Dividend Magic

Saving and Investing towards Financial Independence in Malaysia

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Review of pitchIN – Malaysia’s Equity Crowd Funding Platform

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What is Equity Crowd Funding (ECF)

Equity crowdfunding is the act of raising capital from the ”crowd” through the sale of securities (shares, convertible note, debt, revenue share, and more).

I’ll be using pitchIN as my example here because I only have experience in using pitchIN as an ECF platform. There are many other platforms in Malaysia but right now, pitchIN is the largest and in my opinion safest.

Raising Capital from the Crowd

The ”crowd” includes individuals and institutional investors alike. Anyone can partake in the offering. There are however certain restrictions in place ie. an individual has to be of age. Also, there are limits on how much capital an individual can invest based on their income, net worth, and financial knowledge.

pitchIN groups its investors into 3 different categories.

  1. Angel Investor
    Gross Income of more than RM180,000 per annum.
    An angel investor is entitled to invest a maximum of RM500,000 per annum in total in any company.
  2. Sophisticated Investor
    Net personal assets of more than RM3 million with experience in investing.
    A sophisticated investor can invest freely on pitchIN up to any amount.
  3. Retail Investor
    If you’re not in the aforementioned two groups, you belong here together with me.
    A retail investor can invest only RM5,000 per company and a total of RM50,000 per annum.

Equity Crowdfunding

With equity crowdfunding, companies are selling securities, giving investors skin in the game and a slice of the company.

On pitchIN, investors typically become a shareholder of the company with all the associated rights and benefits.

Pros of ECF

ECFs are a high risk high return form of investment. I’d rank it as one of the highest among all other asset classes.

Your potential return can range from 2x to 100x in a few years if you invested in a well-managed startup.

Individual investors like you and me can get access to start ups for a few thousand ringgit. The risks are high but so are the returns. As with all investing, remember to always do your own due diligence.

Risks and Cons of ECF

The Company Dictates the Terms

The terms and conditions of a deal and offering are dictated by the issuing company. It is imperative that investors especially retail investors take note of this.

Familiarize yourself with how companies raise capital. For example, if you’re in the first round of a start-up’s fundraising exercise, you’ll want to make sure you are protected as an early investor. You don’t want your shares to be diluted when the company goes for its second round of fundraising.

Exiting and Cashing Out

ECF is a long term game.

As an early investor in a private company, your avenues for cashing out and taking profit are limited. You either wait for the company to get big enough and lists on the stock exchange or you find yourself a private buyer.

In my experience on pitchIN, every company out there will tell you they’re aiming for an initial public offering (IPO) in X number of years.

And until platforms like pitchIN provide for a secondary market, those will be the only two options available to you.

Lack of Follow Ups from Management

This is one of my biggest irks with investing in a private company. Their obligation to minor shareholders isn’t much. pitchIN does try to have management engage more with their investors but from my experience, companies don’t try as hard after taking your money.

They’ll woo you with presentations, video calls and nicely done financial projections in the beginning. But after receiving your investments, be prepared to hear nothing from some companies.

At the end of the day, you’re just a minority shareholder and you basically do not have rights. You can vote, but your vote won’t matter. So make sure you do your research on a company’s management team before you invest. You want responsible people at the top that will work for the good of the company and its shareholders.

My Investments on pitchIN

I invested in two companies so far on pitchIN.

I treat my investments here as very high risk with similar potential returns and may even expect them to completely go bust. I invest in these companies with a long term (5-10 years) horizon.

My investment with MHUB was back in October 2019 which makes it a year old now. Oxwhite’s crowdfunding process ended in January 2020 which makes less than a year old. Both are relatively young and I’m excited to see how they’ll continue to develop.

One of my regrets was Kakitangan. I didn’t invest in them because I was still doing my research on the company itself as well as pitchIN as a platform.

Moving forward, pitchIN itself will be doing an ECF offering soon which I again, am mulling over. Is anyone considering investing in pitchIN?

What companies have you invested in and what are your experiences with them? Have they been good to you as shareholders?

US and International Stock Broker Comparison

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Looking to trade and invest in US and international stocks as a Malaysian?

I’m initiating this article because I’ve received messages from readers with concerns about the current broker I’m using – eToro.

Many have quoted an article by the Edge highlighting that eToro isn’t licensed under the Securities Commission of Malaysia (SC) right now. I’ve continued to use eToro because they are licensed by Australia’s SC equivalent – Australian Securities and Investments Commission (ASIC).

Nevertheless, I’m inclined to give Malaysian investors alternatives to eToro because at the end of the day, choices help us make decisions. And I don’t want anyone to use our local brokers because as you’ll find out later, the fees you pay is downright crazy.

Another important thing to note is – like eToro, all international brokers I’ll be mentioning that are actually worthwhile to open a brokerage account with are not licensed with SC. They do have jurisdiction in different countries though which I’ll mention later in the article.

