How to Start Investing in Malaysia?

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MoneyMatters: Your Guide to Smart Investing

12 min readJan 6, 2021

Before you start reading this article, you need to ask yourself why do you want to start investing. You may read my first article “Should You Start Investing” before you start going through the rest of the article below.

Everyone has different reasons to start on their investing journey. For me, I invest to achieve financial freedom and to generate enough passive income to make important decisions without having too much worry too much about the personal financial burden coming with it. Investing is not an easy journey and it is definitely a long journey, always remember this in your mind; there is no shortcut to long term financial goal.

Believe that many people has wondered how to start investing in Malaysia especially with so many options out there, not knowing which are the legal and appropriate one to go for. Hence, I am writing this article to help you to sort out the Investment Platform or Alternatives that are available to you today. I will be categorizing each of the investment options into 3 categories: Low Risk, Medium Risk and High Risk to help you to have a basic understanding of the investing tools below.

1. Fixed Deposit (FD)

I believe most of you understand what is a Fixed Deposit, it is basically a financial instrument offered by most banks in Malaysia, which allows you to save your money in the bank for a fixed period of time (normally in the tenure of 1 month, 2months and etc) to generate interest at a fixed rate compared to a conventional savings account.

Any investment comes with a risk, and fixed deposit is generally one of the safest investment options you have out there as the banks generally guarantee to pay you back under the coverage of the Malaysian Deposit Insurance System up to RM250,000. Fixed Deposit rates generally follow in line with the Bank Negara Malaysia (BNM) Monetary Policy Committee’s (MPC) overnight policy rate (OPR), hence FD rates will drop when BNM makes a decision to reduce the OPR rate and vice versa. Since there is almost no risk from the investment, the returns are also generally low as shown in the table below (as at October 2020).

Risk Level: Low Risk

2. Stock Investing

Another hot topic of the year 2020 would be stock investment. Due to Covid-19 pandemic, several stock markets around the globe crashed in March 2020 and Malaysia Stock Market is also not spared from it.

So what is stock investment actually? Stocks are an equity investment that represents part ownership in a corporation and it entitles you to own part of that corporation’s earnings and assets. Common stock gives you as a shareholder the voting rights but no guarantee of dividend payments. It means that when you buy a stock of a company listed at Bursa Malaysia, you are actually owning part of the company.

There are 2 ways to generate profit from stock investment: Capital Gain and Dividend Yield.

Capital Gain = Sale Price - Purchase Price

You will obtain a Capital Gain when your sale price is higher than your purchase price. For example, you purchase 1,000 Stock A @ RM1.00 per share and sell 1,000 Stock A @ RM2.00 per share later, you are getting a Capital Gain of RM1,000 (RM2,000 - RM1,000). Otherwise, you will be having a Capital Loss if you sell your stock for less than your purchase price.

Dividend Yield = Annual Dividend / Current Stock Price x 100%

For example, you purchase 1,000 Stock B @ RM10.00 and the company pays out total annual dividend of RM0.50 per share. Your dividend yield would be 5% (RM0.50 / RM10.00 X 100%).

There is no right or wrong when it comes to choosing whether to go for Capital Gain or Dividend Yield. As long as you are making profit from stock trading, you are always right. The next question would be how to start lah?

How to start trading on Malaysia Stock Market?

Firstly, you will need to open a Stock Trading Account and a Central Depository System (CDS) Account (a copy of identity card and RM10 is required). Personally, I have been using UOB Kay Hian Stock Trading Account to trade stocks in Malaysia, Singapore and US Stock Market.

They have a strong research team to provide client-focused analyses to help you make shrewd fact-based investment decisions. In addition to web based platform, you may also use the Utrade mobile app to trade your stock. And most importantly, UOB Kay Hian platform has been very stable (*very important) as compared to several other platforms in the market.

If you are interested to open a trading account, you may apply via this link (currently there is a limited promotion to waive the RM10 account opening fee on first-come-first-serve basis for first 100 applicants).

Investing in stocks involves a certain level of risk and hence, always do your own research before you start investing in a stock. (will share more details in the next article)

Risk Level: Medium Risk to High Risk

3. Unit Trust / Bond Investing: Fundsupermart

One of the common investment options in Malaysia is Unit Trust, a collective investment scheme that allows investors with similar investment objectives to pool their funds to be invested by professional fund managers in a portfolio of asset class such as cash, bond & deposits, stock securities, property, commodities and etc according to the fund’s objective and investment strategy.

