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Financial Goal Simulator

Whitepaper

1. Objective

This Financial Goal Simulator lets users define their own personal financial goals. Based on the
information that the user inputs, the tool will simulate a range of potential future outcomes and
how the user can save and invest to meet these goals.

2. Methodology

The Financial Goal Simulator will first ask the user to select the type of goal that they wish to
simulate. Users can choose from three types of goals:
● Education goal - save and invest to pay for education (own or child’s)
● Retirement goal - save and invest for retirement
● Grow My Wealth goal - save and invest to accumulate wealth
The user is then asked to input various information that is relevant to the type of goal selected.
This information will be used by the Financial Goal Simulator to estimate the user’s future financial
needs based on the goal selected. For example, it may be used to estimate the amount needed
in the future to pay for a child’s education, the lump sum needed at retirement age, or simply the
target wealth to be accumulated by a specified date. This amount is known as the “goal target
amount”.
Once the goal target amount has been estimated, the Financial Goal Simulator then simulates a
range of potential future outcomes to try and meet that goal target amount. This simulation is
separated into two steps, which are saving and investing.
In the saving step, the user is first asked to input how much lump sum savings they can commit
upfront to the goal. If the lump sum is not sufficient, the Financial Goal Simulator will also suggest
a monthly savings amount that the user can top up to the goal.
In the investing step, the Financial Goal Simulator projects out potential future outcomes from
investing the savings specified in the previous step. Because investing involves risk, then the
potential future value of the investments could become more or less than expected. In order to
simulate this, the Financial Goal Simulator assumes that the savings are invested in a portfolio of
investments that matches a particular asset allocation1. It is important to note that this asset
allocation is just an assumption, and is not meant to be a recommendation or advice to the user
on how to invest their savings.
Thus, the output of the Financial Goal Simulator is a range of potential future outcomes from
investing the savings allocated to the goal. Users can compare each of these possible future

1
The term asset allocation refers to how the portfolio is distributed over a selection of different types of asset classes
(e.g. equity, bonds, gold etc.). Note that the Financial Goal Simulator does not specify what types of investments
are used to get this exposure. For example, the same asset allocation could be achieved using unit trusts, ETFs,
or else through direct investments such as shares or gold.

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outcomes with the goal target amount to see whether their target is met or not. Each potential
future outcome also comes with a probability number attached to it. This probability number can
be interpreted as the estimated proportion of all potential future outcomes which are at least as
good as, or better than, that particular outcome.

Example

Outcome Probability Interpretation

There is a 25% chance that the final outcome will be at

RM 554,040 25%
least equal to, or greater than RM554,040

There is a 50% chance that the final outcome will be at

RM 345,839 50%
least equal to, or greater than RM345,839

There is a 75% chance that the final outcome will be at

RM 254,340 75%
least equal to, or greater than RM254,340

Assuming the goal target amount is RM 345,839, this means there is a 50% chance that the
final outcome will be at least equal to or greater than the goal target amount. On the other hand,
there is also a 50% chance that the final outcome will be less than the goal target amount.

Note that the Financial Goal Simulator also lets the user adjust the information that they have
input to recalculate the simulation. This allows the user to try different combinations of inputs such
as target date, initial savings amount, monthly savings, risk level and others, so they can see the
corresponding impact on the potential future outcomes. Finally, the user can also choose to
simulate multiple goals such as Retirement and Education goals. This feature allows them to
perform trade-offs between the different goals. For example, they can see the effect of allocating
less savings to Education and more to the Retirement goal.

3. Assumptions

The Financial Goal Simulator relies on a number of assumptions, some of which are listed here.

3.1. General assumptions

(a) The goal target amount is only an estimate based on the information provided by the
user, and is not a guarantee that this amount will be adequate to meet the user’s future
needs. The user is responsible for independently verifying for themselves the actual
amount that they will need to meet the goal.
(b) The Risk Level is a measure of how much expected risk and return the user is willing
to accept in their investments. By default, the Risk Level is assumed to be “Balanced”,
but the Financial Goal Simulator allows this to be changed by the user.

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(c) The asset allocations are only an assumption based on the selected Risk Level. If the
user’s actual asset allocation is different from this assumption, this will result in a
different range of potential future investing outcomes.
(d) For a given asset allocation, the expected risk and return of the portfolio are estimated
based on the long-term historical risk and return of a set of benchmark indexes that
represent each asset class. Note that as these estimates are based on historical risk
and return, they may not necessarily repeat in the future. It is assumed that the average
value of the portfolio grows at the same expected rate of return every year. Any
earnings (e.g. dividends or interest) are also assumed to be reinvested and to grow at
this same average rate.
(e) Both the assumed asset allocations, as well as the expected risk and return of each
asset allocation, may be updated from time to time. This will in turn causes a change in
the projected future outcomes of the investment portfolio.
(f) Given the expected risk and return of the portfolio, the range of future outcomes is
assumed to follow a particular statistical behaviour. However, the actual future realised
outcome may not necessarily follow this behaviour, which may lead to a different result
compared to the simulated outcomes.
(g) The Financial Goal Simulator assumes that each goal has its own savings and
investment portfolio dedicated to that goal. Any surplus or deficit in this portfolio versus
the goal target amount is not offset against other goals, or against the user’s other
assets.
(h) It is assumed that the initial upfront savings amount as well as monthly savings are kept
inside the portfolio that is dedicated to that goal, up to the target date. Users should
ensure that they have sufficient holding power or protection (e.g. insurance) to avoid
liquidating or selling off the portfolio before their target date due to unexpected events.

