In this article, I will be teaching you how to start investing in stocks in Malaysia. Before you begin, make sure you know the basics of investing and learn how to start investing in Malaysia.
Please note that the two articles are different, one is an overview on what types of investments there are in Malaysia, while this article will focus more on stocks.
Remember, investing doesn’t mean just ploughing money into stocks. There are other asset classes and you have to remember your asset allocation rules and make sure you have diversified properly.
How to start investing in stocks in Malaysia
Investing in stocks doesn’t necessarily mean you have to jump straightaway into buying individual shares of companies. There are other ways to get exposure to equities. In short, I will cover the different ways of investing into Malaysian equities, arranged from the easiest to the most difficult.
Investing by using Raiz
Raiz is a robo-advisory that allows you to invest into local Malaysian equities. It’s actually an Australian fintech company that recently set foot in Malaysia and has a collaboration with Permodalan Nasional Berhad.
This means investors now get access to Amanah Saham Nasional Berhad (ASNB)’s unit trust funds. The returns are decent but nothing to shout about, with historical returns ranging from 4 – 6%.
This is the easiest way to get exposure to local Malaysian equities market without you spending time to do research. Simply open an account, fund it and let the robo-advisory take care of everything. (Use my referral code YJ834G to get RM10 bonus when you sign up).
The upside is you can invest regularly by setting up a recurring transaction inside your app. Raiz also helps you to micro-invest by rounding up your Maybank debit card purchases and investing the spare change. The downside is, Raiz is only available for Maybank account holders now. There are plans to introduce credit cards as an alternative funding method in the future.
Buying Unit Trust
If you think buying stocks individually is too difficult, you can buy unit trust funds. These are operated by companies that will pick the stocks and structure the funds according to selected themes, economic sector, geographical regions and so on.
This is better for time-starved, busy individuals. But unit trust funds have a big drawback in the sense they charge fees to manage your fund. Over long periods of time, these fees can eat into your returns.
If you do decide to go down this route, I recommend buying via online platforms such as FSM as you save substantially on fees. The downside is you have to DIY and there is minimal research involved.
ETF allows you to ride the growth of an index but with the liquidity of a stock. Basically it’s composed of a basket of stocks that tracks an underlying benchmark. By buying into one ETF, you gain instant diversification as the ETF typically will carry many different stocks.
The upside of buying into ETF is instant diversification. This is the preferred method for tracking indexes in mature overseas markets like USA.
The downside of Malaysian ETFs is, there is still some lingering concerns regarding its liquidity. As it’s relatively new, the are not many buy-sell transactions going on. However I foresee this to improve in the future.
You can buy an ETF same way as how you buy individual stock. For example, MyETF MSCI Malaysia Islamic Dividend (MyETF-MMID) can be found by entering its stock code 0824EA into your brokerage app or trading platform.
Buying individual shares of companies
This is arguably the most difficult yet most rewarding. In short, here are the steps:
- Gather some capital. I recommend at least RM10,000
- Open a brokerage account
- Research on the companies you want to buy
- Execute your investment plan
But then, how do you know what companies to buy? Herein lies the difficult part. Everybody wants to be Warren Buffett but nobody wants to do the kind of work to reach that kind of consistency. There is no ultimate guideline for this, otherwise everyone would be stock investor millionaires by now.
You need to pick up lots of skills if you intend to invest by yourself:
- Learning how to read financial statements
- Reading the companies’ annual reports
- Following up on the companies’ latest updates in the news
- Learning different valuation methods
Hey, nobody said it’s easy! It takes years, if not decades, to learn.
Even then, you might not profit as most people cannot achieve consistent returns over long periods of time. Even the arguably greatest investor in the world Warren Buffett can earn ~20% CAGR over 6 decades. For normal investors like us, aiming for a 10% CAGR is already beyond excellent.
If you have the patience to learn and have the funds to get a meaningful ROI, then actively picking stocks yourself can yield outsized returns. Returns of up to 20% annually is not unheard of. Check out this KC Chong interview in The Edge.
Finding good companies to buy is almost an art form and will be too long to cover inside one article. I will be writing another article on using a simple screener to find potentially good undervalued stocks in Malaysia easily.
In short, there are few ways on how to start investing in stocks Malaysia:
- Unit Trust
- Buy individual stocks yourself
All these methods will enable you to gain exposure to the stock market in Malaysia. If you want to get more exposure to overseas market, the principle is the same, but there are other tools to use.
The underlying principle for investing in stock market is simple: control your emotions, stay invested over the long run, and let your returns compound. If you do the basics correctly, then you can have a reasonable expectation for a handsome returns.