Local Brokers

Let’s start off with what NOT to use. Here’s an example of a local broker I used to trade – Hong Leong Investment Bank.

I actually made a significant amount from investing in Berkshire Hathaway (B shares) and Vanguard’s S&P 500 ETF. I didn’t keep track of the fees I paid to purchase those stocks but trust me they weren’t little. But, holding the stocks for the long term helped mitigate that.

What I didn’t realize was this..

Why you shouldn’t use local Malaysian brokers to trade internationally.

This is the supposed dividend I was to receive from my Vanguard ETF. USD20. After deducting all the fees – I’m left with 52 cents. Thank you local brokerage.

I hope I’ve made the case for not using our local brokerages to trade US and international stocks.

Moving on!

eToro

eToro Malaysia Review

I’ve written an in-depth review on why I am using eToro hERE.

Pros

  • Zero Fees
    To put it simply – they charge zero commission and zero fees for US stocks.
  • Regulated
    eToro might not be regulated under our local SC but they are under Australia’s ASIC. Which actually has higher standards compared to SC.
  • Fractional Shares
    eToro allows you to buy a fraction of a share. With the MYR falling always, this allows us Malaysians a lower entry point. You don’t have to fork out $450 for one Tesla share. Instead, you can start off with $100 or even $10 for that matter.
  • Easy and Intuitive User Interface
    The easiest to learn and use. The charts are simple and straightforward. If you’re looking to go deep into charts and volume of a stock, eToro wouldn’t be suitable for you.
  • Copy Trading
    If you’re looking to just copy someone’s portfolio, you can do so with just a click on the platform. I’m on eToro as dividendmagic and my portfolio is always available to be copied here: https://www.etoro.com/people/dividendmagic

Cons

  • You can’t trade every stock
    eToro does not have every stock in the US and internationally listed on their platform. They do have all the big ones as well as more popular stocks on there though which works for me.

Sign up

To sign up and open an account with eToro, head hERE.

Tiger Brokers

tiger brokers dividend magic

Pros

  • Regulated
    Tiger Brokers is again not regulated under Malaysia’s SC but they are regulated under SC’s equivalent in Singapore – the Monetary Authority of Singapore (MAS)
  • Listed on NASDAQ
    Tiger Brokers is a listed public company backed by Interactive Brokers Group Inc (IBKR) and Xiaomi (amongst others).
  • In-depth data
    Tiger provides much heavier data and charts for its users. Its level 1 data is sufficient for me but if you want heavier stuff, you can pay for higher level access.

Cons

  • Fees
    Unlike eToro and TD, Tiger charges fees. For trading US stocks, you’re charged US$0.01 per share or a minimum amount of US$1.99 per trade. This does not include forex charges which have been waived by Tiger for now.
  • You can’t trade every stock
    Tiger has much more stocks available for trading in the US and internationally compared to eToro. However, they don’t have stocks from the London stock exchange right now.
  • No fractional share trading
    Unlike eToro, you don’t get fractional share trading with Tiger Brokers. The cost to purchase a single share would be higher for some companies.

Sign Up

You can sign up with Tiger Brokers hERE and use the code DIVMAGIC for the following benefits:

  • Free level 2 Data for US stocks for 30 days
  • 1 commission-free trade for US or HK stocks (after the account is approved and opened)
  • stock voucher worth up to SGD 100 depending on the amount funded
Tiger Brokers referral

TD Ameritrade

td ameritrade dividend magic

TD Ameritrade has been around for a long time and a household brokerage name alongside IBKR. I’m picking TD instead of IBKR because of IBKR’s custodian fees of $10.

Pros

  • Zero fees
    TD, like eToro charges zero fees for US stocks including ETFs
  • Regulated
    Like eToro and Tiger and almost all other international brokers, TD isn’t regulated under SC. TD Singapore however is regulated under Singapore’s MAS.
  • Listed on NASDAQ
    TD Ameritrade, the parent company of TD Singapore is listed on NASDAQ.

Cons

  • No fractional share trading
    Unlike eToro, you don’t get fractional share trading with TD Ameritrade. The cost to purchase a single share would be higher for some companies.
  • Long Account opening time
    It is tedious to open a TD Ameritrade account. I’ve learnt from experience. It’s been a few months now and they are still processing my documents.

Sign up

To sign up and open an account with TD Ameritrade Singapore, head hERE.

End.

Right now, I actually have signed up for all 3 brokers.

A summary of all 3 can be found below based on my experience and research. I’ll continue to update the table and my reviews of both US and International brokers as I try and test them out.

I primarily trade with eToro because of their zero commissions. If however, I want to purchase a certain stock which eToro does not have on their platform, I turn to Tiger Brokers.

I also use Tiger Brokers for their more in-depth data provided.

