Let’s start this article with this fact: I *love* ETFs. Short for exchange-traded funds, I think it is one of the better ways to invest than stock-picking (for most people) and have been promoting it for a while.
The low fee and exposure parts are true. As per Bursa Malaysia’s ETF explainer video, ETFs tend to be more cost effective (cheaper fees) yet allow the investor to get a diversified portfolio of stocks and bonds.
The easiest way to understand ETFs is that they are funds (like unit trusts)… that are traded (bought and sold) on exchanges. Imagine buying ASB, ASM, EPF etc on the stock market. That’s kind of how ETF works.
In Malaysia, you can invest in ETFs through various platforms. All-in-all, there are thousands of ETFs you can choose from around the world!
In this article, I want to give you some exposure to the world of ETFs – by explaining all 16 (just 16!) ETFs listed on Bursa Malaysia. I’ll explain: types of ETFs, what you can tell by their names, which investors they are suited for, and more. This way, you can easily read/dissect other ETFs as well.
ETFs listed on Bursa Malaysia
ETFs are still considered a new type of investment in Malaysia. In fact, the first ever ETF listed on Bursa Malaysia was back in 2005.
At writing time, there are 16 ETFs listed on Bursa Malaysia across 5 Categories:
- Commodity ETF
- Equity ETF
- Equity ETF (Shariah-Compliant)
- Fixed Income ETF
- Leveraged & Inverse ETF
Note: Which ETFs to invest in depends on your financial goals – go to the Best Way to Invest in ETFs section below for more information. Periodically, new ETFs may be added so be sure to bookmark the Exchange-Traded Funds page in Bursa Malaysia website!
What’s in the (ETF) name?
The name of each ETF offers a lot of clues to what they are and what assets make up each ETF. Let’s use TradePlus Shariah Gold Tracker (0828EA) as an example:
- TradePlus means the ETF is under AHAM Asset Management Berhad,
- Shariah means its Shariah-compliant,
- Gold Tracker means this ETF closely tracks the performance of the price of gold, and
- (0828EA) is the stock code
The name of the ETF might also include the country or region (Malaysia, ASEAN etc), the underlying index (FTSE, KLSI, etc), the quantity of tracked companies (50 biggest in China, etc) and more.
You’ll see what I mean, continue reading below 🙂 Next, let’s understand each of the ETF categories:
#1 – Commodity ETF
Commodity ETFs are ETFs that track the price of a given commodity. Commodities are physical products that are meant to be consumed or used in the production process – things like oil, gold, wheat, etc.
There is one Commodity ETF listed on Bursa Malaysia:
- TradePlus Shariah Gold Tracker (0828EA) – You already know you can do gold investment through digital platforms or in physical gold (coins, jewellery etc). But you can also do gold investment through this ETF!
#2 – Equity ETF
Simplistically, equities are shares issued by companies. This category of ETF is the most similar to mutual funds/unit trusts and most popular among investors seeking long-term and/or strategic investment opportunities.
Generally speaking, Equity ETFs are GREAT for investors seeking exposure into different markets (ASEAN, China, Asia, U.S. etc) and have medium-to-high risk appetites.
There are six Equity ETFs listed on Bursa Malaysia:
- FTSE Bursa Malaysia KLCI ETF (0820EA) – exposure to the 30 biggest listed companies that collectively represent the Malaysian stock market
- Principal FTSE ASEAN 40 Malaysia ETF (0822EA) – tracks the performance of 5 ASEAN markets and consists of 40 constituent stocks from Singapore, Malaysia, Thailand, Indonesia and the Philippines
- Principal FTSE China 50 ETF (0823EA) – tracks the FTSE China 50 index that gives exposure to 50 largest and most liquid Chinese stocks listed and traded on the Hong Kong Stock Exchange
- TradePlus S&P New China Tracker (MYR Class: 0829EA; USD Class: 0829EB) – tracks the performance of the S&P New China Sectors Ex A-Shares Index, which are Chinese listed companies in the consumption and service-oriented industries
- TradePlus DWA Malaysia Momentum Tracker (0836E) – invest in Malaysian stocks with high momentum movement in terms of pricing
- TradePlus MSCI Asia Ex Japan Reits Tracker (0837EA) – invest in high dividend paying real estate investment trusts in Asia (excluding Japan)
#3 – Equity ETF (Shariah-Compliant)
Equity ETFs (Shariah-Compliant) are the same as Equity ETFs, except they also adhere to additional Islamic guidelines.
