10 Best Investments in Malaysia: Understand the Risks and How to Protect Your Money

Introduction to Investment Options in Malaysia

Investing your money can be a great way to build wealth over time. In Malaysia, there are many different investment options available. However, each comes with its own risks. In this blog post, we'll explore 10 popular investment choices in Malaysia, explain their risks, and share tips on how to mitigate those risks. Let's dive in!

Amanah Saham Bumiputera (ASB)

What it is: ASB is a unit trust fund offered primarily to Bumiputera individuals by Amanah Saham Nasional Berhad (ASNB). Non-Bumiputera can invest in Amanah Saham Malaysia (ASM) funds, which are open to all Malaysians. ASM funds have a fixed price of RM1 per unit and provide competitive returns, although they may not outperform ASB funds. The maximum investment limit for ASM is RM100,000 per individual. It's considered a relatively safe investment option with consistent returns.

Risks: While ASB is generally low-risk, the returns can vary, and there is a minimum holding period.

How to mitigate: To mitigate risks, diversify your investment portfolio by including other investments alongside ASB.

Amanah Saham Nasional Bhd (ASNB) has announced a total income distribution payout of RM1.13 billion for its Amanah Saham Malaysia 2 - Wawasan (ASM 2 Wawasan) fixed price fund for the financial year ending Aug 31, 2024. The distribution, which translates to total returns of 4.75%, will benefit 939,200 unitholders and exceeds the benchmark Maybank 12-month fixed deposit of 2.71% by 204 basis points. (https://www.thestar.com.my/business/business-news/2024/08/30/asm-2-wawasan-declares-rm113bil-income-distribution)

Tabung Haji

What it is: Tabung Haji is a savings fund for Muslims planning to perform the Hajj pilgrimage. It offers profitable returns and is Shariah-compliant.

Risks: Similar to ASB, the returns can fluctuate, and funds are tied to the specific purpose of Hajj.

How to mitigate: Combine your Tabung Haji savings with other safe investment products to balance the risk.

Lembaga Tabung Haji (TH) has declared a profit distribution of 3.1% after zakat for the financial year ended December 31, 2023, maintaining this rate for the fourth consecutive year. The total distribution amounts to RM2.72 billion, benefiting 9.15 million depositors, compared to RM2.64 billion for 8.8 million depositors in 2022. (https://www.thestar.com.my/business/business-news/2024/04/03/tabung-haji-to-focus-on-domestic-investments)

Fixed Deposit (FD)

What it is: FD is a financial instrument provided by banks where you can deposit a sum of money for a fixed term at an agreed interest rate.

Risks: Low risk but it offers lower returns compared to other investments, and penalties may apply for early withdrawal.

How to mitigate: Choose FDs with tenures that match your financial needs and avoid withdrawing early.

The latest round-up of fixed deposit (FD) accounts in Malaysia reveals that Agrobank offers the highest interest rate at 3.45% for a 12-month FD. Other notable rates include 3.15% from Bank of China and 3.05% from BSN for senior citizens. (https://ringgitplus.com/en/blog/fixed-deposits/best-fixed-deposit-accounts-in-malaysia.html)

SSPN

What it is: Skim Simpanan Pendidikan Nasional (SSPN) is a savings scheme aimed at providing funds for higher education.

Risks: Limited to education funding, and returns may not be as high as other investment options.

How to mitigate: Pair SSPN with diverse investments to cater to both specific and general savings goals.

The National Higher Education Fund Corporation (PTPTN) has announced a dividend of 3.6% for its National Education Savings Scheme (Simpan SSPN) for 2023, resulting in a total payout of RM357.65 million benefiting 6.25 million depositors. (https://www.thestar.com.my/news/nation/2024/04/05/sspn-i-announces-dividend-of-360-for-2023-up-from-2022)

EPF/KWSP

What it is: The Employees Provident Fund (EPF) is a mandatory retirement saving scheme for private sector employees in Malaysia.

Risks: Generally low risk, though returns are dependent on the overall economic performance.

How to mitigate: In addition to EPF contributions, consider investing in stock or unit trusts for added diversification.

The Employees’ Provident Fund (EPF) has reported higher dividend for 2023, declaring 5.5% for Conventional savings and 5.4% for Syariah savings. (https://www.thestar.com.my/news/nation/2024/03/04/epf-declares-55-54-dividends#:~:text=SHAH%20ALAM%3A%20The%20Employees'%20Provident,and%205.4%25%20for%20Syariah%20savings.)

