Now that we have cleared the credit card debts & personal loans and setting financial goals with the correct mindset, let’s take a look at the different types of investments in Malaysia and create a action plan using the RM500 that we have saved. As a refresher, below are the short, mid, and long term financial goal that we have created:
- short term – clear all credit card debts and personal loans and save RM500 in 3 months
- mid term – RM5k passive income per month in 3 years while maintaining active income
- long term – RM20k passive income per month in 10 years and retire
To explain on active and passive income, let’s take a look at the ESBI quadrant that is created by Robert Kiyosaki, the author of Rich Dad, Poor Dad. I got the image below from here.
- E – employee
- S – self-employed
- B – business owners
- I – investor
In a nutshell, we want to move from the left side quadrant (E & S) to the right side (B & I). On the left side, we exchange time and energy for money which is known as active income. On the right side, the business have a system that keeps generating money and investment that keeps giving dividends etc which are passive income. Besides B and I, if you are a writer or inventor, you can get royalties which is a form of passive income as well.
With RM500, the easiest way for us to step into the right quadrant is being an investor. However, there are a lot of investments that are available in Malaysia, let’s take a look at each:
Fixed deposits (FD)
Fixed deposits or FD is where you place your money with a bank for an agreed time frame and the bank will pay you interest for it. The rate is usually 3.x% and can reach 4.x% during promotions. However, there are usually terms and conditions such as minimum RM10k to enjoy the promotion rate.Although the interest rate is low compared to other investments, it is the safest as PIDM insures up to RM250k of your deposits.
Bonds is somewhat similar to fixed deposits (FD). You put your money with an institution, corporate, or government for a fixed period where you will be paid interest. At the end of the tenure, you will get back the full capital. However, it is riskier than FD due to higher possibility of default. Besides that, it is not covered by PIDM as well.
Most bonds have a very high initial investment which is out of reach from normal retail investors. However, Fundsupermart launched FSM Bond in 2017 which allows all types of investors access to secondary bond markets. They offers various bonds for 3 main types of investor profiles – fixed deposit alternatives, stable income seeker, and high yield seeker. A rule of thumb is that the lower risk of default for the bond, the lower the interest rate.
You can research and compare the different bonds at Fundsupermart.
Unit Trust (UT)/ Mutual Fund/ Exchange-Traded Fund (ETF)
Unit trust (UT), mutual fund and exchange-traded fund (ETF) are funds that consist of multiple underlying assets. For example, UT and mutual fund can consist of stocks, bonds, and mortgages etc. ETF on the other hand can be a pool of stocks, bonds, and commodities based on the different types of ETFs. Some of the main ETFs are bond ETFs, commodity ETFs, and inverse ETFs which can be found here.
UT and mutual fund are traded once per day while ETF is bought and sold like normal stocks. Besides that, the price of UT and mutual fund is known as net asset value (NAV). Based on Investopedia, NAV is derived by dividing the total value of the securities in the portfolio by the total amount of shares outstanding. On the other hand, the price of ETF fluctuates all day like stock market.
Lastly, UT and mutual fund can be bought from fund houses like Public Mutual and Fundsupermart while ETF can be bought through stock brokers like Maybank Investment Bank or Kenanga Investment Bank etc. However, Malaysia ETF is not popular unlike in the US. You can trade US ETF through institutions like TD Ameritrade or eToro.
Amanah Saham Nasional Berhad (ASNB)
ASNB offers Malaysians various funds to invest which is similar to unit trust. There are 2 main types of funds offered which are the fixed and variable price funds. For fixed price funds, they are further split into ASB and ASM funds. Amanah Saham Bumiputera (ASB) is offered only to bumiputera while Amanah Saham Malaysia can be purchased by non-bumiputera. Fixed price funds are always RM1 no matter when you buy or sell while variable price will change everyday. For more details of the funds, you can visit ASNB website here.
You might have heard of people going to banks everyday to see if there are units to purchase for the fixed funds. This is because only limited units are released and they are all sold out. Therefore you would have to go to the banks everyday to see if anyone released their units. However, gone were the days and now purchasing the units are faster and easier.
Steps to purchase ASNB fixed price units
First, you would have to open a ASNB account. This can be done by going to ASNB branches or their agent banks and post office. You can visit here for the ASNB branches and here for the full list of their agents. If there are no fixed price units, you can purchase a minimum of 100 variable price units to open the account.
Once you have that, download the ASNB app for Android or Apple. Then, choose to purchase the fixed funds via the app or website. After that, just keep pressing the same fund until an error message appear. When that happens, wait for 5 minutes before trying for the same fund again. Rinse and repeat until you get the number of units that you wanted. I joined ASNB Lowyat Forum group in Telegram which helps in fishing the fixed price units. Once you see someone alerted that they got the units, go and try as you might get some units as well. All you need is patience and determination, good luck!
