How and where to invest in ETFs in Malaysia

One can invest in ETFs either through robot-advisory platforms or Bursa Malaysia. (rawpixel.com pic)

ETFs are an awesome investment. It is recommended by many top personal finance experts, including Sallie Krawcheck and Ramit Sethi.

Ellevest (where Sallie is the CEO) has the easiest-to-understand definition of ETFs: “Exchange-traded funds (ETFs) are baskets of investments that resemble mutual funds, but trade on an exchange like a stock. They also tend to have low fees.”

The low fee part is important. The fee range for ETFs in Malaysia is between 0.2-0.8% in management fee per year. That’s cheap, in case you didn’t know.

Usually, mutual funds have a management fee of between 1-2%. And that’s not including the sales charge that you have to pay if you buy mutual funds, which can go up to 7% of your total amount.

The only not-so-good part about ETFs is that the volume is low in Malaysia, so it can be a bit hard to liquidate*. However, as ETFs get more and more popular, the situation will get better. ETFs are supposed to be for long-term investments anyway.

*Hard to liquidate = a bit hard to sell back

How to invest in ETFs

There are two main ways to invest in ETFs in Malaysia – through robo-advisory platforms or Bursa Malaysia.

You can also invest in ETFs outside of Malaysia, but that requires you to open a foreign account before you can top up your ETFs-earmarked accounts. All this is possible but a little messy and inconvenient, so ignore this if you want to keep it simple.

Investing in ETFs through robo-advisory platforms

As of the time of writing, there are two robo-advisory platforms serving the Malaysian market – Stashaway (from Singapore) and MyTheo (from Japan).

Pros:

  • Nice interface and very millennial-friendly.
  • They ask you questions then help you select which ETF to buy, based on your risk appetite and goals. So you don’t carelessly pick the wrong one.
  • You can automate monthly top-ups so it’s a nice way to invest passively. A set-and-forget system.
  • You’ll like it if you’re into fintech.

Cons:

  • No Syariah-compliant ETFs offered through them (yet).

Investing in ETFs through Bursa Malaysia

You can also invest in ETFs through Bursa. Quite a few companies offer them there, and the number is growing.

Pros:

  • Should be easy if you are already familiar with the stock-buying process. Just use your CDS account to buy the ETF you want.
  • Syariah-compliant ETFs are available.

Cons:

  • It’s unlikely that you can make automatic monthly top-ups here, unlike with the robo-advisory.
  • A little bit more technical. Not as friendly as the robo-advisory.
  • You have to pick the ETFs you want yourself. Thankfully the selection is still fairly small.

This article first appeared in https://ringgitohringgit.com/etfs-in-malaysia/

Suraya is a corporate writer-for-hire and the blogger behind personal finance website Ringgit Oh Ringgit. She is more of a minimalist, less of a consumerist, a konon DIY enthusiast, a let’s-support-small-businesses-over-big-corporations kinda girl. Prior to her current role, she worked in various capacities within the non-profit industry.