And the big question as to why I’m not using TD? Their sign up process is long and tedious. I registered months ago and right now I’m still waiting for them to approve my documents.

Lastly, a few things to note when investing in the US. You should know by now that Malaysians are taxed a 30% withholding tax as foreigners by the USA. Which is why dividend investing isn’t that great when investing in the US.

Instead, I focus on capital gains there. Because as Malaysians, we don’t pay capital gains tax like our US counterparts. I leave dividend investing to local stocks, and focus on growth and capital gains in the US.

You can check out my US holdings and portfolio hERE. Onwards and upwards!

Passive Income in Malaysia

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Readers of the blog will be familiar with the term passive income. And to once and for all give my point of view on what is actual passive income as well as my own passive revenue streams.

What is Passive Income?

The notion of having your money work for you, to have it generate additional income while you sleep is a wonderful one.

Right off the bat, let me dispel the notion that passive income is only for the wealthier individual. In fact, passive income is for anyone and everyone. Regardless of the amount, passive income is passive income. RM10 a month is a passive income if your assets are generating it for you. Everyone starts small. In fact, I think my first dividend received was in the region of RM50 for the first year. That’s like RM4 per month. Work on it continuously and trust me, it’ll grow.

More popular forms of passive income in Malaysia include rentals from real estate, interest from bank deposits and P2P lending, and dividends from stocks and businesses.

”Passive Income”

The term Passive Income has been thrown around and mentioned a lot recently as Malaysians become more financially literate. In general, passive income is defined as income earned with little or no effort. So not all ”passive income” is truly passive.

For example, almost everyone would list their rental income as passive. I beg to differ. In my experience, taking care of your rental property takes time and effort. You may have a real estate agent working with you at the start but most of the time, you’ll be doing the work yourself. Personally, I put up ads on my own as I feel my agent’s ads were too generic. I even attend the viewings to make sure the said agent is doing his/her job right.

Now all that is just to get your unit rented, what happens when a pipe bursts or your air conditioners malfunctions. Your agent isn’t going to help you with it as there’s nothing in it for them. So no, I’ll not list my rent collection as a passive income.

However, your rental income will be classified as passive once you hire a proper property manager where he/she is hired on a full time basis to take care of your real estate portfolio. Of course, you’ll have to have a large mix of properties before that is viable.

My Passive Income

I myself like to only call a source of income passive when it truly requires zero to minimal effort on my part.

This is why, out of all my income streams, I only actually consider my dividends from stocks and interest earned from P2P lending passive income. 

A good benchmark to know if your passive income returns are up to par would be your fixed deposits with banks. Historically, it has been at the 3% mark. Recently, a 2% return is the norm. So if you’ve already got investments generating passive returns for you, check if it’s higher than your FD rates. I’d even go so far to say that FDs are like the kings of passive income. Easiest to obtain, all you need is capital.

My income right now comes from the following:

  1. Salary
  2. Stakes in businesses
  3. Rental
  4. Dividends
  5. Interest

Earned income from working a job is the total opposite of passive income. My businesses, although can run by themselves, I still consider them not to be truly passive because they still require constant monitoring and checking in with.

As mentioned earlier, rental income from my properties does not fall under the passive category for me. My properties require attention from time to time in the form of rent collection, having to look for tenants, fixing stuff etc. So, not passive. For me at least. Until I hire a property manager.

Dividends from my stocks I totally consider passive because the valuation of a company is done once before I purchase the stock. Thereafter, I only check in with the same company either quarterly, half-yearly or sometimes even once a year. 

Lastly, my income in the form of interests comes mostly from fixed deposits and lending money via P2P lending platforms. FDs are a no-brainer, you can even make placements online nowadays. As for my P2P lending, although small in comparison to my other income, this one is passive for me as well. I just read the prospectus and information on the company/business I’m lending money to, and then sit back and receive my money in the form of capital plus interests.

My main source of passive income comes from dividends generated by my Freedom Fund. To achieve financial independence, I’ve calculated that I’d need roughly RM3,000 a month in passive income.

Last year’s dividends came up to RM16,322.27. I’m almost halfway to my goal of RM36,000 in dividends per annum. My dividends so far for the year 2020 can be viewed hERE.

How to Generate Passive Income

Earning any form of income boils down to two factors – the effort and time and/or the amount of capital you put in. In essence, either you invest and put up your time or you put up your money.

So if you’re young, you’re able and you’ve got time to spare, you will want to consider putting in your time and effort towards building a steady stream of passive income. A good example of this would be someone in their 20s working their ass off in a business with the eventual goal of automating it and generating returns without their involvement.

Or, that same 20-year-old person could work at their career, save their salary, and then invest that money to then eventually earn passive returns. Which means – time and effort first, and then putting up the capital after.

Unless you’re fortunate to be inheriting wealth, you’ll always have to put something up for returns. Your effort, your time, your money.

