Investing Made Simple for Malaysians
A lot of friend have asked me for investment advice. Common questions I get include:
· “How should I invest?”
· “What stocks should I buy?”
· “Is unit trust a good investment?”
· “Should I invest overseas?”
· “What do you think of Bitcoin?”
It made me realized that financial literacy is low in Malaysia. And it doesn’t help when there are many self-proclaimed gurus and financial salesman who cares mainly about profiting from your ignorance, greed or insecurities. Many do not have your interest at heart. So I have decided to write this article for the benefit of every Malaysian. Hopefully it can give most of you some ideas and help you with your financial knowledge.
Investing is not difficult. You don’t need a high IQ to be a good investor. You don’t need to learn accounting & finance or spend hours reading annual reports and analysing stocks. You certainly DO NOT need to pay thousands for financial courses or stock tips. Focus on your career or business or start a side hustle to make more money so that you can increase your investment capital to grow your wealth.
Here’s a story of how a janitor by the name of Ronald Read amassed a fortune of US$8 million. https://www.cnbc.com/2016/08/29/janitor-secretly-amassed-an-8-million-fortune.html. All it takes is time & patience and of course, the right investment which is what I am going to share with you.
Follows the steps below and you will do better than 90% of the people.
Invest 30% into the US stock market. Why? Because US is the largest economy in the world. The average return from the US stock market since 1926 is about 10–11%. You can do this by buying the VTI ETF (https://www.etf.com/VTI). With VTI ETF, you will own the top 3,000+ companies listed in the US stock market and it only cost you 0.03% a year! You will own great companies like Microsoft, Apple, Facebook, Alphabet (Google), Amazon, Berkshire Hathaway, etc. You have some of the best CEOs running the most successful companies in the world making money for you! Forget about picking stocks because plenty of research has proven that fund managers cannot outperform the market. All you need to do is to buy VTI and enjoy the success of these companies. You can see the performance of VTI ETF below. If you had invested 10 years ago, you would have achieved a return of 14.5% per year. RM100,000 would have become RM390,000 and all you had to do was to buy it once and hold it for 10 years!
You can buy VTI ETF with Malaysian brokers (ask them to open the US trading account for you) or if you want to save cost like me, use the Singapore brokers (FUTU, Tiger, POEMS or FSMOne).
Invest 30% into China to ride of the fast-growing Chinese economy as China & Asia is the epicentre of growth in the coming years or decades. Instead of investing via an index ETF which I have recommended above, I would suggest going with unit trust to invest in China. While the fees are higher than ETFs, I have compared the past performance and found that active fund management has actually outperformed the index, unlike the US market. Even after accounting for the annual management fees of 1.8 to 2% per year, the returns were still higher than the passive index funds. I do not know the exact reasons for this and can only speculate that the reason is because the China stock market is less developed and efficient and hence offers better stock picking opportunities for active fund management to outperform.
So how do we choose the best China funds to invest in? For this we will use the Fund Screener tool in Morningstar (https://my.morningstar.com/my). Select 5 Stars Rating under Morningstar Rating, choose Long Term Performance and click 10 Years Annualized (%).
From this list here, you can invest:
15% into AmChina A-Shares (domestic mainland China companies). This fund has generated 17.7%+ return per year on average for the last 10 years. RM100,000 would have turned into RM500,000! Again, just buy and forget!
15% into Principal Greater China Equity Fund (here you get to own exciting growth stocks like Tencent, Alibaba and Chinese banks, insurance, etc.). 13.7% average annual returns for the last 10 years.
So where do you buy these funds? Find the cheapest way, whether is it online platforms like FundSupermart or eUnitTrust or directly through your banks. You want to minimize the sales charge. DO NOT pay anything above 1% for sales charge because fees will eat into your returns. I have invested many times paying 0% sales charge via eUnitTrust (they have 0% sales charge promotions as often as Shopee promotions).
Invest 30% into Malaysia. That’s right. I would advocate investing into Malaysian stocks because it’s our home country. From the Morningstar list, the fund that stand out is Areca EquityTRUST fund. Close to 14% per year.
For Areca, you can invest directly thru them and the sales charge if you do it online is 1% the last I heard. If you need a Consultant drop me a note and I can recommend a friend.
Invest 10% that into Bitcoin and crypto. You cannot afford not to have crypto exposure. There is already a lot of real-life use case of Blockchain, DEFI & NFT and it’s growing exponentially. It’s like the early day of internet and you have some of the world’s smartest brains investing and building in this space. I would suggest investing 5% into Bitcoin & 5% into Ethereum. For the more advanced, you can consider putting some into DEFI assets. But that’s another topic altogether. You can use Luno (regulated in Malaysia) or the most popular exchange in the world — Binance (not regulated in Malaysia).
So there you have it. Here’s how your investment look like:
Simple right?
Oh one more very important thing. Time in the market is more important that timing the market. So please do not try to time your entry or exit. The key is to invest early & regularly, stay invested for the long-term and enjoy the magic of compounding!
Happy Investing!
Disclaimer: I am NOT a financial adviser and I am not affiliated to any of the funds or platforms mentioned. This is for educational purposes only. So please DYOR.
