1. Given Alvin’s financial resources and investment objectives, what kinds of mutual

funds do you think he should consider?

Alvin currently has partially tax-free income of RM4500 per month from EPF and pension, in

addition to rental income sufficient to cover his mortgage payments. He has also been saving

a considerable amount of money in the bank which he plans to take a portion out to invest in

a mutual fund. Although he states that he plans to be around for a long time, but he’s a retiree

who has at most half his lifespan left, given that he retires around the age of 50.

Alvin would like to receive a monthly return of RM1000-1500 out of an invested RM100

000. This represents a high return of 12-18% per annum. He plans to use this additional

income to travel and “live the good life”. His funds need to be liquid as he plans to obtain

steady monthly income. He is said to have high risk tolerance. This is due to him having

other forms of income like EPF and pension, should his investment fail. He does not put all

his eggs in one basket, as he still has more reserves in the bank.

We would recommend the fixed-income mutual fund to Alvin. This mutual fund is based on

government and corporate bonds with a fixed rate of return. This mutual fund provides steady

cash flow in the form of bond interest payments. It pays higher returns compared to the

money market mutual fund, which is another form of steady income but a safer version.

These higher returns are derived from riskier corporate bonds and junk bonds. Alvin can

choose to consider fixed-income mutual funds which invest more in junk bonds that provide

higher returns, but also have higher risk. There is no issue with the higher risk as he has

enough income from other sources to cover his low personal expenses as he lives alone. The

investment returns from the mutual fund is just for the “good life” and is an additional

“bonus” income.