Getting to where I’m at hasn’t been an easy ride. My portfolio is mainly built on frugality. In my experience, passive income does not come easy. It’ll take a huge initial investment on your part. In the case of my dividend income from stocks, to earn that RM16K per annum, I had to have about RM400K in capital which comes up to about a 4% return for me.

Why is Passive Income Important

If like me, you’re on a quest for financial independence, passive income will cover your expenses. Financial freedom and security has always been my ultimate goal.

When I invest, I invest to first increase my passive income. And when I’ve eventually reached my passive income goal, I’ll focus on growth. Because that is when I’m set and I can afford to take bigger risks with my investments. Also, I’d rather not liquidate and sell my stocks for income.

With a steady, reliable source of passive income generating for you every month, trust me, you’ll be in a very happy place. Investment decisions can be so much more logical and less emotional. You worry less about losing the shirt off your back if your investments don’t work out. Of course, being a rational investor you’ll still exercise caution, you just won’t be hindered by thoughts of bankruptcy and worst-case scenarios.

Passive Income Ideas

If you’re like most readers of the blog, you probably are in your 20s or 30s, and you’re working for a salary. You might want to first consider putting in FDs, and then maybe stocks for dividends.

Another way to go is properties, it may not be passive for now. But once you’ve built up a substantial real estate portfolio where hiring a property manager is viable, it most definitely will be passive then.

One more potentially lucrative endeavor are businesses. You may have a hobby right now which can be turned into a side hustle and eventually into a full-fledged business. Or if you’ve got the dough, look into franchises that do not require your full attention.

I’m always trying to find other ways to generate passive income for myself. Some good ones come to mind like royalties from book publishing, music, or any kind of intellectual property.

The blog itself is earning a little from ad revenue and affiliate marketing. This however isn’t passive YET. I don’t want to bombard you guys with too many ads on the site. And affiliate marketing only happens when I actually like and/or use the products. Right now I’m just really enjoying writing and having a community built on investing and FI/RE.

Now, as you can probably tell, not everything may qualify as passive at first because it requires a tremendous amount of effort. But at the end of the day, say 10 years down the road when you’re able to be hands-off and collect your cash, it’s most definitely passive.

A Few Closing Thoughts

Passive income for me is tied closely to my goal of financial independence and freedom. And I’ve decided on dividends to be my main stream of income. You may have other ideas for passive income and your goals might differ. At the end of the day, we can all agree that passive income is a good supplement to your portfolio whatever your financial goals might be.

Ever since I graduated and started my first job, I’ve worked towards a goal – having a stock portfolio whose dividends I can live off for the rest of my life. So, if you haven’t already, set yourself a target and work towards it. Don’t just work that 9 to 5 job aimlessly. Your goal could be like mine, financial independence. Or maybe you truly find happiness in living a lavish life. There isn’t anything wrong with either one. A goal is a goal, as long as you have one and you’re happy, by all means!

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Duopharma Biotech Berhad (DPHARMA 7148)

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The following article is written by a close friend – Wilson Wong.
He is an investor and works in the pharmaceutical industry.

I’ve found his analyses of companies to be really good and asked him to write this piece on Duopharma. It was his introduction and recommendation that put the company on my radar and eventually into my portfolio – the Freedom Fund.

As always, this is his take on things and you as a reader should always do your own due diligence before investing.

Also, both the investment and pharmaceutical terms used here might be a little advanced for some, if you have questions, please do leave a comment at the bottom of the article.

I thoroughly enjoyed reading this and I hope you do as well.

DUOPHARMA

History

Duopharma Biotech Berhad, previously a subsidiary under CCM Berhad underwent a demerger in 2018 as part of a restructuring exercise for companies under PNB’s portfolio. A main reason for Duopharma’s demerger is to focus on building a strong pharmaceutical business.

Over the years, Duopharma has grown into Malaysia’s leading pharmaceutical company in terms of sales volume and no.2 in sales value (behind Apex Healthcare). 

Duopharma’s portfolio consists of 367 generic drugs covering some of the very common therapeutic classes such as diabetes, cardiovascular disease, respiratory disease and many more. 

On the consumer end, Duopharma boasts a portfolio of 70 different supplements. Its products include a few household brands such as Champs, Flavettes, and EyeGlo.

For readers who are not clear about the pharmaceutical business, every drug that is discovered or developed by a company has a 20-year patent.

During the patent period, the drug will be termed as a branded drug which only the original manufacturer is allowed to market and sell. Branded drugs usually command a higher price as the original manufacturer aims to recoup its R&D costs as well as to maximise profits within said 20-year period.

Think of this as your most advanced cancer drug which can cost you up to 6 digits annually. After the patent expires, other companies are then allowed to manufacture these drugs. As competition comes into play, the price will of course be lower. The same drug will be sold under different brand names at a more affordable price.