A stock is a share of a company. When you buy stocks, you gain a share into a company which grants you voting rights. In Malaysia, you can purchase stocks through investment banks like Maybank, RHB, Kenanga etc. When you are choosing the institutions to sign up for your investment account, take note of the brokerage fee. I’m currently using Maybank and Hong Leong Bank which charges 0.1% or minimum RM8 on my online trades.
There are 2 main types of account when you open an investment account which are direct and nominal. This blog has tabulated the differences between the 2 accounts. I would suggest opening a direct account as you can apply for IPO (initial public offering) and can attend AGM (annual general meeting) without hassle.
To purchase stocks, you would use 2 main analysis which are fundamental analysis (FA) or technical analysis (TA). FA focuses on a company’s financial statement, financial ratios, economics etc. On the other hand, TA focuses on charts, support and resistance, moving averages etc. I have created an article which you can read here.
REIT (real estate investment trust)
REIT is a company that owns, operates, or manages income-producing real estate. In Malaysia, REIT that gives back 90% of its income to shareholders as dividends is tax-exempted. Therefore, defensive investors buy REIT as the price is quite stable yet it gives constant dividends.
You can buy REITs like stocks through your brokers. In Malaysia, some of the famous REITs are Pavilion REIT, Sunway REIT, and IGB REIT. Different REITs have different portfolios which can be office towers, malls, or hospitals. There are 18 REITs currently in Malaysia as below:
|AI-'Aqar Healthcare REIT||Hospitals|
|AI-Salam REIT||Mixed, mostly restaurants|
|Amanah Harta Tanah PNB||Mixed|
|AmanahRaya REIT||Mixed, mostly offices|
|AmFirst REIT||Mixed, mostly offices|
|Axis REIT||Mixed, mostly warehouses and facilities|
|Capitaland Malaysia Trust||Malls|
|KLCC Property Holdings||Mixed, mostly offices|
|MRCB-Quill REIT||Mixed, mostly offices|
|Pavillion REIT||Mixed, mostly malls|
|YTL Hospitality REIT||Hotels|
You can visit here for daily REIT updates.
If you have the capital, buying properties for rental or capital appreciation is another option. To gauge if a property is worth the purchase for investing, you would need to do a lot of researches. Firstly, decide on an area that you think has potential for growth ie Cheras, Kajang etc. After that, you can decide if you want to invest in landed or high-rise. Usually for investment, high-rise is the popular one as the rental is higher and there is also potential capital appreciation. Besides that, the 3R2B layout is the popular ones for investment. Next, you can choose between under-construction projects, subsales, or auctions.
For property investing, we want to buy properties that are below market price. To do this, research the average price in psf (per square foot) transacted in the area you have shortlisted. Next, filter down to the layout ie 3R2B if possible. Therefore, if you can find a property or project with RM500 psf in an area with average psf of RM550, that would be a good find. You can use brickz, EdgeProp, and PropSocial.
Once you got the keys, consider furnishing the property using companies like The Makeover Guys. This is because fully or partial furnished properties tend to fetch higher price. Then, you can market your properties at platforms such as iProperty or PropertyGuru or you can also appoint property agents.
New Investment Options in Malaysia
Besides the above various types of investments in Malaysia, there are also some new investing options emerging in Malaysia.
In its simplest definition, cryptocurrency is digital money unlike our cash. It can be used to transfer from one to another without any financial institutions like bank. All the transactions are encrypted and recorded on a digital public ledger known as blockchain. The first cryptocurrency that was created is Bitcoin (BTC). There are tons of cryptocurrency nowadays such as Ethereum (ETH), Ripple (XRP), Litecoin (LTC). They can be bought and sold like stocks in the market.
In Malaysia, you can use Luno to buy and sell BTC and ETH.
P2P and ECF
In layman term, P2P financing allows investors to lend their money to businesses to earn interest. On the other hand, ECF allows investors to put money into a business to gain shares and/or dividends. Both P2P and ECF allows businesses to raise capital or business funds. In this previous post, I have listed out the P2P and ECF platforms in Malaysia, their pros and cons, and also comparison between the platforms. In addition, I have also created a review post on the P2P platforms in Malaysia here.
Action Plan and Asset Allocation
Based on all the different types on investments in Malaysia listed above, FD is the safest investment vehicle. However, it has also one of the lowest yield. To create the financial action plan and the asset allocation ratio, we need to gauge our risk appetite. If you are below 30, have a stable income, and are a risk taker, you can invest more in higher risk investments such as stocks.
To gauge your risk profile, you can answer the questions here. I got ‘moderate’ which is somewhat similar to my asset allocation ratio. I have 20% in FD and ASNB, 45% in UT/mutual fund/ETF, 35% in stocks.
Which types of investments in Malaysia that you prefer? Feel free to share in the comments section below.