FIMM Malaysia: Ownership of the fund is divided into units of entitlement. As the fund increases or decreases in value, the value of each unit increases or decreases accordingly. The number of units held depends on the unit purchase price at the time of investment and the amount of money invested. The return on investment of unit holders is usually in the form of income distribution and capital appreciation, derived from the pool of assets supporting the unit trust fund. Each unit earns an equal return, determined by the level of distribution and/or capital appreciation in any one period.

In Malaysia, the entry fees (around 4–6%) imposed on fund management (unit trust) is known to be one of the highest in the world according to The Star’s article. Don’t worry, let me share with you: Fundsupermart.com, an online unit trust platforms which you can invest in unit trust funds, bonds and money market fund for minimum initial investment amount for as low as RM1,000 with subsequent investment amount from RM100. At FSMone, you only need to pay 1.50% sales charge on equity funds, balanced funds, alternative investments and mixed assets as well as 0% sales charge on bond funds and money market funds.

Risk Level: Medium Risk

If you are interested to open an account with Fundsupermart as a new account holder, you may apply via this link to enjoy 1.00% maximum sales charge for their unit trust purchase for 30 calendar days upon account activation.

4. Robo Investing: StashAway

StashAway is an Singapore-based digital investment advisory platform that helps you to get access to invest in more sophisticated investment options but in a simple way. There are 2 main products developed: StashAway Simple™ and StashAway Invest.

StashAway Simple™

StashAway Simple™ is a cash management portfolio without restrictions, that works similarly like a money market fund in which your funds are placed at steady investment assets. With StashAway Simple™, you can earn a projected rate of 2.4% p.a. on any amount. As compared to Fixed Deposit, the main key features are no lock-up periods, minimum deposit requirements, credit card and investment requirements, or any other confusing conditions. In short, it’s like a FD-like Product but with ample liquidity and flexibility.

Risk Level: Low Risk

StashAway Invest

It is not easy to invest in oversea exchange-traded funds (ETFs), especially when there are many fees and charges involved with the transaction. Unlike traditional investment platform, StashAway allows you to get access to invest in ETFs -mainly in US stock market with just an app. Generally, exchange-traded funds (ETFs) are index-tracking funds that are listed and traded on a stock exchange like stocks.

Besides that, Artificial Intelligence (AI) is also applied to help manage and rebalance your investment portfolio depending on how much risk you decide to take (StashAway Risk Index). From a customer experience perspective, it is simple to use by investing via the StashAway mobile app and you can set recurring transfers monthly for automated investment.

StashAway: Fees is relatively low if you compared to unit trust entry fees (4–6%). ETF fund managers who build the ETFs usually charge a fee, known as an expense ratio and the average expense ratio of the ETFs selected is just 0.2% p.a. Aside from that, management fee for our investment portfolios is between 0.2% and 0.8% per annum for your investments.

Below are StashAway investment portfolios’ performance and equivalent same-risk benchmarks’ since launch in July 2017; StashAway’s performance is actually pretty good if you compare the benchmark performance.

Risk Level: Medium Risk to High Risk

If you are interested to open an account with StashAway, you may apply via this link to enjoy free management of your investment portfolio up to RM30,000 for 6months.

5. Unit Trust Investing: Raiz

Raiz is micro-investing mobile app developed by Permodalan Nasional Bhd (PNB) to invest as low as RM5 by taking a small cut from daily purchases with no commissions. Raiz aims to help Malaysians above 18 years old to save by proactively investing in ASNB’s unit trust funds.

Risk Level: Medium Risk

One of the unique features is that Raiz round up each of your transactions to the nearest Ringgit, and invest the change into a diversified portfolio. You can do so by simply connecting to a debit card.

It is quite transparent in terms of fees that they do not charge fees for RM0 account balance and you can withdraw the fund anytime anywhere.

The answers provided during the sign-up process will be used to determine your risk profile and Raiz will use an algorithm to recommend 3 portfolio choices, consisting of Conservative (low risk), Moderate (medium risk) and Aggressive (high risk). Of course, you may also choose to switch to other portfolio at anytime and no fees will be charged for portfolio switching.