A good example would be Panadol. The next time you’re at a pharmacy, try asking for generic paracetamol. Then compare the price difference.

Duopharma, Pharmaniaga to Undertake Fill and Finish Process for Covid-19 Vaccine

14 July 2020 – our current Science, Technology and Innovation Minister Khairy Jamaluddin announced that the Prime Minister had agreed to this proposal and it will be executed once a vaccine is available. Investors immediately flocked towards these 2 stocks, causing a brief limit up on 15th July before an eventual price retrace.

A few days later, our health DG briefly mentioned that the vaccine might be available as soon as the end of this year. Both Duopharma and Pharmaniaga stock prices again immediately rallied with extremely strong buying sentiment. They both closed at RM2.85 and RM4.03 respectively (up by close to 100% before all announcements).

Duopharma – The Pros

Higher margins

Compared to pharmaceutical companies such as Pharmaniaga, Duopharma in general, has a higher overall margin. This is understandable as both companies essentially have a very different business model although general investors tend to lump them together.

Duopharma primarily focuses on manufacturing generic drugs and selling them to hospitals/government while Pharmaniaga focuses on logistics and distribution services for drugs. 

Even though Pharmaniaga essentially monopolizes logistic and distribution services in Malaysia with their sheer amount and reach of distribution centres in Malaysia (that’s how our drugs can reach even the most rural hospitals), we cannot ignore that this also comes with a very high operational cost. It acts as a double-edged sword for Pharmaniaga.

Strategy to venture into niche drugs

Among all other pharmaceutical companies in Malaysia, Duopharma clearly outlined that they wanted to focus and develop a basket of niche drugs to meet the market gap. This is an interesting strategy and could pay off should they succeed in their venture.

Moat in Insulin production

I first encountered Duopharma when I was studying the price of insulin in Malaysia and realized that Duopharma offers the cheapest insulin to our public hospitals.

For those with a brief understanding of diabetes, you will know that all diabetic patients will eventually end up relying on insulin. As it turns out, Malaysia has one of the highest diabetic populations in the region.

Duopharma’s insulin contract was extended by the Malaysian government at the end of 2019 and is estimated at a value of around RM91.06 million. Looking back at their financial report in 2019, as much as RM283mil of revenue is derived from the public sector. By combining both numbers, insulin contributes a huge chunk to Duopharma’s bottom line.

Duopharma – Future Prospects

Acquisitions in Korea

In line with Duopharma’s strategy to foray into the development of niche drugs, the company acquired stakes in both Pangen Biotech (8.9%) and SCM Lifescience (5.8%). By partnering with both firms, Duopharma has access to the development process of biotherapies.

As of FY2019, PanGen had obtained product registration approval for Panpoetin, the EPO biosimilar co-developed with Duopharma Biotech, from the Korean Food and Drug Administration (KFDA) on 28 November 2019 and is in discussion to set up a joint biological manufacturing plant in Klang.

As for SCM Lifescience, they are on track with Phase II clinical studies for chronic graft-versus-host disease (GVHD) and Phase I clinical study for acute pancreatitis. Also, the company will embark on Phase 1 clinical trials for stem cell treatment for atopic dermatitis.

Launch of new bio-similar

This is again a bit technical and might be difficult for readers without pharmaceutical knowledge to understand. For certain breast cancer patients, they can be treated with a targeted treatment called Herceptin (trastuzumab). Duopharma had managed to manufacture a biosimilar of trastuzumab with Zuhera as the brand name. Again a biosimilar will be cheaper than the original biologic drug (almost similar to generic drug vs branded drug). This will again help Duopharma gain more sales and provide an affordable option to patients who cannot afford branded drugs.

Other expansion plans

Aside from developing revenue streams from niche drugs, Duopharma is also aggressively expanding its facilities. Over the last financial year, Duopharma completed its Highly Active Pharmaceutical Ingredients plant, upgraded its soft gel and liquid manufacturing line and is set to upgrade another Oral Solid Packing line in 2021. With the higher manufacturing capability, we should see a growth in revenues. 

Duopharma – Risks

Losing out in government contract

Traditionally, Duopharma is relying a little too much on government contracts and will see it’s earning affected if they lose out in tenders. The management has acknowledged this issue and has since been working on improving sales in the private sector as well.

Clinical trial results

Clinical trials are always hit or miss. Should SCM Lifescience fail any of its clinical trials, it might affect potential new revenue streams for Duopharma.

Is it still worth buying Duopharma?

With the current price, the short answer is “NO”. Even with a government contract to manufacture Covid-19 vaccine pre-filled syringe, it will not propel Duopharma earnings by 2X and I doubt the growth will even be anywhere close to 50% yoy.