Gold

What it is: Investing in gold can be in the form of physical gold or through financial products tied to gold prices.

Risks: Gold prices can be volatile and may not provide regular income.

How to mitigate: Hold gold as a long-term investment and pair it with assets that offer income, such as FDs or dividends from stocks.

Analysts suggest that gold-linked counters on Bursa Malaysia may continue to rise, driven by geopolitical tensions and increasing global demand for gold. The price of gold recently peaked at US$2,431.29, and experts anticipate further price increases, potentially reaching US$3,000 this year. Companies like Poh Kong Holdings and Tomei Consolidated have seen significant share price increases, reflecting the bullish sentiment in the gold market. (https://theedgemalaysia.com/node/708948)

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Unit Trust

What it is: Unit trusts pool money from various investors to invest in securities like stocks and bonds.

Risks: Market risks apply as the value can fluctuate based on fund performance.

How to mitigate: Research and select unit trusts managed by reputable fund managers and diversify within other asset classes.

According to the news articles, the average returns for Malaysian unit trust funds in 2023 performed impressively in 2003, with funds averaging 20.39% in gains and all unit trusts ending the year in positive territory. The average annual return was more than 16 percentage points greater than that of 2002.

Stocks

What it is: Stocks represent ownership in a company and are traded on stock exchanges.

Risks: High risk due to market volatility but potential for high returns.

How to mitigate: Invest in a mix of well-established companies and emerging startups. Keep updated with market trends.

Analysts are optimistic about the Malaysian stock market's performance as the FTSE Bursa Malaysia KLCI has reached a new high since June 2022, growing by 7.2% in 2023. Projections indicate that earnings for the FBM KLCI are expected to grow by 12.3% year-on-year in 2024, supported by a favorable economic environment and positive corporate earnings growth.

Property

What it is: Property investment involves buying real estate to generate rental income or capital appreciation.

Risks: High upfront costs, potential for property market downturns, and maintenance requirements.

How to mitigate: Purchase in high-demand areas and seek professional advice for sound investment decisions.

Average House Price Growth: The Malaysia House Price Index (MHPI) recorded moderate annual growth of 3.2%, with the average price standing at RM467,144 per unit in 2023. The property market is expected to maintain a cautiously optimistic outlook, with projected economic growth between 4.0% and 5.0% in 2024, supported by government initiatives and ongoing infrastructure projects. (https://napic2.jpph.gov.my/storage/app/media/3-penerbitan/pasaran-harta-tanah/laporan-pasaran-harta-tahunan/2023/Laporan%20Pasaran%20Harta%202023.pdf)

Forex

What it is: Forex trading involves buying and selling currencies to profit from exchange rate movements.

Risks: Extremely high risk due to market volatility and potential for significant losses.

How to mitigate: Gain knowledge through courses and practice with demo accounts before trading with real money.

Growth in Forex Trading Platforms as Malaysian Investors Embrace Global Markets: The number of forex trading platforms available to Malaysian investors has expanded, providing access to global currency markets. This growth is attributed to the increasing demand for alternative investment opportunities and the potential for higher returns compared to traditional investment avenues. While the articles do not provide specific return figures, they indicate that forex trading is gaining popularity in Malaysia, driven by the availability of online platforms, investor interest in diversification, and the potential for higher returns. However, analysts also emphasize the importance of understanding the risks associated with forex trading and the need for proper risk management strategies.

Cryptocurrency

What it is: Cryptocurrencies are digital assets using blockchain technology for secure transactions.

Risks: Highly volatile and susceptible to market sentiment and regulatory changes.

How to mitigate: Invest only what you can afford to lose and diversify into more stable investments like stocks and fixed deposits.

Cross Light Capital, a local fund management company, and Affin Bank have launched an actively managed fund dedicated to digital assets, as reported by The Edge Malaysia. The newly launched Performa Digital Asset Fund aims to offer exposure to digital assets through exchange-traded funds (ETFs) and exchange-traded products (ETPs), targeting premier banking customers.

Conclusion

Understanding the different investment options in Malaysia, along with their associated risks and ways to mitigate them, can help you make more informed decisions. Remember, diversifying your investments is key to managing risk and securing financial stability. Happy investing!

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