For parents who want to invest for their children below the age of 18, there is also Raiz Kids in which you can invest small amounts regularly for your children and/or dependents. Raiz Kids sits within your current Raiz account as a feature in the menu.

To start investing using Raiz app, you may apply this promo code: “ZRXWR4” to get a RM5 bonus when you sign up via the mobile app.

6. P2P Lending: Funding Societies

Peer-to-peer (P2P) lending basically allows investors (like individuals) to lend money to business who want to borrow but without going the lengthy process and requirement from the bank. Compared to traditional investments, P2P lending generates a higher return ranging from 10% to as high as 18% on your investment depending on the risk profile of the borrower. And of course, do not forget that the risk of the investment gets higher along with higher rate of return. The worst scenario would be that the borrower default on their payments and you are set to lose your entire investment on the defaulted financing option.

Risk Level: High Risk

It is important to choose a strong P2P platform provider and I recommend Funding Societies, one of the Southeast Asia’s largest peer-to-peer financing platform to connect SMEs with investors through an online marketplace to increase financing access for SMEs. As January 2021, they have funded a total of S$1.92billion across 3 countries: Singapore, Malaysia and Indonesia.

With a low minimum investment amount of RM100, Funding Societies allows you to invest in different financing options such as Micro Financing, Term Financing, Invoice Financing and etc. After investing in the financing options, you will start to receive monthly repayment from the borrower

If you are interested in Funding Societies, you may apply via this link to get a RM30 bonus when you sign up via the mobile app.

7. Property Investment

Another popular investment alternative is to invest in property be it to generate a Property Capital Gain or Property Rental Yield (similar to Stock Investing). There are a lot of considerations when it comes to property investment, and one of the most important question is how much do you afford to commit to purchase a property also; also known as Debt to Service Ratio (DCR).

Total monthly commitments refer to all bank (personal loan, credit card bill and etc) and non-bank debt (PTPTN and etc).

For example, with a net income of RM5,000 per month, you have a monthly commitment of RM800 and you are applying for a mortgage loan with an estimated monthly commitment of RM2,500. Your DSR would be 66% [(RM2,500+RM800)/RM5,000]

Risk Level: Medium Risk to High Risk

GuestReady

Thanks to technology advance, Airbnb, a property rental online marketplace has actually created a strong demand for property investment via home rental. Many investors have invested in property all over Malaysia and turned them into Airbnb hosting to rent the property for vacation rental.

GuestReady, an Airbnb management company located in Kuala Lumpur provides tailored services to help property investor to feature their properties on multiple short and medium term booking channels (such as Airbnb, Booking.com, Expedia) to get rental income. To know more about their service, GuestReady will be in touch when you leave your contact here.

Before you start to invest in property, there are also a lot of research required to check the property out and there are also several ways to purchase a property. Will be sharing in another article on the details.

8. Bitcoin Investing: Luno

Bitcoin is a cryptocurrency, an electronic version of money that verifies transactions using cryptography (the science of encoding and decoding information). The blockchain technology behind the Bitcoin network is interesting because the record-keeping technology is decentralized - so no single group has control and many believe it has the power to transform the world’s financial institutions and business dealings for the better, resulting in faster but more secure transactions, along with improved transparency and communications. Bitcoins can be sent from anywhere in the world to anywhere else in the world. No bank can block payments or close your account.

Bitcoin is also known as new digital gold due to its scarcity as there will only be 21 million Bitcoins, and as time goes on, they become harder and harder to mine.

Risk Level: High Risk

At the time of writing, a Bitcoin is worth 34,000 USD. If you look at the past, you will see that Bitcoin price is extremely volatile as Bitcoin prices can drop very quickly and reach very low prices. From a traditional perspective, Bitcoin is considered extremely high-risk as the bitcoin’s value is solely determined by investor interest. Nevertheless, many hedge funds have started to allocate part of their portfolio to this digital currency for long term asset allocation. To invest in this would be purely depends on your personal investment appetite and strategy.

Luno

Luno is the first cryptocurrency exchange in Malaysia to receive full approval from the Securities Commission (SC) of Malaysia buy, sell and store crypto safely. Luno provides easy access to major cryptocurrencies including Bitcoin, Ethereum, XRP, Bitcoin Cash and Litecoin. You can also store your crypto in a Luno Wallet for industry-leading protection as Luno stores 95% of crypto in “deep freeze” — multi-signature wallets protected by many layers of encryption.