There are five Equity ETFs (Shariah-Compliant) listed on Bursa Malaysia:
- MyETF Dow Jones U.S. Titans 50 (0827EA) – tracks the performance of the Dow Jones Islamic Market U.S. Titans 50 Index which comprises of the 50 largest companies listed on NYSE and Nasdaq
- MyETF Dow Jones Islamic Market Malaysia Titan 25 (0821EA) – tracks the performance of 25 largest Shariah-compliant companies listed on Bursa Malaysia
- MyETF MSCI Malaysia Islamic Dividend (0824EA) – tracks the performance of the Benchmark Index, which is a price return index comprising 16 to 30 Shariah-compliant securities listed on Bursa Securities with higher than average dividend yield
- MYETF MSCI South East Asia Islamic Dividend (0825EA) – tracks the performance of the MSCI South East Asia IMI Islamic High Dividend Yield 10/40 Index which objectively and passively represent the dividend yield opportunity within South East Asia’s Shariah equity markets
- VP-DJ Shariah China A-Shares 100 ETF (0838EA) – tracks the performance of the largest 100 Shariah-compliant A-share stocks screened from the Dow Jones Islamic Market China A universe which are eligible for Stock Connects
#4 – Fixed Income ETF
Fixed Income financial products typically promise investors payout on a regular basis or upon maturity. This type of ETF suits investors with a more conservative risk profile (like retirees) and those looking at diversifying their portfolio with fixed income.
There is one Fixed Income ETF listed on Bursa Malaysia:
- ABF Malaysia Bond Index Fund (0800EA) – exposure to Ringgit denominated government and quasi government debt securities
#5 – Leveraged and Inverse ETFs
Unlike other ETFs in this list, Leveraged and Inverse ETFs are for short-term trading, not medium-to-long-term investing. One can profit from both bullish (Leveraged) OR bearish market (Inverse) using Leveraged and Inverse ETFs.
There is one Leveraged ETF and one Inverse ETF listed on Bursa Malaysia:
- Kenanga KLCI Daily 2x Leveraged ETF (0834EA)
- Kenanga KLCI Daily (-1x) Inverse ETF (0835EA)
I’ll be upfront: Leveraged and Inverse ETFs are not recommended for beginners – they are only suited for sophisticated investors, who are knowledgeable traders with high risk tolerance.
Leveraged and Inverse ETFs have gained popularity among sophisticated investors as they aim to deliver magnified returns. For example, a 2x leveraged ETF seeks to deliver double the daily performance of the index it trades. Inverse ETFs seek to deliver the opposite of the daily performance of the index it tracks.
That said, don’t let me stop you from learning. You can start your journey to become a sophisticated investor by enlisting in Bursa Academy’s Empower Your Leveraged & Inverse (L&I) ETF Investment Journey course. It’s FREE to enroll.
Beyond Bursa Malaysia: Global ETFs
I hope the explanation of 16 ETFs above will give you some idea of (1) the different types of ETFs, and (2) who they are suitable/not suitable for.
Among all the global ETFs, it might be useful for you to be aware of one particular ETF, called the S&P 500 ETF. Different asset management companies may offer it, but basically it is a highly popular ETF that tracks the performance of top 500 companies in the US.
