Investing, which involves allocating specific resources to obtain long-term returns, plays a crucial role in achieving financial goals, building wealth, and securing future financial stability.
Before an individual embarks on his or her investment journey, they need to understand the options available in Malaysia, as well as the advantages and risks associated with each type of investment.
1. Fixed-income investments
Fixed-income investments, as the name suggests, offer stable and guaranteed returns. There are several instruments available in Malaysia, as follows:
- Government bonds
A government bond allows individuals or entities to lend money to the government for a specified period. These bonds offer stability with interest payments guaranteed by the government, making them a popular choice among investors who prioritise stability and positive returns.
- Corporate bonds
These are issued by private companies or corporate entities. Corporate bonds offer fixed interest payments for a specific period to investors, who can decide which to invest in based on the desired risk and return levels.
- Fixed deposits
With this option, investors allocate a certain amount into an account for a specific period with a fixed interest rate. This type of investment is popular among investors who prioritise capital stability and prefer to avoid high risks.
2. Equity investment
This involves owning a portion or all of a company’s shares. Here are options you can choose from in Malaysia:
- Common stocks
Common stocks, a primary instrument in equity investment, allow investors to own a small portion of a company that is traded on the stock market, i.e. Bursa Malaysia.
Profits from stock investments are generated through price appreciation and dividend payments. However, investors are exposed to the risks of stock price fluctuations and uncertainties in company performance.
- Initial public offering (IPO)
An IPO refers to the sale of company shares to the general public. It typically presents an opportunity for an investor to gain significant profits if the stock price increases after the public offering.
- Exchange-traded funds (ETFs)
ETFs, which are collective investments traded on the stock exchange, track market indexes or specific sectors, allowing investors to gain exposure to various types of stocks through a single purchase.
This option offers the benefit of risk diversification and trading flexibility.
Real estate investment is another popular form of long-term investment. It involves the purchase, ownership, and management of properties to generate income or profit through rental income, property appreciation, or both.
There are several types of real estate investment options available in Malaysia:
- Residential properties
These refer to houses, condominiums, apartments, or flats used for living purposes. Investors can purchase residential properties as a long-term investment or rent them out to tenants.
Income is generated through rental payments, and profits can be obtained through property value appreciation.
- Commercial properties
Commercial properties encompass buildings such as offices, shopping centres, factories, hotels, or other commercial structures that are used for business purposes.
Investors can lease out commercial properties to business tenants, generating a steady income. Profits can also be obtained through value appreciation, and the potential for future development and growth of the property or area.
- Real estate investment trusts (REITs)
A REIT is an investment instrument that allows investors to own a portion of a large real estate portfolio.
REITs typically own and manage income-generating commercial properties, through which investors can purchase units and receive regular income in the form of dividends.
Don’t miss part two of this article tomorrow.
This article was written by Shafiq Wahab for Qoala Malaysia.