Broaden options for small investors

MANY money games like Jie Jiu Pu Tong Ren (JJPTR or saving ordinary people), Change Your Life (CYL) and YSLM founded by Zhang Jian, who claims to be the “world’s future richest man”, are more than a financial disaster for investors and their families.

Purporting to offer instant riches, these schemes underscore many Malaysians’ alarming naiveté about business norms and are an indictment on the limited options for small investors in this country.

Most money games share three characteristics – investment opportunities involving small sums of money, a stratospheric rate of return and an equally short payback period.

Take the CYL scheme. Initiated last November, the CYL scheme reportedly offered several investment packages – starting from a low of US$500 (RM2,131) to a high of US$10,000 (RM42,612) and a promised WEEKLY return on investment of 7.5%. On a compounded basis, this translates into a stunning rate of return of 3,273% in one year.

My father often warned my sisters and I that businesses offering such sky-high rates of return in a short time were either a con or involved an illegal activity.

Statistics from Bukit Aman’s Commercial Crime Investigation Department highlight three worrying trends. First, although the number of individuals involved in such money games is small, it is rising rapidly.

Second, the largest number of cases is from Selangor, Kuala Lumpur and Penang. Despite extensive negative publicity in newspapers, this suggests urbanites are unaware that legitimate businesses don’t earn such fantastical rates of return in one year.

Third, the aggregated amounts involved each year is also accelerating.

“We recorded 408 cases with RM70.1 million in losses in 2015, followed by 1,151 cases (RM210.3 million in losses) last year. As of April this year, we have already recorded 324 cases and RM98.7 million in losses,” department director Commissioner Datuk Acryl Sani Abdullah Sani said.

For policymakers, the ever-continuing money games saga and the tear-stained ending for the unfortunate investors highlights several issues.

First, regulators and policymakers should step up efforts to inculcate greater awareness of investment opportunities and how to differentiate genuine investment opportunities from scams through user-friendly programmes on radio and television. These programmes should be in Bahasa Malaysia, Mandarin and Tamil – and not limited to English.

Additionally, these programmes should emphasise it is possible to enjoy “ten baggers” through long-term investment in shares listed on Bursa Malaysia. One key requirement is oodles of patience.

A term popularised by famed manager of Fidelity’s Magellan Fund, Peter Lynch, who enjoyed the distinction of outperforming the Standard & Poor’s 500 index for 11 years during his 13-year tenure, “ten baggers” are shares whose value has accelerated to 10 times the original cost.

One example of a “ten bagger” listed on Bursa Saham is Public Bank. In a Letter to Stakeholders in its recent Annual Report, CEO Tan Sri Tay Ah Lek noted an individual who bought 1,000 shares in Public Bank when it was listed in 1967 (at RM1.26 a share) and subscribed to all subsequent rights issues, the shareholder would own 148,938 Public Bank shares worth RM2.9 million based on a share price of RM19.72 at end-2016.

Additionally, the individual would have received gross dividends of RM1.2 million.

Another ten bagger listed on Bursa Saham is Dutch Lady Milk Industries Berhad. Purchased at end-December 2000 for an adjusted price of RM2.69 a share, Dutch Lady closed at RM57.92 a share on June 9 this year, a total adjusted annual return of 2,053%.

Unlike the CYL scheme, Dutch Lady’s four-digit annual percentage rate of return – with significantly lower risk – was earned by holding the shares of the milk and dairy products manufacturer for more than 16 years.

Second, policymakers should broaden the variety of affordable investment alternatives for those with funds ranging from RM2,000 to RM10,000 – the target for money games like JJPTR and CYL. These should include bonds and higher-yielding assets.

That almost RM100 million has been lost to money games from 2015 until April this year – an understated figure because many investors don’t report their losses – underscores the potential market these small investors offer.

In Singapore, individuals can buy government-backed bonds for a minimum sum of S$500 and the purchasing process is user-friendly – via ATMs or online. Individuals aren’t allowed to buy Malaysian government bonds.

For Malaysians, investment options include buying shares listed on Bursa Saham, participating in global funds or in equity-based unit trusts for a minimum sum ranging from RM500 to RM5,000.

Although the rate of return may appear derisory compared to money games, Malaysians should be educated on the advantages of investments that offer significantly lower risk and a consistent rate of return every year plus the compound impact over a period of time.

In short, small gains each year can add to a massive profit in 10 years.

Opinions expressed in this article are the personal views of the writer and should not be attributed to any organisation she is connected with. A long-term shareholder of Public Bank Berhad and more recently Dutch Lady Milk Industries Berhad, she can be contacted at siokchoo@thesundaily.com