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Thanks to online stock brokers, it’s now easier than ever to buy and sell stocks online in Malaysia. This guide will take you through the basics, including how to buy stocks online, how much it costs and whether it’s a safe option for you.
Choosing an online stock broker can be one of the most challenging parts of the process. There are dozens of platforms available to Malaysian investors – some of them are offered by major banks, while others are provided by specialist stockbrokers.
While it might be more convenient to stick with your current bank, you could lose out in terms of brokerage fees. Instead, compare the features and fees of a number of platforms before choosing the right one for you.
What you need to consider when picking a broker:
- Brokerage fees. This is the fee that applies to each buy or sell transaction. Depending on the platform you choose and the size of your transaction, this could be a flat fee or a percentage of the total transaction cost.
- Other fees. Brokers can charge all kinds of additional fees to use their platform. Some of the most common include an inactivity fee, subscription fee and foreign exchange fee.
- What you can trade. Some platforms offer access to Bursa Malaysia only, while others also allow you to trade on stock exchanges all around the world.
- Ease of use. Consider how easy each platform is for the type of trading you want to do. Most providers give you the option of a free demo account for a short period so you can trial the features they offer.
- Who the platform is suited for. Some stock brokers are designed with casual investors in mind, others are more suited to active and experienced traders.
- Customer support. How easy is it to get in touch with the provider if you ever have any issues? Is their customer service team based locally in Malaysia?
Once you’ve chosen a platform you’ll need to register for a Central Depository System (CDS) account and a trading account. This step is usually free, but keep in mind that some providers may charge subscription fees or ongoing fees for features such as market research.
The registration process takes place online and if you’re a new customer you’ll need to provide:
- Your name, address, date of birth and contact details
- Copies of NRIC for Malaysian or passport for non-Malaysian citizen
- Latest bank statements or savings passbook
- Latest EPF statements, pay slips or EA form
You’ll usually be asked to deposit a specified minimum amount in order to open an account. Once your application has been assessed and approved, it’s time to start trading.
You may have already decided what stocks you want to buy but if not, now’s the time to start researching stocks that match your investment goals. You’ll often be able to access a wide range of market research, analysis and even trading recommendations through your platform, so use this info to help make an informed decision.
You’ll also need to consider the number of shares you want to buy. This will obviously be down to your budget and your investment goals, but keep in mind that the minimum investment for every Bursa Malaysia-listed company you invest in is 1 lot which is equivalent to 100 shares. So if company XYZ is valued at RM2 a share, you’ll need to buy at least 100 shares.
It’s also worth pointing out that larger purchases may incur higher fees or involve different fee structures depending on the trade. For example, your platform may charge you RM30 as a brokerage fee to buy a smaller number of stocks, but will change the fee structure to 0.1% of the trade value when larger amounts are purchased.
This is where things can get a little confusing for novice stock traders. You have two main options when placing a trade to buy stocks: you can place the trade “at market” or “at limit”.
- Market orders. You place a market order when you want to buy a stock immediately at the best price currently available.
- Limit orders. Placing a limit order allows you to set a maximum purchase price for your buy order. If that price becomes available within your specified time period, your trade will be executed.
Depending on the platform you choose, you may also be able to take advantage of a range of conditional orders that allow you to take advantage of market opportunities. For example, by placing a rising buy order, you can instruct your online trading platform to buy stocks in a particular company once its stock price reaches a certain level.
Once you’ve entered all the specifics of your transaction, you’ll then get a chance to review all those details before placing your buy order.
You’ll need to have sufficient funds in your online stock trading account to cover the cost of the transaction, including the brokerage fees that apply. The trade settlement period on Bursa Malaysia is two business days, which is commonly referred to as T+2.
Now you’ll need to monitor the performance of your stocks in regard to your investment plan. However, the frequency with which you monitor them will depend on your strategy. For example, if you have a long-term investment strategy, you may only check in and see how your stocks are performing every month. If you have a medium-term strategy, it may be a good idea to check each night or each week.
Whichever option you choose, you can review the performance of your investments by logging into your trading account.
When you decide to sell your stocks, the process is very similar to the method of buying stocks described in Step 4. Once again, you can choose whether you want to sell them via a market order or a limit order. A market order means the stocks will be sold immediately at the best available price, while a limit order allows you to set the minimum sale price you’re willing to accept.
Tips when buying stocks in Malaysia
If you want to get more out of your online stock trading, try to keep the following tips in mind:
- Do your homework. Making informed trading decisions is crucial to the success of your investments. Research the financial health and growth prospects of companies by poring over annual reports, keeping an eye out for company alerts, reading stock prospectuses and accessing research reports.
- Stay up to date with the Malaysian economy. Keep an eye on the health of the Malaysian economy, Central Bank interest rate decisions, government policy changes, levels of investor confidence, exchange rates and the performance of stock markets in Malaysia and overseas. All of these can influence when is and is not a good time for you to invest.
- Start with blue chip companies. One of the safest options for anyone starting out in the stock market is to invest in blue chip companies. These are Malaysia’s top 30 companies, as listed on the FTSE Bursa Malaysia KLCI (FBM KLCI), and are typically well-established companies. They usually offer the best chance for minimising your risk and providing steady returns.
- What about speculative stocks? Speculative companies are not in the top 100 Malaysian companies and have a shorter history doing business. Some investors are attracted to buying stocks in these companies because they offer the potential for large returns, but be aware that they also have the potential to suffer large losses.
- Buy what you know. Rather than diving in at the deep end and investing in a company which operates in a field you have little or no understanding of, start with industries and businesses you have some sort of background knowledge of.
- Diversify. If you want to minimise your exposure to risk, diversify your portfolio across a range of different industries. If you buy stocks across five or six industries instead of just one or two, you can be better protected against losses if one particular industry experiences a sharp downturn.
Risks of online stock trading
Before you start buying and selling stocks like you’re Gordon Gekko, make sure you’re aware of all the risks involved, including:
- Financial losses. A company’s stock prices can fall dramatically and even drop as far as zero. This can mean significant financial losses for investors.
- Last in line. Shareholders are usually the last in line to be paid when a company goes broke. When this happens, there’s a definite chance that you won’t get your money back.
- Stress. The stock market fluctuates on a daily basis, which can cause plenty of stress for investors. If you can’t handle the ups and downs you may be better off looking for a safer and steadier investment option.
- Unexpected problems. Even if you do an enormous amount of thorough research into a particular company, it’s simply not possible to predict the future. Natural disasters, terrorist attacks, bad company news and even changes in government policy can all occur unexpectedly and adversely affect the price of stocks.
- Lack of expertise. While investing in the stock market sounds quite easy in theory, it can get quite complicated if you don’t know what you’re doing. First-time investors should be wary of getting ahead of themselves.
- Getting in over your head. A final word of warning if you’re thinking of investing in stocks: don’t bite off more than you can chew. Make sure to use your common sense and take a cautious approach – good advice no matter whether you’re planning on investing in stocks, property or anything else.
Frequently asked questions about buying stocks online in Malaysia
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