In this article, I’m going to give you a condensed but concise pros/cons list of five of the most popular investments in Malaysia: fixed deposits, mutual funds/unit trust, stocks, gold and properties/land. I’m also going to give you the tried-and-tested strategies that work well with each type of investment.
Why these five? Simple – because the overwhelming majority of us will start our investing journey with one of them first.
Let’s get right into it.
#1 – Fixed Deposit
- Easy to get. Many banks offer it.
- Easy to compare rates. Many financial comparison platforms list rates from different banks. Use them, it saves a lot of time
- Super super safe. Your initial capital is guaranteed.
- Set-and-forget system. Pretty passive
- Small return on investment. You’re lucky to get 4.x% ROI. Usually it’s 2-3.x%. That’s barely keeping up with the inflation rate.
- Your money is locked away for the duration. Cannot use for up to 5 years.
- There are penalties if you do need to take out the money before the term is up.
- Be realistic. Don’t chase the highest rates offered if you’re not sure you can spare the high minimum amount needed. Don’t lock it away for years unless you have a healthy-sized emergency funds socked somewhere else
- Open a new fixed deposit every month/every 3 months/ every 6 months. Over time, you’ll always have FDs expiring every so often
#2 – Mutual funds/Unit trust
- It’s like instant diversification in your investment portfolio. Your mutual funds/Unit trust might have a mix of: stocks (of different markets), properties, precious metals, currencies and more
- So. Many. Options. To. Choose. From.
- Suits different risk profiles. Can choose based on its risk level. The higher the risk, the higher the potential income.
- Some mutual funds and unit trusts have tax benefits too. When filing taxes, don’t forget to deduct amounts contributed to EPF, PRS*, SSPN** and investment-linked insurance products. Yes those are considered a type of mutual funds and unit trusts too
- An investment in Tabung Haji specifically lets you queue up for haji
*PRS = Private Retirement Scheme. Kinda like secondary, but optional EPF
**SSPN = education-earmarked funds for your kids
- So. Many. Options. To. Choose. From.
- Some are only available for Bumi folks (hi ASB)
- You really have to check the fees offered by some financial institutions. Some can get pretty high.
- Many people forget that the ROI is not guaranteed. As such, many people investing in high-risk growth funds especially have lost money here
- If you’re Bumi, definitely take advantage of the ASB loan if you can commit to the monthly payments.
- If you’re non-Bumi, just get investment-linked insurance (for the insurance+tax benefit; usually higher fees) or ETFs instead (not technically mutual funds/unit trusts but kinda sorta; low fees via roboadvisory platforms like Stashaway).
- Do take advantage of the mutual funds/unit trusts that can give you tax benefits
- You can take out a portion of your EPF money to invest in other unit trusts, or to buy property (whether you should is another matter. I vote no. Try not to disturb your retirement money)
- Automate monthly contributions to your preferred mutual funds/unit trust and its as passive as it can get
#3 – Stocks
- Super fun for people who like to read and do research. Lots of publications and seminars you can attend.
- You get to choose to learn about the fundamentals, the technicals, or both.
- As a shareholder, you get to attend AGMs and get nice doorgifts
- Not so much fun if you have no interest in company news and updates, and macroeconomics in general
- You get the ‘what if’ syndrome. What if bought lower? What if sell higher? What if I waited? Why didn’t I sell then?
- While lots of people made money on the stock market, don’t forget lots of people have lost money there, too
- If you like fundamental analysis, you’re suited for value investing and dividend investing strategies. Read those books and attend those talks
- If you also like technical analysis, you can potentially increase your ROI with warrants trading. Read those books and attend those workshops
- Except for rare events, don’t disturb your stocks after you buy them. Just hold them for the long term. Many people itchy fingers like to buy/sell too often.
- Buy when others are selling, sell when others are buying
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#4 – Gold
- Historically holds value. Probably won’t go down to zero
- You can get them in physical and digital versions. Physical gold is quite fun because you can wear gold jewellery and start coin collections and pretend you’re a pirate
- You can also temporarily pawn physical gold to use as emergency money, and buy it back when you can
- But on the other hand e-gold is very practical and hard for thieves to steal
- Buy-and-forget type of investment. Pretty passive
- Physical gold can be stolen
- And if it gets stolen, you might get hurt or your house might get broken into. Buy insurance.
- Muslims are obligated to pay zakat on gold (over a certain amount). Google ‘zakat emas’ for more info
- The price fluctuates. Buy a little bit every month to average it out
- Remember that gold prices tend to go up when the stock markets are not performing well
- It’s probably not a good idea to make gold your only investment
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#5 – Properties/Land
*Note: this is not property purchase for own stay, strictly for investment purposes
- Big. Solid. Very satisfying to own.
- You can earn from capital appreciation (the value of the property) AND rental income. The estimated annual ROI is 8% for properties in Klang Valley.
- You can make any adjustments you want. Anything. A fireplace in Malaysia? Why not YOU OWN IT WHAT.
- Nothing about it is cheap. You need 10-20% of the property value as downpayment. You need to pay legal fees and stamp duties (some developers may waive this). You need to buy house insurance. That’s not including furniture, installing fixtures, renovations. So many things to pay for.
- Becoming a landlord/landlady/Airbnb owner is no joke. It’s hard work.
- You always need to have extra money for repairs and more renovations.
- Harder to liquidate (turn back to cash) than other types of investments. It’s also not the best time to sell houses in Malaysia right now, there’s a housing oversupply.
- The holy grail is to find tenants that can pay more in rent than the monthly mortgage.
- You can outsource some work to agents (for rental) and AirBnB property management company (for AirBnB). It’ll cut into some profit, but it’ll save you a lot of time
- Or you can always opt for the least-hassle one, REITs. Think of it as the mutual fund version of properties.
This concludes pros, cons and strategies of five of the most popular investments in Malaysia: fixed deposits, mutual funds/unit trust, stocks, gold and properties/land.
If you’re completely new in this investing thing, your first few investments should be a combination of the these first. Mix-and-match them. At least 10% of your income should go to these investments, more is better.
How about other investments and strategies? Consider that ‘play money’, money that you can afford to lose. You can try out other less popular (and riskier) investments like cryptocurrencies, p2p lending, forex, equity crowdfunding and the rest later.
Do you agree or disagree with my analysis? What else would you add? Share them in the comments! Let’s help each other make good investment decisions.