We need to remember that Duopharma does not develop the vaccine, they are just getting the vaccine and packaging it into syringes. Of course, if you are a speculative trader who spotted a nice chart pattern or indicator and can stomach the risk, Duopharma and Pharmaniaga will definitely be one of the few active stocks in the next few trading days. However, for long term investors looking for a good company, Duopharma is definitely worth keeping in the watchlist. 

by Wilson Wong

For more analyses on companies, I have a list hERE.

Lastly, keep up to date by following my Facebook and Instagram.

My Portfolio is Built on Frugality

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The Freedom Fund – A Product of Good Offense and Defense

I’ve been asked often about how I managed to amass an RM400K (almost RM500K) portfolio at 30. This post isn’t about showing off and flaunting my portfolio, so I hope it doesn’t come off that way.

I can narrow it down to two basic parts – Offense and Defense.

The first and most obvious is your ability to generate income and returns – your offense. With a high income, be it from your day job, side hustles, a business, or from your investments, a good offense is directly proportional to your increase in wealth.

However, based on my experience, a good and solid defense is perhaps much more important than your income. A solid defense is equivalent to having a high savings rate and being frugal.

Let me start off by saying that playing good defense and being frugal isn’t for everyone. I am not telling you to follow and copy what I do to the letter, but this is how I was brought up and how I built my Freedom Fund.

My Childhood / Youth

I’d like to think that my childhood and good early parenting helped make me the person I am today.

I am from a middle-class family. We’ve had our fair share of ups and downs. We’ve never gone hungry or without a meal but food was never EVER wasted.

I got RM10 per week from my mum during primary school. Thus, the first lesson in budgeting was born. If I spent all RM10 on Monday on nasi lemak and french fries, I’d starve for the week during recess. Even at that young age, I managed to save some money every week. That money was then used to buy stuff like erasers for that eraser flipping game.

Fast forward a few years, high school was pretty much the same. I had a bump in allowance of course but I was still saving money every week. I recall looking on enviously at my friends who all had iPods. I had to save money for a year before getting my own. That feeling of achievement at the end though, was worth it.

University – One of the biggest regrets I have to this day is that I didn’t take the time to apply for scholarships after my SPM. I surprisingly got really good results but no one taught me about scholarships.

I had the opportunity to study abroad as well with my parents offering to fund my studies in Australia. Instead, I completed my education locally to save my family money.

Back then, I was fortunate enough that my parents were able to pay for my education. However, I took out a PTPTN loan anyway as the interests were lower than FD rates. It was a no brainer for me. I took my parent’s money for my education and placed them in FDs. And after 3 years of education, guess what? PTPTN was giving out a 20% discount for those who settled their loans early. At the age of 21, I had made a 20%+ return. This was to be my seed money.

Another thing that helped fund my portfolio initially was that I took a part time job when I was studying. The money was one thing but it helped built character and a sense of gratefulness when I eventually entered the workforce full time. So parents, even if your teenage child doesn’t need to get that part time job, I think you should make them work anyway.

Entering the Workforce

In the first week of entering the workforce, I followed my seniors and colleagues around. We mainly ate in the mall costing me RM15 – RM25 per meal. This was when I was on an RM2,800 salary. Thankfully, I smartened up pretty quickly and my staple food was economy rice – chap fan.

I had breakfast at a nearby kopitiam – eggs, toast and coffee for around RM5. Lunch was economy rice which cost me around RM10 or if I’m feeling rich, RM13. I had my dinners at home. This was my life for 4 years. Of course there were times when I splurged occasionally. Birthday meals, dates, the usual.

During this time, if memory serves, I had a savings rate of around 50%. This was when I started buying stocks. I spent the day at work and in my free time, I analyzed stocks. Sunway, Nestle and Scientex were my very first stocks and I still hold them to this day.

Being Frugal Today

A Penny Saved is a Penny Earned

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#buffet . #wagyu . #nais

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Today, as you can tell from some of my posts on social media, I do splurge a little on food and travel. But let me assure you, every other day I am still in essence a frugal person.

I still play good defense and it is in my nature to be frugal. I still go for that economy rice (now RM15) when my friends and colleagues go for lunch at the nearby bistro.

I still turn off the lights and appliances when I leave the room. I even do it when I’m not in my own house / property.

I still do not turn on the tap to the maximum when washing the dishes.

I make sure to have a fan in my room and office so I don’t turn have to turn on the air conditioning. And at times when I am hot and I have to, I set it to 24°C. That’s the lowest I’ll ever go.

I practice most hacks on frugality like waiting a week before making a big purchase. I pay myself first when I get my salary. I buy in bulk whenever I can. And I love credit cards for their cashback and points.

All these might seem a little extreme to you, but this is how I live. It isn’t tiresome for me (it might be for the people around me), but I believe these are good habits to have. And all these, in a huge way has helped me immensely in wealth creation.

Because a penny saved is a penny earned, a penny earned is a penny invested and compounded.

