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).
- 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.
- 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.
- 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.
- 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.