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How to invest money in Malaysia

Learn how to choose your investment account in Malaysia, how to find the right broker and how to select stocks.

The sooner you begin investing, the sooner you can begin to grow your gains into a sizeable nest egg. With the power of compound interest, investors in Malaysia can potentially turn an initial investment of RM 10,000 with a monthly contribution of RM 500 for 30 years into almost RM 700,000.

So whether you’ve never even involved in investing or you’re just starting out, it’s time to get to work. Here’s how to invest your money:

Get your finances ready

You want to invest money you won’t need right away so it has time to grow. You’ll need to do a few things first.

Build your emergency fund. The common recommendation is three to six months of living expenses. You don’t need to keep this money in your current account though. A money market fund at a share trading account or a high-yield savings account will work fine.

Pay off high-interest debt. If your credit cards hit you with double-digit interest rates, you’ll save more by eliminating that debt than you’d gain with a lot of investments over the short term.

With those goals in mind, you can set up a share trading account (if you don’t have one already) and start investing.

Decide what kind of investor you’ll be

Your strategy will likely change over time, but these are the most common types of investors:

Type of investorHow activeType of brokerLikely investmentRisk
Passive/retirementHands-offRobo-advisor or automated trading featuresETFs, blue-chip stocks, mutual fundsLow
ActiveMultiple trades monthlyCharting and research toolsStocks, ETFs, mutual funds, options, futuresMedium
Day traderMultiple trades dailyFast execution, advanced charting and research toolsBuying stocks, over-the-counter (OTC) stocks, ETFs, options, futuresMedium to high
CryptocurrencyVariesOffers multiple cryptocurrencies, potentially with low or no feesCryptocurrencies — Bitcoin, Ether, Litecoin, Dogecoin, Monero, Ripple, NEO, StellarHigh

Pick the right accounts

There are several types of investment accounts. To trade in Malaysia, you will have to open two accounts, Central Depository System (CDS) account and trading account.

A CDS account is operated fully by Bursa Malaysia Depository Sdn Bhd. You can open the account with any Authorised Depository Agents (ADAs).

With an account like this, you can deposit as much as you want and withdraw whenever you want. You’ll pay taxes on profits but you can also write off taxes on your losses.

Choose the right broker

With so many brokers to choose from in Malaysia, you’ll likely find the perfect one for your financial situation. Here’s how to compare them:

  • Level of complexity. Beginners typically need a simple platform to place buy and sell orders and start investing. This can be done even through a mobile app. Because of their intuitive apps, platforms such as Zack Trade are often a good place to start. As you learn and grow, a broker such as International Brokers or IG Markets may be your next step because of their advanced charting and research features.
  • Activity. Active and passive investors have different needs. Active investors typically require advanced charting features and research and they execute the orders themselves. Passive traders often either buy and hold long-term or use automated trading systems like the ones from robo-advisors.
  • Fees. Some trading platforms don’t charge commission on stock and ETF purchases, and they don’t charge inactivity fees — which is great if you plan to hold your stocks long-term.

Compare trading options

Consider your options and needs when picking a broker.

Name Product Brokerage fee Interest on deposit? Intraday trade CDS fee
Zacks Trade
Zacks Trade
US$0.01
No
Yes
N/A
CFD Service. Your capital is at risk.
The Zachs Trade platform offers stocks, ETFs, bonds, options, and more with access to more than 90 exchanges worldwide
Alliance Bank Trading Account
Alliance Bank Trading Account
0.15% - 0.29%
Yes
Yes
N/A
CFD Service. Your capital is at risk.
Trade on-the-go and diversify your portfolio with a myriad of investment products, ranging from bonds to unit trusts.
CIMB Trading Account
CIMB Trading Account
0.22% - 0.45%
Yes
Yes
RM0
CFD Service. Your capital is at risk.
Access multiple stock exchanges,  exclusive research materials, real-time portfolio management, and other trading conveniences to grow your investments.
Hong Leong Trading Account
Hong Leong Trading Account
RM8 - 0.10%
Yes
Yes
RM10
CFD Service. Your capital is at risk.
Enjoy the flexibility of bursa trading and access global markets with a single platform.
Rakuten Trade Trading Account
Rakuten Trade Trading Account
RM7 - RM100
Yes
Yes
Free
CFD Service. Your capital is at risk.
Benefit from low fees and earn reward points when you trade on this all-in-one digital brokerage.
RHB Trading Account
RHB Trading Account
0.21% - 0.42%
Yes
Yes
RM10
CFD Service. Your capital is at risk.
Trade in futures, shares, and warrants across major foreign markets with Malaysia's largest investment bank.
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Compare up to 4 providers

Pick stocks and funds

An investment can be anything you think will increase in value over time, but for most people, it starts with stocks or exchange-traded funds (ETFs).

Individual stocks

In any given year, countless stocks outperform the market average. Tesla grew by nearly 700% just in 2020. Netflix went up 3,900% in the last decade. No question, it’s fun to own the right hot stocks.