A few of the stuff I use to save, earn points etc can be found hERE.

Despite everything I’ve laid out, remember to treat yourself to that occasional good meal, to travel and experience the world once you’ve built up your portfolio. Use your dividends and passive income for some leisure. Just remember to flip that light switch off before heading for that holiday.

End.

Both defense and offense are equally important on the road to financial independence. With my savings and frugality, I wouldn’t have much of a portfolio if I did not invest my money. So remember to always invest. And invest for the long term.

I apologize if you came here looking for tips on how to invest and how to pick stocks and build wealth. But the truth is, with me at least, it was discipline and good solid defense.

It’s a boring route and definitely not for everyone. So please do not feel bad about yourself if you are a big spender. Your huge income capabilities could very well outweigh your bad defense.

It is however my intention and wish that perhaps after reading this, you just might turn off that switch when you leave the room.

Do not confuse frugality with being cheap.

Onwards and upwards!

Investing in US Stocks via eToro in Malaysia

By 75

eToro being one of the biggest (as well as controversial) names in the world, it’s no surprise that one of the most common search terms related to eToro on Google is: ”Is eToro legit?”

I have been talking to them on and off for months leading up to this post. Getting my questions about their legitimacy answered.

And to answer your question right off the bat, yes! I am going with eToro.

Investing in US Stocks as a Malaysian

Why eToro?

First off, I was looking for an easy to register and easy to use international broker. I started off looking for one where I can invest in the US stock market.

I currently use Hong Leong Bank to invest and I invest in two different counters – Berkshire Hathaway and Vanguard’s S&P 500. Both of which I’ve sold off and moved the cash to eToro.

I’ve looked around and I think the next best thing people would recommend is registering with someone like TD Ameritrade or Interactive Brokers. I’m not sure about the procedure now but back then they required a US residential address for an account.

By this time, I’ve heard of eToro and like others, was really skeptical. Mainly due to their cheesy Alec Baldwin ad.

But I decided to really look into it some time in March this year.

So, in my opinion, if you as a Malaysian wants to invest in the US, you have 3 viable options – eToro, TD Ameritrade and Interactive Brokers.

I personally am going with eToro because I think it would be the place to invest with for the younger generation and I hope to see more innovation from them as we go along.

Conversing with representatives of eToro, I’ve gotten confirmation that commission-free trading is coming to Malaysia very very soon! It is limited to US stocks only though.

Fees

Update 20 May 2020:

eToro has just announced ZERO commissions for non-leveraged positions on US stocks.

Which is exactly what and how I am trading in.
This is really huge considering how much I have been charged in the past by my local broker.

I’ve created added a video towards the end of this post to show how one can purchase the underlying assets instead of CFD.

You do not get higher spread than usual and you are not paying any fees. Provided you trade WITHOUT leverage and you trade in US stocks. The only fees you’ll actually be paying is a slightly higher currency exchange rate and a withdrawal fee when you eventually withdraw your money from eToro.

For non-US stocks, you are charged based on a spread. The difference between these two prices is known as the spread. The spread is how “no commission” brokers make their money. Instead of charging a separate fee for making a trade, the cost is built into the buy and sell price of the currency pair you want to trade.

Min of 0.18% and a maximum of around 0.25% per trade.

In contrast, this is the fee charged by Hong Leong for the sale of my USD counters. Standard $25 per trade, and on top of that, another %, and stamping. As seen below.

Another one of my concerns with my previous brokers was the handling fees charged by my previous broker on dividends received.

As you can tell from the below statement, my dividends received are charged taxed, heavily. I pay a ridiculously huge amount in fees and in the end, I receive next to nothing.

Withholding Tax for Malaysians

I’ve received confirmation from eToro that they do not charge handling fees on dividends received. The only cost to my dividends will be the different withholding taxes different countries charge.

As a Malaysian investing in the US, we are charged a 30% withholding tax on our dividends. Which is why my attitude towards investing in US stocks is more for capital gains. My portfolio and investing philosophy in the US can be found hERE.

Registration

Registration is easy compared to many other international brokers. I managed to register in 5 mins. Verified using my details including my passport in a day.

I’ve sold my US stock holdings in Hong Leong Bank and deposited my entire capital and then some into eToro.

Huge Array of Assets to Invest In

Although I plan to invest primarily in stocks, the huge variety of assets offered on eToro brought me there.

I’m looking at commodities such as gold, silver, oil. Cryptocurrencies – Bitcoin, Ethereum and the likes. And many others.

Starting Out

After selling off my holdings of VOO and BRK:B shares, I deposited the proceeds in eToro.

The first share I bought is Disney! The interface of eToro was extremely easy to use.

So right now, I’ll be figuring out the ins and outs of eToro and will have updates of my US stocks for everyone.

