What can I and should I do with my savings and excess funds? What are my investment options in Malaysia. That ought to be the question in the back of our minds, constantly.
My train of thought has always been as follows.
Savings – Investment – Passive Income – Reinvestment – Financial Independence
I know, Dividend Magic is almost always about Dividend Investing. And, I’m aware it can be somewhat intimidating for most of you to start dabbling in the stock market and investments in Malaysia.
In light of that, allow me to introduce the 7 viable, long-term investment options in Malaysia that might suit your needs.
When I say investing, I mean investing and not speculating. The difference?
Investors seek to generate a satisfactory return on their capital by taking on an average or below-average amount of risk. On the other hand, speculators are seeking to make abnormally high returns from bets that can go one way or the other.
The list is arranged from safest to riskiest.
Fixed Deposits (“FDs”)
Returns per annum: 3 to 4%
Let’s start with the simplest of them. Fixed deposits or FDs if you will.
Now, I wouldn’t even classify fixed deposits as investments. They’re more of a financial instrument where you place your money while waiting for investment opportunities.
Most of you may have heard of fixed deposits but I know for a fact that most Malaysian youths have their money in savings accounts. And they leave it at that. So instead of earning 3-4%, they earn that miserable 0.1 – 1% provided by most savings account.
And yes I know M2U savers gives you 2%.
Where can you place FDs?
I’d suggest going to your own bank and opening an online FD account. It is important to have an online account as it will save you time. You’ll be able to handle all fixed deposit placements and upliftments through the click of a button without having to be physically present be at a branch.
Treasury Notes and Bonds
Returns per annum: 4 to 6%
Before everyone starts making a fuss about how bond returns can go up to 8-9%, let me remind you that this article focuses on long-term and calculated investments in Malaysia, for the masses.
And the term used for high-risk, high return bonds is Junk Bonds.
Moving on, treasury notes are actually safer in comparison to fixed deposits because they’re issued by the government. However, they’re usually issued in the millions and not for most of us.
Bonds, if you don’t already know are a fixed income investment in which you, as the investor loan your money to a company. In the event that the company goes broke, you as the bondholder gets paid first, before the company’s shareholders.
In the past, the way I invested and put my money into bonds was through mutual funds via Fundsupermart. I’ve been told that they’ve recently started offering bonds right off the bat broken down into lower values ie. RM10,000. This makes it easier for the average Malaysian to get a piece of the bond action.
Gold and Silver
Returns per annum: N/A
Look, there’s no way I’m going to give you an estimate on the returns of trading in precious metal. One thing holds true, however, during times of uncertainty, the price of gold and silver goes up. They, therefore, serve as a good defensive asset.
If you time it correctly and buy them during economic booms, you’ll have an investment that will see you through the decades ahead.
Personally, I chose to invest in silver years ago. The way I invested was by buying and collecting silver coins offered by various governments around the world. My favourite is the American Eagle and Canadian Maple coins. The Chinese Panda coins are also part of my collection.
My coins cost a total of RM2678 back when I purchased them in 2013 and in 2015. They’re now worth about RM2975. About RM95 each. Cheapest I found on Malaysian sites.
That’s about a 10% gain for me over 5 years. It’s nothing to shout about but I’ve seen my silver increase to 50-100% during recessions. Still, I don’t plan to dispose of them anytime soon.
Returns per annum: 3-10%
Welcome to my neck of the woods.
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3Q UPDATE: Freedom Fund as at September 2018 Gross Investment: RM367,168.13 Market Value: RM453,205.61 Dividends (2018): RM14,554.34 Dividend Yield: 3.96% We're almost touching the 4% dividend yield mark just as we hit the 3rd quarter. https://dividendmagic.com.my/portfolio-freedom-fund/
Investing in stocks in Malaysia has always been viewed as a risky business. Why? Because Malaysians confuse investing with speculating.
Dividends are like the gift that keeps on giving because as the company you invest in grow and increases its profits, the dividends they pay out increases every year subsequently.
But guess what? You would have still paid that same RM10K initial capital and your dividend yield will continue to increase every year. A quick look at my portfolio – the Freedom Fund would show that sweet increment in dividends.
Of course, to enjoy these kinds of returns and yields, you’ll have to get some legwork in and pick only financially sound companies to invest in. And you’ll have to invest for the very long term. Think 10 – 30 years.
I’ve compiled a list of the Best Dividend Stocks in Malaysia here for your perusal.