But in investing, winning big generally means bigger risks. So while many investors in Malaysia start with individual stocks, it’s best to keep stock-picking to a portion of your account dedicated to riskier investments. Keep the bulk of your funds in safer places, such as large blue-chip stocks.

ETFs

Most financial advisors would point novice investors in Malaysia to exchange-traded funds before buying a lot of individual stocks. That’s because ETFs give you a diversified portfolio across companies and across sectors, which is how you get that steady growth over the long term.

In general, ETFs track indexes, matching their performance at an average low cost of around 1% of invested funds each year. Over time, you may want to add other types of ETFs, such as sector funds, commodity funds and other classes as you become more comfortable targeting your investments and have more money to work with.

Bonds and bond funds

Buying bonds is the traditional hedge for a diversified portfolio focused on stocks. When stocks go down, bonds usually go up, though the returns are generally lower.

The old rule used to be to hold your age in bonds – at 30, 30% bonds, at 60, 60% bonds. But bond returns have been so much lower for so long that new rules have emerged. One says subtract your age from 110 and put the remainder in stocks. So at 30, you’d be 80% stocks, 20% bonds. Investing sage Warren Buffett has talked about a 90/10 mix for even retirees, with the bulk in a broad market index fund.

You can buy bond funds, actual bonds and junk bonds, and build ladders of bonds reaching maturity at different times – in short, like stocks, you can get really into bonds.

Real estate, gold and other stuff

Stocks and bonds are readily accessible, but almost anything you expect to rise in value can be part of your investment portfolio.

Real estate investing is one way to go. You can buy your house or rental property (some would question counting your home as an investment since you have to have a place to live, but that is a side issue.) You can try an ETF, a real estate investment trust (REIT) or several specialised investment brokers that let you join a deal with very low buy-in.

Investing in metals, and particularly investing in gold, has always been viewed as a safe haven when the market crashes. Most commodities in fact can be invested in via the futures markets, or through ETFs, though that might not be as satisfying as dropping a gold coin in your pocket. (Storing commodities on your own can be a hardship, though.)

Foreign exchange investing, as well as cryptocurrencies, have grown in popularity in recent years. In forex, you’re basically betting that one country’s currency will rise and fall against another. In crypto, you’re picking one of several digital currencies because you think people will pay more for it down the road. Unlike a stock that is backed by a real company or a currency backed by a government, crypto is only worth what someone will pay you for it. So the risks are higher, but the rewards in recent years have been huge.

Collectibles: Almost anything from collectible cars to art to antiques can be acquired and tucked away as investments. Some are literally worth more than their weight in gold.

The hitch is that for the biggest gains, you have to know the field well enough to figure out what will sell a decade or more down the road. Or have the capital to buy classics when they’re already classics.

That’s at least as challenging as picking individual stocks.

Investing myths

Now that you know how to invest your money, let’s take a look at some investing myths

MythReality
You need a lot of money to startStart with just a bit of money each month
The stock market is too riskyWhile more risks can mean bigger returns and losses, the broad market goes up reliably over time
You have to pick stocks to succeedThe market as a whole outperforms a lot of expert stock pickers
You need to actively tradeBuy and hold is one of the most profitable investment strategies
You need to do a lot of researchSafely pick large and popular companies and hold them long-term
You are too old to start investingInvest at any age, but to get the same results, you’ll need to invest more money if you start at a later age

Pros and cons

Pros

With investing, the idea is to use your money to make more money. By creating and preserving your wealth, you can reap the rewards of:

  • Return on investment. Many investments increase in value over time. Investments aren’t always guaranteed, but profit projections can help you decide what to invest in and how much to invest.
  • Dividends. If you purchase stocks, funds or cash-value life insurance, you own shares in that company and may receive a percentage of its profits — which you can either cash in or reinvest. These dividends are distributed to shareholders on a set schedule. Stocks and funds typically pay quarterly dividends, while mutually owned life insurance companies tend to pay annual dividends, sometimes called a return of excess premium.
  • Compounded interest. Many investments give you the opportunity to earn compound interest, which is essentially interest on your earnings. The longer you hold a stock, the higher its value — and the more interest you’ll earn.
  • Voice in how a company operates. When you own shares in a company or corporation, you get to vote or have a say in how it’s run.

Cons

Risks investors face include:

  • Volatility. The value of an investment can fluctuate, sometimes wildly, due to internal factors like faulty products or external events they have no control over.
  • Losses. The value of investments can decrease for many reasons. Companies can underperform, demand for products or services can dry up and the stock market can crash. The result: you lose money.

When assessing risk, consider your age as a key factor. Younger investors in Malaysia can take more risks because they have time to make up for losses. Those nearing their retirement are usually told to dial back risk.

Bottom line

The key to getting started with investing is centred on having a plan and understanding the assets you’re investing in. If you can handle the volatility of investing and minimise the risks, there exists an opportunity to grow your money. Evaluate your options, learn what fits you best and compare the products and services that will help you achieve your goals, starting with online trading platforms.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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