Was Genneva Gold Investment Scheme a Scam?

Lately, I have a long-lost friend calling me out for a drink. Without hesitation, I am more than happy to meet up with him, a successful businessman. Well, we started off with very casual conversation from politic to investment. Yes, investment is my all-time favorite topic and he knew it. Once my hot button was pressed, he share with me the Genneva Gold Investment Scheme.

With its headquarter situated at Kuchai Entrepreneurs Park, Genneva has evolved to become one of the leading and most innovative gold traders in Malaysia and neighboring countries. What I want to stress here is INNOVATIVE. Why? Please read on...

About the Scheme

Through Genneva's unique wealth sharing platform, you are not only the owner of the gold bullion in hand, you also will get 1.8-2.5% cash return (hibah) every month for 3 months under Genneva's Syariah principle-based product plan. (see picture below)

It is similar to placing your savings in Fixed Deposit. Whether the price of gold goes up or down, your capital is 100% protected with an annualized return of 21.6-30.0%. Whilst if you placed your money into fixed deposit, which only gives you around 3% per year, which one is better? In addition, at the end of each tenure (4 months), you can return the Gold Bullion at the SAME price that you bought the gold. This means a 100% capital protection and guaranteed above 20% return.

WOW. Amazing, fantastic, unbelievable, right? Wait.................................

As an investor, we always reminded that be careful on whatever schemes that promise to gives us high return. Some more, there is NO risk at all in this case. Without rushing for a deal, I search through their website and read some forums on the scheme. It was stated that the company has complied with BAFIA 1989 act and AMLA 2001 act in its website. However, forums are hot in this topic with many people commenting that it was a scam and many Genneva-friendly people refuted their claims. Which side was correct?

Here, Finance Malaysia would like to gather public opinions and comments. Whether you like it or not, it's up to you to judge and decide. For many people, they would rather refrained from entering into this scheme. Why?

1. The return is too good to be true. Minimum of 21.6% annualized return, some more it is Guaranteed!!! How Genneva going to guaranteed such attractive return?
2. Can Genneva generate better return from other investment using the capital? (Better than Warren Buffett?) If not, the business model for sure will fail and it's a scam...
3. Some said Genneva sell gold at a rate more than 20% above market price? Some claims that this is Genneva's admin and processing costs. If that's true, Genneva is making huge profit from us then giving us back the said hibah. Why invest then?
4. Yes. You can get the physical gold bullion after 4 months. But, how are you going to store it? Investors should look at the cost of holding gold bullion too. That is investment expenses which will eat into the return.
5. Who is going to certify that the gold bullion was genuine?

Unbelievable 1Malaysia Amanah Rakyat Scheme?

Did you watch TV news just now? There is a good news for Malaysian who are looking for higher saving rate for their monies. Yes. I am talking about the fresh from oven 1Malaysia Amanah Rakyat scheme. The scheme was launched by Prime Minister, which aimed at helping those with a monthly household income of RM3,000 and below.

Unlike the previous series, the new scheme was a hybrid of a unit trust investment and loan product, capable of generating a consistent cash flow or monthly income. It will be made available from Jan 30. But, the best part is it comes with a Guaranteed return. Unbelievable?

The limit is RM5,000 and it can be bought through savings or investment loans from selected financial institutions, such as Maybank, CIMB, RHB and BSN. Investors would get a guaranteed RM134 monthly and for those who borrow, they only need to pay RM84 a month and still get RM50 in profit.

Too Good to be TRUE?

Let's us calculate the return on investment. If investors fork out RM5,000 themselves to invest, the return would be RM1,608 per annum (RM134 x 12 months) and was equivalent to 32%. You don't have to calculate again. It's 32%, some more guaranteed.

Well, how about by borrowing the RM5,000 investment capital? If you borrow to invest, based on the RM50 net profit per month, it works out to be RM600 profit per year or equivalent to 12% return. Still consider very good. Nope, it was infinite return though because basically you pay nothing up-front to make 12% return, right?