Why is the S&P 500 ETF popular? Well, because:
- Financial media tend to be dominated by US market updates
- The US market recorded positive growth for most years
- S&P 500 ETF are frequently recommended by popular finance personalities
- The fees are very, very low (for Americans)
However, as a Malaysian, you need to think twice about investing in S&P 500 ETF. It’s not that you can’t, because exposure beyond Malaysia markets can be a good idea, but definitely seek advice from professionals so it fits into (rather than harm) your investment portfolio.
Where and How to Buy/Invest in ETF in Malaysia
Malaysian investors can invest in ETFs through 3 main ways:
- Regulated brokers
- Regulated robo advisors
- Regulated online investment platforms
- Note: The regulated part is non-negotiable – imagine depositing funds then they don’t let you withdraw! Best to be safe and avoid this situation.
Which option to pick, out of the 3? Well, you can read the pros and cons of each option in the How to Buy ETFs in Malaysia Easily and SAFELY article.
ETF Rewards 2023 Campaign – Win a trip for 2 to Langkawi, Bali or Tokyo
However you *might* want to take advantage of the ETF Rewards 2023 Campaign, and win yourself a trip for 2 to Langkawi, Bali or Tokyo! Here’s how to join:
- Step 1: (skip this if you already have a CDS account) Open a CDS account from any of the regulated brokers (select Equity)
- Step 2: Buy RM1,500 worth of ETFs between 1 May – 30 June 2023, and/or RM2,000 worth of ETFs between 1 July – 31 August 2023, and/or RM2,500 worth of ETFs between 1 September -31 October 2023.
- Step 3: That’s it! Just wait until the Lucky Draw announcement and see if you win. For a higher chance of winning, simply invest more. New investors get DOUBLE entries too 🙂
Do check the ETF Rewards 2023 Campaign for more info on campaign mechanism and T&C. All the best!
Best Way to Invest in ETF
The best way to invest in ETFs depends on the type of ETF. Briefly, from the Categories we’ve learned so far:
- Commodity ETF – If Gold, then limit to 5-10% of your portfolio. If other types of commodities, seek professional advice (or less than 5% of your portfolio to be safe)
- Equity ETF – use DCA strategy (see below)
- Equity ETF (Shariah-Compliant) – use DCA strategy (see below)
- Fixed Income ETF – for people seeking regular income and lower risk investment
- Leveraged & Inverse ETF – for advanced investors with trading skills. Note that L&I ETFs are not Shariah-compliant
Use Dollar-Cost Averaging strategy
The best way to invest in (Equity) ETFs is to use the DCA or Dollar-Cost Averaging strategy. How this strategy works is:
- Put in RMxxx in Week 1, Week 2, Week 3… until Week 52 and repeat, or
- Put in RMxxx in January, February, March… until December and repeat, or
- Put in RMxxx in Q1, Q2… until Q4 and repeat
- Just repeat this strategy for years, and save for extremely bad market conditions, you should find yourself with a significant amount
Why should you do this strategy? Because consistency > timing the market. By allocating a set amount, you do not need to worry if the price will go up or down next week, month or quarter. You may get more ETF units when the price is lower, and vice-versa.
Over time you would average out your cost, hence the strategy name ‘Dollar-Cost Averaging’.
When to ‘cash out’ on your ETF investment?
Some of you may ask – Suraya, when do I withdraw the money, when do I cash out?
The answer is to seek professional advice from licensed financial planners.
As a general rule though, you should almost never ‘cash out’, unless you need to use the money. The key with any long-term investment is to stay invested.
I hope the explanation on the 16 ETFs listed on Bursa Malaysia above helps you understand ETFs. By now, you should know some of the categories and can tell more or less what the ETF tracks based on its name. Use this information to make an informed decision in your investment journey.
Again, ETFs are one of my favourite investment vehicles as they (tend) to be lower in fees. Less fees mean more profit kept by you (or less loss)!
Beyond this article, you can find resources to learn more about ETFs in Bursa Academy and information-sharing sessions organised by regulated platforms offering ETFs.
Do you invest in ETFs? If yes, which ones? If no, I hope this article will kickstart your ETF journey 🙂