Also, for you credit cardholders chasing them points and miles. eToro allows top-up via credit cards! I am assuming that depositing to eToro via my cards would constitute online spending. Imagine $50,000 worth of points.

Risks of eToro

eToro’s Regulation

I’ve had people compare eToro to Malaysia’s illegal investment schemes and all sorts of scams and shams.

Now, I know eToro isn’t regulated by our SC in Malaysia. As a matter of fact, eToro isn’t regulated by every country’s financial authority. Like every other offshore broker, they are only licensed with a few major ones. In eToro’s case – CySec (Cyprus), FCA (UK) and ASIC (Australia).

eToro in the Asia Pacific region (which includes Malaysia) is regulated under ASIC – Australia’s SC for CFD trading. I’ve confirmed with ASIC that eToro is actually regulated there.

ASIC is a top tier financial authority. They are at the top level. I know many MANY of you are worried about eToro as being not safe. But eToro is one of the few offshore brokers that belong to a Tier 1 financial authority.

In this case – ASIC. Which Malaysian accounts belong to.

As for not being licensed under SC, I know many of you are concerned by the recent article. All off shore brokers like TD and IB are not licensed under SC. It’ll be tough for an international platform to get licenses from every country whose citizens choose to invest with them.

I think I’m comfortable with eToro being regulated by ASIC. Even more so than SC actually.

Not Understanding the Platform

I fear that many new investors to eToro should take some time to understand the platform. First, sign up for a virtual account, give it a week or so at least and then go for the real thing.

Another potential issue is when you use leverage, so if you’re not a seasoned investor, please steer clear of leverage.

Take the time also to look at the video I’ve posted later in the article on how to purchase without leverage etc.

Stocks held under?

Investing via eToro Malaysia, your investments will be held ”in street name”.

A security is held in “street name” when a brokerage holds it on behalf of a client. The name that appears on the stock certificate is that of the broker, but the person who paid for the securities retains ownership rights.

It’s similar to a nominees account here in Malaysia.

Withdrawal

I’ve had readers asking about issues with withdrawal. Ie. Taking your money out from eToro.

First thing you have to make sure to do is to get yourself 100% verified. Submit all the necessary documents. Then you deposit.

If however, you’re still having problems withdrawing your money, you can just easily submit a help ticket and eToro will get back to you.

I myself have not had any issues with withdrawal.

Important Note.

By default, Malaysians using eToro will be under ASIC. And eToro has just recently announced the following:

eToro is excited to announce that 0% commission trading of NYSE and NASDAQ stocks on the eToro platform is now available in your region.

Please note that leveraged positions, short positions, and positions on stocks traded on exchanges other than NASDAQ and NYSE will be executed as CFDs, and incur commission and relevant fees.

I am currently investing only in US stocks, non-leveraged and under ASIC regulation.

Video Tutorial

I’ve created a video on how to trade on eToro without leverage. This allows eToro users in Malaysia to buy the underlying assets instead of CFD.

As such, there is no need to change to CySec regulation if you’re only buying US stocks. If you are looking to buy stocks other than US ones without CFD, you’ll have to change to CySec – which I have also included in the video.

As mentioned previously, ASIC is a Tier 1 regulator.

I DO NOT recommend people changing it to CySec. Stay with ASIC, I’d suggest just buying without leverage, and only buying US stocks. Zero fees boys and girls.

And if you want to buy stocks of other countries, just go with CFDs, I’m sure the majority of your holdings would be US stocks.

Start Investing

eToro Malaysia Review

Practice Account

If you’re unsure about investing with your own money just yet, you can sign up for a practice account first, trade with a virtual $100,000 and when you’ve familiarized yourself, continue with real money.

You can open an eToro practice account hERE.

If however, you want to jump straight in like I did, you can sign up hERE.

Copy Trading

I know this is a feature of eToro and many will want to have a look at my portfolio and eventually copy it.

I am on eToro as dividendmagic.

Those of you who have signed up and started investing, you can join the FB group hERE.

Alternatives to eToro

If you have doubts and do not like eToro, I have actually written a comprehensive comparison on the top 3 brokers available to us Malaysians to trade US and international stocks.

You can find the comparison hERE.

End.

Now, I must make it clear that I am using eToro to invest for the long term. I do not plan to trade in CFDs (except maybe for a few China and HK stocks) now that we can purchase the underlying stock instead. And I do not plan to use leverage.

If you are still unsure how to do the above, please take a moment to go through the video I’ve posted above.

I’d like to emphasize that I am not here to represent or defend eToro. I am just sharing what I am using to invest in the US markets. Of course I’d be more than happy to help with any questions you may have.

Finally taking the Freedom Fund international, seriously. Let’s see where global stock investing and eToro will take the portfolio!

If you’ve been wanting to invest in the global markets, sign up via the links above to support the blog. Thank you!

You can also check out my US holdings and portfolio hERE.

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