If you a bumiputera in Malaysia I’m sure you have heard of Amanah Saham Bumiputera or better known as ASB. In fact most of you might already have invested in this type of unit trust, afterall is there any reason for you not to invest in it? I don’t see any reason to say no. Lately there are some banks like CIMB,MAYBANK and RHB offering loans to invest in ASB and the frequent question ask is does it worth it to take a loan for your ASB investment? Well today I’m going to compare it for you so that it will help you to decide what is the best method to choose, the method that I want to show to you are:

1)      Bank Loan ( pay the whole installment tenure with your income)

2)      Bank Loan (pay only the 1^st year with your income and the year after by using the dividend generated from ASB)

3)      Regular investment (No loan taken)

Before we going further let set a few details, let set the dividend, installment and interest charge on the loan are same as below for the whole loan tenure:

Loan Amount              : RM 50 000

Loan Tenure                : 25 years

Interest rate                 : 4.95%

Monthly Installment   : RM 292

ASB Dividend            : 8%  annually

Now let proceed to the method that we are going to compare.

METHOD 1: BANK LOAN (pay the whole installment tenure with your income)

For this method your investment of RM 50 000 will become RM 342 423.76 after 25 years if you don’t disturb the dividend and let it compounded for the whole 25 years. The amount that you have pay for the whole 25 years is RM 87 600. So it means your net profit is RM 254 823.76 .

METHOD 2: BANK LOAN (pay only the 1^st year with your income and the year after by using the dividend generated from ASB)

For this method your investment of RM 50 000 will become RM 89 764.58 after 25 years. Since you only pay for the first year so the amount that you actually pay for your self is RM 3504. But by using this method RM 84 096.00 of your ASB dividend has been used to pay for the installment which also will effect the compounded effect on your net profit which is reduce to RM 86 260.58 compare to the first method where the net profit is RM 254 823.76

METHOD 3: REGULAR INVESTMENT (No Loan Taken)

Now let see if you decide not to take the loan but discipline yourself to invest regularly  RM 292 monthly for 25 years.  In 25 years your investment  will be RM 267 133.11 and the amount that you have invest is RM 87 600. Your net profit is RM 179 533.11