Comparing to Fixed Deposit rate of only 3.25% per annum currently, 32% is 10 times that figure. Example, if you put your money into the new scheme, it was equivalent to putting your money into 12months FD for 10 years!!!

How did PNB guarantee?

Frankly speaking, Finance Malaysia really do not know. We're cracking our head hard now, and yet still do not have any clue. I think only PNB and Government know. Maybe, this is just another way of dishing out money to the hand of Rakyat. The special part is Government giving out beautifully this time indirectly (but, it still very obvious for us).

New Fund: RHB Dynamic Oil-Gold Capital Protected Fund

Launched on 11th March 2011, RHB Dynamic Oil-Gold Capital Protected fund is investing in oil and gold, which have the potential to perform in both areas that have great bullish and bearish markets.

This is a 3 years capital protected fund. As usual, it will invests at least 85% of the NAV in zero-coupon negotiable instruments of deposits. Meanwhile, up to 10% of the fund's NAV will invest in an over-the-counter (OTC) option that gave investors returns (if any).

The OTC option will provide exposure to the performance of the Option Strategy, which is an index, maintained by the issuer of the OTC option and is subject to a dynamic risk adjustment linked to the realized volatility of the underlying.

Option Strategy

This Option Strategy is a rules-based strategy computed and developed by the option issuer / counterparty. It aims to tap into the growth of oil and gold through the use of a "momentum" based strategy to capture the trends of the Underlying and also, volatility stabilization to reduce the exposure to the Underlying if the volatility is high.

The theory behind momentum strategy assumes that a leading performer from the last period will continue to be leading performer in the next period, while the volatility stabilization will protect investors against sudden changes in the Underlying prices.

How to determined the asset class?

In determining which asset class to invest into, the Option Strategy will look at the below rations:

1. (gold price / oil price) spot ratio
2. 60 days Moving Average (MA) of the Gold / Oil Ratio

To read the prospectus, please click here.

Source: RHB Investment Management

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FIMM is a Self-Regulating Organization now. What does it mean?

My First Home Scheme: Home of Trouble Ahead?

Once again, to address the affordability issues of properties, MyFirst Home Scheme (My1st) was launched by government on 8th March 2011. Thanks for addressing the problem faced by young Malaysians working adults. But, does it really worth to even think about the scheme?

Of course, owning a house at young age is a good start to family planning. In fact, we're living in a society where buying a new house tights closely to starting a family. But, this is not necessary a MUST to everyone of us. We must do proper planning before committing for such a long-term loan with such huge amount. Buying a house is not buying an iPad or iPhone.

Only apartments are likely with less than RM220,000 price tags in Klang Valley now

Highlights of My First Home Scheme...

• For those earning less than RM3,000 monthly
• Working in private sector
• Confirmed employees with a minimum of 6 months in the job
• Joint applications are allowed (both in private sector and are family members)
• 100% loan financing for first house purchasing
• Eligible houses: Between RM100,000 and RM220,000
• Both under construction or completed properties
• Repayment period of up to 30 years
• Monthly loan repayment must be < 1/3 of applicants' monthly gross income
• 25 participating banks / financial institutions

Burning questions to participating banks...

1. Does the participating banks offering the same rate as currently practiced?
2. Does the banks really allocate sufficient funds for such loan?
3. Would the bank perform stricter credit checks since many borrowers are young and categorized as higher risk group?

Burning questions to borrowers...

1. Are there any houses out there you still think that is not overvalue? Still berbaloi?
2. Assumed that you found one, does it fit into your desired picture? Safe surrounding?
3. Assumed that you also found one, are you quick enough to snap it?

"Trouble Ahead"?

Assuming that loan rates as BLR-2.2% (BLR currently is 6.30%) and a 100% loan amount of RM220,000, the monthly loan repayment is RM1,063. If an eligible guy take the loan with maximum salary of RM3,000 allowed, the take home pay after EPF deduction was RM2,670 only. This translates into 40% of net income!

