 2017, which increases the total maximum borrowing a person has to RM 400,000 for these 2 vehicles. Bankers have also been giving advice on utilising trusted proxies – e.g. a spouse or a sibling – to gain even greater leverage.

My personal goal is to achieve RM 1,000,000 worth of controlled assets (including RM 700,000 of Other People’s Money) by age 38.

The wait now is for ASB2 Financing to get through the narrow door as the total fund size is limited. Perhaps people would cash out their earnings after dividends are given on 1st April 2019, and that hopefully creates more room for my investment.


*Technically, the term is distributions. I have liberally used dividends to mean distributions in this post.
**Estimate only. Bonuses were calculated differently in the past, so this result may be inaccurate.

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