Interview: Financial Freedom Investing With Yap Ming Hui

Interview: Financial Freedom Investing With Yap Ming Hui


What is financial freedom? Chances are that you will likely get a different answer for every person you ask. In order to find out more about what being financially free truly means, we had the opportunity to meet with Yap Ming Hui, Founder and Managing Director of Whitman Independent Advisors and the author of the recently released best-seller: Financial Freedom Investing.

Yap is an author, columnist and founder of Whitman Independent Advisors, a licensed independent financial advisory firm which has been helping Malaysians to optimise their wealth and achieve financial freedom since 2000.

As an expert in investment planning & management, risk management & insurance, retirement planning, estate planning, debt & loan management, iMoney sat down for an interview with him to share his secret to financial freedom. Here’s what he has to say:

What is financial freedom?

Most might probably think that financial freedom is having enough money to purchase anything you want. However, Yap explains that financial freedom is a state of being where your wealth has been optimised to such an extent that it meets your optimum amount of needs and wants.

The definition of financial freedom varies from person to person because everyone has different wants and needs to satisfy. A millionaire may not have financial freedom if their wants and needs are more expensive than their millions can afford. On the other hand, a middle class person may obtain financial freedom if their wealth is more than enough to meet their own less expensive set of wants and needs.

You will see that there are two components of this definition.

Number one is to grow your money to optimise wealth without taking too much risk. The second component is about identifying your financial goals, needs, wants, how much you need, and whether these goals are realistic. - Yap Ming Hui

How can investments help Malaysians?

Growing up, we are often taught to save as much money as we can. As we grow older, we might begin dabbling with fixed deposits to help supplement our wealth growth in addition to things like EPF.

However, some might be a little reluctant to begin their investment journey. Yap argues that while savings and fixed deposits do help you gain some money, your wealth will ultimately still be at risk of inflation. 

This is because interest rates offered by banks on savings and fixed deposit accounts do not keep pace with the inflation rate. While the amount in your accounts will earn some returns, the overall value (amount you can buy with it) of your savings is decreasing each year.

A lot of people like to save their money in fixed deposits. However, they may not really understand the impact of inflation on their money. By putting money into a fixed deposit, you will be earning interest, but at the same time suffering the depreciation caused by inflation. So over time, your money is shrinking. - Yap Ming Hui

As such, he advocates for Malaysians to put some of their wealth towards investments. While there are risks involved with investing, Yap believes that it is a necessary part of helping us achieve financial freedom and a golden retirement. 

The signs to look out for before investing

While there is an abundance of investment opportunities for us to invest in, choosing the wrong investment to put your money into can quickly lead to you losing all of it. Not to mention the possibility of scam investments.

The key to successful investments involve looking those that conform to the SRB principle:

  •  Safety (S)
  • Long-term returns (R),
  •  and being the best-of-breed (B).

Safe (S)

A safe investment should conform to the following:

  1. The investment must be a regulated product, preferably by Malaysian regulators.
  2. The investment must not be aiming for too high a risk and return as it may deplete your capital over a short period of time.
  3. The investment must have a proper trustee structure (ideally third party) to protect investor money should the investment company ever go bust.

Yap also goes on to note that people should also take into account the platform by which you intend to invest through. He highlighted that the platform should be regulated; as investing via overseas unregulated platforms runs the risk of losing all of your investment.

Investments must be transparent with the underlying assets and what your money is being invested into. Failure to disclose such information should be considered a huge red flag.

Always rises in the long-term (R)

People invest because they want their wealth to grow, compound, and beat inflation. As such, Yap advises us to invest into things that have actual value. These are items that are tangible and have the potential to grow in value over the years. 

One example which was given is property, which fits the criteria almost perfectly. Shares was another example that was given, especially those from blue chip companies. These companies usually have consistent profit and growth year-on-year, making it a relatively safe bet for a continuous increase in value.

Best-of-breed (B)

Aside from safe and rising investments, Mr Yap also recommends putting money into investments that are considered the “best-of-breed”. To clarify, best-of-breed simply means the best performing investment within a certain investment type.

If you plan to invest in something like stocks or bonds, it is advisable to look through twenty or even thirty different kinds of stock/bond investment options to determine which is the best performing investment that poses a safe level of risk.

By doing this, you will have a higher chance of getting more consistent returns without stressing too much on whether your investment value will fall.

What kind of investments are good for beginners?

With regards to which investment would be a good first choice for first time investors, Yap recommends unit trusts as they present a good opportunity to learn about investing without putting too much risk on your money. 

This is especially true in the current economic climate where major equity markets such as China, US, or technology sectors have taken a huge hit as of late. This presents beginners with the opportunity to start investing in said markets at a relatively lower price.

If you are not sure which unit trust to invest in, iMoney can help recommend to you some of the best unit trust options available in Malaysia. You can find these recommendations here.

However, you are first recommended to put at least six months worth of living expenses into savings, fixed deposits, or money market funds, so as to ensure that you have a reserve to rely on in case of emergencies or necessary expenditures. This way, you will not have to sell off investments early and at a loss should any unforeseen expenditures arise.

Following this, Yap suggests that those who contribute to EPF (11%) should, as a rule of thumb, save or invest an additional 19% of their income to work towards a comfortable retirement and financial freedom.

By combining your retirement contributions plus your additional investment and savings, that will be a total of 30% of your income, thus putting you on track to achieving financial freedom. - Yap Ming Hui

Those who do not contribute to EPF are still recommended to save or invest up to 30% of their income. 

However, those who are high income earners will likely be able to get away with contributing less of their income to savings and investments, depending on what their goals are regarding financial freedom.

Invest early to secure your future

Investing should be seen as a marathon, not a sprint. Yes, if you play your cards right, it is possible to see big returns in a short period of time. However, doing so places much risk on your investments and one wrong move could cost you everything.

Instead, Yap believes that the right path of investment involves carefully considering each option to find the safest, and most consistent investment options that will provide enough returns to fight off the ever-present threat of inflation. By doing so, we will be able to enjoy a financially free retirement without worry.

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