Example calculations of monthly loan repayment

Do not forget the legal fees, stamp duty, fire insurance, MRTA, cukai pintu, cukai tanah and renovations fees! I think most of our fresh graduates will buy a new car first. Assuming that the car loan installment is RM500 monthly, this would add up to 58% of net income!

To make trouble bigger, please take note of the changing interest rate environment, which means the BLR would possibly revised upward in the future. Then, your loan repayment will be adjusted higher accordingly. Can you afford your loan repayment then?

Related posts:

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70% Loan to Value (Nov 2010)

Why China Raised Interest Rate? And, what's the effect?

Motor Insurance to cost more starting 2012?

Last year, Malaysia Automobile Association (MAA) reported a record number of cars sold. Are you one of them? If you're not in that statistic yet and planning to own a new car now, please read this post which could scare you away.

In fact, petrol prices are heading up again since 2008 with prices of RON97 reviewing monthly. Without failed, the price of RON97 is going up consecutively for the past few months. Anyway, are you driving fuel-efficiency car like me? Despite that I am pumping RON95 petrol and driving the so called "fuel-efficiency" car, I still feel the pain of pumping money.

Source: Malaysia Automobile Association

What to do?

If you don't eat, your car still have to "drink" ma. Uncertainties in Middle East is already spiking up oil prices globally. You think this is the worst for motorists like us?

By "pouring oil on fire" (to make things even worse), government plans to gradually increase motor insurance premiums from 2012 onwards under the new motor insurance framework to be prepared by Bank Negara Malaysia (BNM).

How much more?

Up by between 250% to 450%?

Bank Negara assistant governor citing it totally incorrect. He said the premiums increases would be gradual, and spread over 4 years. See chart below for illustration made. Please take note that the increase will depends on vehicle's age and motorist's history of claims.

www.financemalaysia.blogspot.com

Why we need the new framework?

1. This is the 1st revision since 1978
2. Government plan to do away with tariffs for motor insurance business in 2016
3. Insurance companies are crying over high claim costs which make their business unprofitable

On the flip side, the new scheme would see improvements in the overall delivery system including addressing issues relating to affordability and accessibility to Malaysian Motor Insurance Pool cover. Hence, it could significantly reduce claims settlement period to between 6 - 18 months from more than a year currently.

According to Bank Negara, the motor insurance business incurred an estimated annual loss of RM650 million as at 2009/2010, which means the motor insurance business is unsustainable if we don't act now.

Related posts:

1. Proton loves Perodua to avoid extinction?
2. Fraudulent Insurance Claims and YOU

EPF declares 5.8% dividend rate for 2010

For the financial year ended 31 December 2010, Employees Provident Fund (EPF) announced a 5.8% dividend rate. This translates into RM21.61 billion, which is the highest dividend payout amount ever to members, an increase of 11.55% over the 2009 dividend payout of RM19.37 billion.

For the year 2009, the dividend rate is 5.65%. "The remarkable investment income achieved in 2010 was especially driven by the performance of equity investments. The improved financial and economic conditions provided the market with sufficient liquidity, allowing profit taking activities throughout the year", said EPF chairman in statement issued.

Who is the main contributor?

Buoyed by a good year for the equities market, equities were the largest contributor to the EPF's gross investment income in 2010, representing 45.45% of EPF's total gross investment income. (See Table 1)

Source: EPF website

During the year under review, EPF total investment assets also continued to register healthy growth by crossing the RM400 billion mark to stand at RM440.52 billion as at 31 December 2010.

EPF's investment strategies are broadly guided by its Strategic Asset Allocation model which was designed to fit EPF's risk and return profile and to maintain consistent returns in the long run. The year 2010 saw about 2/3 of EPF's total investment assets remaining in low risks fixed income instruments with stable streams of income.

Accordingly, members may check their EPF Account Statement for the crediting of the 2010 dividend, either via EPF kiosks, counters or i-Akaun, from 21 February 2011 onwards.