Blue-Chip Defensive Stocks
Now, blue-chip defensive stocks like NESTLE are stable stocks you can hold for the rest of your lives. You’ll receive increasing dividends every year without ever having to work for it.
And because blue-chip companies are huge and stable by themselves, they won’t be as affected by the volatility of the market.
Another fine example would be investments in Malaysian banks. My RM26,527.86 investment in Maybank alone since 2016 has brought in a total of RM4,685.36 in dividends alone. That’s a 17% return in passive income for me. I’m enjoying a 7% yield this year with Maybank and hope to see this value increase in the near future.
Real Estate Investment Trusts (REITs)
Another type of stocks that I always encourage beginners to invest in Malaysia are Real Estate Investment Trusts.
My all-time favourite Malaysian REIT right now is IGB REIT. They’re mainly in charge or Mid Valley Megamall and The Gardens.
The dividend yield from IGB REIT has skyrocketed to RM2,865.43 which translates to 7.09% for me this year.
My gross investment is RM40,417.74 (at RM1.3563 per share).
Market value (as of 9 Dec’18) is RM50,660.00 (at RM1.70 per share).
My capital gain is RM10,242.26 or 25.34%.
A comprehensive review of the company can be found hERE.
Returns per annum: 3-10%
Property. This is a tricky one for Malaysians.
The current mentality of Malaysians is to purchase your first residential real estate right off the bat. If your monthly salary is RM5K, get a home that’ll cost your RM4k in monthly repayments. They’ll tell you to hold on to that and in 10 years time, sell it and double your money.
This isn’t investing. This is speculation. A savvy investor would look to a property that can not only cover your monthly repayments but give you a positive net income every month.
And from what I’ve seen and from personal experience, the only two types of real estate that can give you positive returns right now are low-cost residences and commercial properties.
If you’re looking to buy and hold and bank on the real estate’s value skyrocketing, you’re better off purchasing a piece of land.
I personally own 2 low-cost flats. How I manage and my returns are all detailed hERE.
TLDR: They net me a positive income every month. But they’re giving me a headache in terms of maintenance and tenant management. I’d rather have invested my money in REITs.
Commercial Real Estate
Specifically, shop lots and offices. Having companies and registered businesses as tenants is a much less risky affair compared to low-cost residential tenants.
The cons. You’ll have to fork out a huge sum to get yourself a commercial lot.
Unit Trusts and Mutual Funds
Returns per annum: 1-5%
I am for all intents and purposes anti Unit Trusts and Mutual Funds here in Malaysia. Why? Read this article here and you’ll come to realize how the exorbitant fees charged by funds in Malaysia will impact your financial wellbeing.
Private Retirement Schemes (PRS)
Nevertheless, I’d recommend investing and putting your money in Private Retirement Schemes. If you’re a Malaysian youth, you get an extra bonus from the government. If not, there’s always that extra tax-deductible afforded when you put your money into PRS. More on PRS hERE.
You’ll also want to check out Stashaway. You pay much less fees compared to Unit Trusts and Mutual Funds. And you get access to the global markets.
More on Stashaway hERE.
Returns per annum: 10-12%
I’ll never recommend investments and services I wouldn’t use and/or purchase myself. I’ve put up some of my own funds and tried P2P lending with Funding Societies.
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13.12% annualised return. Been investing with Funding Societies for more than half a year now. And a 13% pa return really astounded me. A post will be up on how my investments there are doing soon. Meanwhile, if you're thinking of investing, here's a code for free RM50: j1mwa37p Thank you everyone who has been using my code to invest. I hope you've been doing as well with Funding Societies as I have. @fundingsocieties @fundingsocietiesmy
My experience and the review can be found hERE.
All you need to know about Peer to Peer Lending and Funding Societies can be found there. My annualised returns have reached 13.12% per annum.
Which actually beats the returns from my stock portfolio last year. Go figure.
The risk with P2P lending here in Malaysia isn’t high at all contrary to popular belief. It ranges in the 0.1 to 0.5% right now. The key is to diversify and place RM100 in 100 different loans, as opposed to RM1,000 in 10 loans.
I’ve personally invested in all 7 of the aforementioned investment options here in Malaysia.
I’m sure many of you will have additional investments not listed above that you’ve put your money and faith in; Do drop me a comment letting me know what they are and why you think they’re investments worth considering.
I’m both excited and eager to hear what Malaysians invest in.
As always, due diligence on your own part is required when deciding to invest. I urge you again to invest and not speculate. Invest for the long term and invest in the fundamentals.
This has been a particularly long one. That’s what she said.
Onwards and upwards!