3.2. Education assumptions

In estimating the Education goal target amount, the following assumptions are made:
(a) Three factors are considered in estimating the goal target amount for Education: level
of education (pre-university, university, postgraduate), area of studies (general or
medicine), and country of education (local or foreign).
(b) For Children’s Education, the starting ages are assumed to be 18 years old for pre-
university, 20 years old for university, and 24 years old for postgraduate.
(c) For local institutions, it is assumed the student will be paying local private college fees,
while for foreign institutions the student will be paying international student fees.
(d) For pre-university level, a selection of colleges from each country were surveyed in
order to obtain an estimate of tuition fees for that country. Estimated tuition fees in each
foreign country were then averaged to obtain a fee estimate for pre-university studies
overseas.
(e) For university and postgraduate level, tuition fees for the top-ranked universities in each
country were averaged in order to obtain a representative fee estimate for that country.

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An average of representative non-medical courses was obtained in order to estimate

the cost of general studies.
(f) Only tuition fees and cost of living were considered for pre-university, university and
postgraduate studies. Other costs and fees (e.g. student fees, visa application fees etc.)
were not included. For cost of living, government estimates for student costs are
obtained for Malaysia, Australia and New Zealand respectively. For the UK and US,
third-party estimates for student costs are used as reference, while for Singapore the
estimates provided by the respective universities are used.
(g) The estimated costs and fees are assumed to grow at an inflation rate of 3% per annum
until the target date. Foreign costs and fees were converted to Ringgit Malaysia based
on Maybank’s counter rate, observed at the time the costs and fees were last updated.
All estimates are revised and updated periodically.

3.3. Retirement assumptions

In estimating the Retirement goal target amount, the following assumptions are made:
(a) The user will save the monthly savings amount from the current date up until, and
including, the age of retirement. After that, they will stop further savings and instead
drawdown their monthly expense amount every month until the end of the estimated
life.
(b) The value of the retirement portfolio is assumed to be zero (completely used up) by the
end of the estimated life.
(c) The retirement portfolio is assumed to be continuously invested in a portfolio matching
the assumed asset allocation, both before and after retirement.
(d) Other retirement savings (e.g. KWSP/KWAP, property) are not considered in the
Financial Goal Simulator. Likewise, other sources of income in retirement are not taken
into account.
(e) Unexpected expenses in retirement (e.g medical emergencies) are not considered. The
user should ensure they have adequate protection (e.g. medical insurance) in case
such events occur.
It is important to note that this is not necessarily an exhaustive list of all assumptions made by the
Financial Goal Simulator tool. Furthermore, any of these assumptions may be changed by
Maybank at any time without prior notice, including changes which may significantly affect the
results of the Financial Goal Simulator.

4. Limitations

Users should be aware that the Financial Goal Simulator has limitations, some of which are
listed below:
▪ The Financial Goal Simulator depends on the inputs provided by the user. Incomplete or
inaccurate inputs will lead to inaccuracy or bias in the results. Furthermore, there may be other
factors which are not taken into account by the tool, but which may be relevant to defining or
achieving the user’s goals.

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▪ Investing is inherently risky. While the Financial Goal Simulator assumes that on average, the
portfolio grows at the expected rate of return for that asset allocation, the actual performance
for any given year may be significantly greater or less than this average rate. In addition, there
is always the possibility of unexpected events (e.g. 2008 Financial Crisis, Covid-19), which
may cause a sudden extreme fall in the value of the portfolio. The impact of such events is
especially severe when the goal target date is due to arrive soon, as there is less time for the
portfolio to recover. The user should pay close attention to the entire range of potential
outcomes, and not just the average or best cases.
▪ All estimates – whether it is the user’s own inputs, the calculation of the goal target amount, or
the projection of future investment outcomes – are subject to estimation error. For this reason,
it is important for the user to always be conservative when making their own estimates. For
example, for the Retirement goal, underestimating one’s own lifespan may lead to the
retirement portfolio being used up too early. Likewise, it is important for the user to have
additional resources (e.g. insurance) to call upon in case of unexpected events.
▪ The Financial Goal Simulator is not financial planning or investment advice. You should seek
your own independent advice before deciding to invest, or before taking any other important
actions.
It is important to note that this is not necessarily an exhaustive list of all of the limitations of the
Financial Goal Simulator tool.

5. Disclaimers

It is important to note that this Financial Goal Simulator is provided solely on an "as is" and "as
available" basis, and that Maybank does not warrant, represent or guarantee the accuracy,
completeness, fitness for purpose or applicability of the tool or its results. You are required to read
the Terms & Conditions of Use before using this Financial Goal Simulator tool. By using this
Financial Goal Simulator tool, you are agreeing to be bound by these Terms & Conditions
of Use. This tool is not to be construed as financial planning or investment advice. You are
required to seek your own independent advice before deciding to purchase any investments or to
enter into any transactions whatsoever. Nothing in the Financial Goal Simulator nor this
whitepaper is to be construed as an offer or invitation to purchase or subscribe for any securities
whatsoever.

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