Source: EPF website

Related Posts:

Revised EPF approved funds effective 1 September 2010

EPF: i-Akaun

Fraudulent Insurance Claims and YOU

Recently, theStar highlighting a serious issue pertaining to insurance claims - Fraud Claims. It even started with staggering paragraph "Fingers have been chopped off, medical ailments exaggerated and even death faked - all for the purpose of fraudulent insurance claims".

Among the issues:

• RM500 mil in bogus insurance claims are detected each year
• At least 2 insurance firms have folded as a result of high compensation claims compounded by fraud
• Insurance firms fight back by setting up special fraud detection units

Regarding to this topic, Finance Malaysia would like to shares some views here pertaining to the effects on Malaysians as a whole. And, most importantly, the impact of insurer would definitely pass it to people insured. Why I said so?

First, you must understand how insurance companies compute their premiums charged to each clients. If the insurer is financially stronger, it may charged a lower premium for the same amount of coverage on its policies. In other words, if an insurer is facing financial problems, it may raised its premium charged, even to their existing loyal customers.

If your friend is making a fraud case, let it be?

For example, one of your friend is making fraud claims by collaborating with a particular doctor and agent to issue a false physician statement. Subsequently, your friend could received compensation from insurance company based on that statement. Of course, you can closed one eye and let it be. But, your inaction would lead to higher claim amount being paid by that insurance company for the wrong reasons. If those act was rampant everywhere, insurance companies could raised its premium imposed. So luckily, if you're insured by the same company, you could be a victim of your friend's unlawful act.

Supposedly, we should advise whoever out there to stop making fraud claims as it may abuse the whole insurance systems. Objective of getting an insurance is to transfer our risk to third party, hoping that we could financially went through unfortunate events which may happened,  NOT to gain from an insurance.

Think about this:

What is the purpose of insurance?

Protection or Investment?

Revised EPF approved funds effective 1 Sept 2010

Effective 1 September 2010, there are 223 unit trust funds approved under the EPF Members Investment Scheme (EPF-MIS). The list of EPF approved funds is updated upon conducting the fund evaluation exercise based on EPF-MIS fund evaluation methodology (FEM).

Under the FEM, funds must meet the set standard criteria, including:-

1. At least 3-years track records
2. Have investment mandate of not exceeding 30% in overseas assets
3. Consistency in return performance among peers/ with benchmark

How frequent will it be reviewed?

By using an international research house rating data as input in the assessment and evaluation of funds, the exercise will be conducted once a year. 

Suspended Funds?

Funds that underperformed their peers will be suspended, until they are qualified to be reinstated. Suspended funds are not allowed to received new investment under the EPF-MIS, yet investments made by investors prior to the suspension are nevertheless allowed to remain in the funds.

Suspended Funds are loss-making funds?

Not necessary. FEM is just a measure of relative performance, as suspended funds may still generate strong profits, but not as high as their peers.

Please click "EPF approved funds" for the list of 223 funds.

Related links:-

Tax Benefits of Unit Trust YOU must know

Budget 2011: Goodies for first-time house buyers

First Home Scheme was being introduced by the Government in Budget 2011 as below to encourage home ownership among Malaysians:

• Specially cater for first-time house buyers with monthly household income below RM3,000.
• 100% loan for houses priced below RM220,000.
• 50% stamp duty exemptions on instruments of transfer on houses below RM350,000.
• 50% stamp duty exemptions on loan agreement instruments on houses below RM350,000.

To facilitate the 100% loan, Cagamas Bhd (national mortgage corporation) will provide guarantee on the 10% down-payment to eligible house buyers.

Signals sent-out by Government:

1. Enabling first-time buyers to afford their first home.

2. Developers should build more houses which is affordable for such categories.

Advise to first-time house buyers:

1. The securing of such a loan is still subject to how much the banker willing to lend you.

2. 100% loan means higher monthly repayment for borrower.

3. Always buy within your means, not because of such scheme.

How about the buzzing higher down-payment ratio?

Although Government does not raising the down-payment to 20% or 30%, I believe it will announce later. The interesting part is always follows later.