Guide: How and Where to Invest in ETFs in Malaysia

Some questions I get with surprising regularity nowadays are (1) is ETFs a good investment, (2) is ETFs in Malaysia good, and (3) do I personally have investment in ETFs.

And the answer to that is, so far, (1) yes, (2) depends, and (3) not yet.

Let’s go deeper a bit into each of the questions.

Is ETFs a good investment?

Yes. Yes it is. ETFs is awesome. It is recommended by many top personal finance experts I respect, including Sallie Krawcheck and Ramit Sethi.

Ellevest (where Sallie is the CEO) has the easiest-to-understand definition of ETFs:

“Exchange-traded funds (ETFs) are baskets of investments that resemble mutual funds, but trade on an exchange like a stock. They also tend to have low fees.”

The low fee part is important. The fee range I’ve seen for ETFs in Malaysia is between 0.2-0.8% in management fee per year.

That’s cheap, in case you didn’t know. Usually, mutual funds have a management fee between 1-2%. And that’s not including the sales charge that you have to pay if you buy mutual funds, which can go up to 7% of your total amount.

The only not-so-good part about ETFs I can think of is that the volume is low in Malaysia, so it can be a bit hard to liquidate*. But I believe as it gets more and more popular, the situation’ll get better. ETFs is supposed to be for long-term investing anyway.

*Hard to liquidate = a bit hard to sell back the ETFs

How to Invest in ETFs in Malaysia

There are two main ways to invest in ETFs in Malaysia: (1) Through robo-advisory platforms, and (2) through Bursa Malaysia

(You can also invest in ETFs outside of Malaysia, but that requires you to open a foreign account before you can top up your ETFs-earmarked accounts. It’s possible but a bit messy and inconvenient, so ignore this if you want to keep it simple).

Invest in ETFs through robo-advisory platforms

As of time of writing, there are two robo-advisory platforms serving the Malaysian market – Stashaway (from Singapore) and MyTheo (from Japan)

Pros of buying ETFs through robo-advisory platforms:

  • Nice interface. Very Millennial-friendly
  • They ask you questions then help you select which ETFs to buy, based on your risk appetite and goals. So you don’t simply pick the wrong one
  • You can automate monthly topup so it’s a nice way to invest passively. A set-and-forget system
  • You’ll like it if you’re into fintech

Cons of buying ETFs through robo-advisory platforms:

  • No Syariah-compliant ETFs offered through them (yet)
  • People who have excessive Domestic Ringgit Borrowing (local loans/debt) may not be able to open an account. BNM rules

Since there are only two options, the next natural question is: which one is better, Stashaway or MyTheo?

I use neither but according to Mr Stingy, Stashaway seems better (for now)

I actually don’t use Stashaway (read further down why I don’t) but I think they look good. Use this link to open an account – play around with the interface. If you choose to invest with them, you get 50% off your (already low) fees.

etfs in malaysia

Invest in ETFs through Bursa Malaysia

You can also invest in ETFs through Bursa. Quite a few companies offer them there, and I believe the number is growing. Click this link to view the offering of the day (scroll to the red box section for the list)

etfs in malaysia

Pros of buying ETFs through Bursa Malaysia:

  • Should be easy if you are already familiar with the stock-buying process. Just use your CDS account to buy the ETF you want
  • Syariah-compliant ETFs are available

Cons of buying ETFs through Bursa Malaysia:

  • I don’t think you can make automatic monthly topups here, unlike with robo-advisory. Let me know if it’s possible
  • A little bit more technical. Not as friendly as robo-advisory
  • You have to pick the ETFs you want yourself. Thankfully the selection is still fairly small

Why I don’t invest in ETFs

Simple actually – I don’t invest in ETFs because there are no robo-advisory platforms in Malaysia that offer Syariah-compliant ETFs yet.

I mean I could buy Syariah-compliant ETFs on Bursa Malaysia, but I want the robo-advisory part, I want the system to pick the funds for me. I already eenie-meenie-mini-mo-ed the unit trust for my PRS account, this time around I was hoping to put a little bit more thought and strategy into my selection, you know what I mean?

I’ve actually asked Stashaway about it (many times actually), and they keep saying ‘offering Syariah-compliant ETFs in our platform is in the works’. So here’s hoping.

Do you invest in ETFs?

If yes, which ones? How long? How is it so far?

What tips, pros and cons related to ETFs in Malaysia would you add in this article? Share in the comments so all of us can learn!

Author

6 comments

  1. For a total newbie, thank you for writing this out! And includes your stand Stashaway(which I find intriguing!!). I am sure a lot of readers esp Muslims appreciate this.

    1. Hi Hani,

      You’re welcome! Glad you think so – although I do think I’m a product of brainwashing sometimes aha

  2. Hi Suraya – lovely article. Only thing I would add is that StashAway helps you choose a portfolio, which is made up of ETFs, that is tailored to your risk / investment goals. With a portfolio of ETFs, you are even more diversified! Plus we’ve done all the hard work of selecting the best ETFs for you (cost, liquidity, tracking error). PS: I work with StashAway, so feel free to AMA here.

  3. Great article 👍🏼

    On your point of liquidity, there are market makers appointed by the ETFs who provide liquidity.

    Haven’t faced any issued trading ETFs on Bursa since I started dabbling in them a while back.

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