Grow Your First RM1000: Best Investments in Malaysia Revealed

Starting your investment journey with RM1,000 might seem like stepping into the ocean with a paddleboard. It’s easy to feel underprepared if you do not have a large portfolio and a sophisticated investment strategy. Yet, this initial sum holds more potential than meets the eye. 

In the realm of investment, great oaks from little acorns grow, and your RM1,000 is no exception. This guide aims to debunk the myth that meaningful investment is the exclusive territory of the wealthy and to show you the myriad ways your RM1,000 can become the seed of your financial growth. Far from being a mere drop in the financial bucket, this amount is your gateway to learning, earning, and gradually escalating your investment prowess. 

Let's embark on a journey to discover how your RM1,000 can work for you, multiplying and maturing in ways you might not have imagined. From solid, low-risk options to more risky, higher-return products, we've mapped out a route for every type of investor. Welcome to your first step towards financial empowerment. Let’s dive in.

Employee Dividend Fund (EPF)

The Employees Provident Fund (EPF) stands as a cornerstone of retirement savings for many Malaysians, offering a blend of reliability and respectable returns. With a history of delivering dividends between 5.2% to 6.1% annually over the past five years, the EPF not only promises a safety net but also growth for your hard-earned money. 

This consistency is further underscored by its assurance of a minimum 2.5% dividend for conventional accounts, making it a bedrock for those seeking a low-risk investment path. If you're already in the workforce, chances are contributions to your EPF account are a regular part of your financial routine. 

However, the opportunity to amplify your savings through increased or additional contributions might be an untapped avenue. For those looking to expedite their savings growth, considering an uptick in your mandatory contribution rate could be a wise move. Engage with your company’s human resources department to explore your options. Additionally, voluntary self-contributions stand as a viable strategy for boosting your EPF savings, an approach that is particularly beneficial for freelancers, self-employed individuals, or anyone navigating the gig economy. 

The i-Saraan scheme extends an olive branch to those not traditionally covered by regular employment, allowing for a more inclusive approach to retirement savings. This flexibility ensures that more Malaysians can secure their financial future, regardless of their employment status.

In sum, the EPF offers a low-risk investment avenue with steady returns that can play a critical role in your long-term financial planning. Whether you're looking to solidify your retirement fund or simply seeking a reliable investment, the EPF provides a foundation upon which to build a more secure financial future.

Amanah Saham Bumiputera (ASB)

Amanah Saham Bumiputera (ASB) presents a unique opportunity for Malaysian Bumiputras to delve into the world of investment through a unit trust scheme tailored specifically to their financial growth. Eligible investors are able to invest up to RM300,000 into ASB, which was increased from RM200,000 in 2023. Managed by Amanah Saham Nasional Berhad (ASNB), a subsidiary of the esteemed Permodalan Nasional Berhad (PNB), ASB stands as a beacon of financial inclusivity and empowerment within the community.

Designed with longevity in mind, ASB is not a sprint to quick profits but a marathon towards substantial, long-term gains. The principle is straightforward: the more extended the investment period, the higher the potential returns. This approach underlines the essence of ASB as a prime vehicle for wealth accumulation over time.

Historically, ASB has been synonymous with robust performance, providing investors with impressive returns. This track record is due to its strategic asset allocation, of which 83% is invested in equities. As the fund is a large shareholder in Government Linked Companies like Maybank, Sime Darby and Tenaga Nasional, these large stakes in these blue-chip companies provide stable dividends for the fund. Despite a recent dip in distribution rates, it continues to offer one of the most attractive low-risk investment avenues in Malaysia, combining stability with the prospect of financial reward. Interestingly, ASB has also increased its asset allocation to overseas markets to about 9.6% of the portfolio, providing unit holders with diversification.

Investors also have the option of borrowing from certain banks to invest in ASB. Given that the returns have been demonstrated to be positive and above the borrowing costs, this is something investors should consider. Investors seeking to finance their ASB investments should consider their entire financial position and the ability to service the interest payments before proceeding.  

With returns ranging from 4.60% to 8.7% per annum over the past ten years, ASB offers a compelling argument for Bumiputera investors seeking to embark on or expand their investment journey. It serves not just as a financial instrument but as a stepping stone towards achieving long-term financial security and prosperity within the Bumiputera community.

Wealth Management Platform or Robo Advisors

Wealth management platforms or robo advisors employ sophisticated algorithms to manage your investment portfolio based on your personal risk tolerance and investment goals, which are determined through an initial questionnaire. Commonly, these platforms invest your funds in a diversified way in several asset classes through ETFs and periodically adjust your portfolio to optimize performance in varying market conditions.

These platforms are ideal for those who prefer a hands-off approach to investing. They typically charge lower management fees (e.g., Stashaway’s management fees is from 0.2% to 0.8%) compared to traditional investment funds like unit trusts, thus preserving more of your potential returns. Additionally, they offer the convenience of starting with minimal initial investments, sometimes just a few ringgit.

In Malaysia, notable wealth management platforms include:

1. StashAway
2. Akru
3. BEST Invest
4. KDI Invest
5. MyTHEO
6. Raiz
7. Wahed Invest

Each offers unique features tailored to different investment preferences and goals, making it important to compare them to find the best fit for your financial needs. The risk associated with these platforms ranges from low to high, depending on the specific investment strategies and asset allocations they employ. Returns, likewise, vary based on how the chosen platform manages your investments and responds to market conditions. 

Looking for Effortless Wealth Growth? Explore General Investing with StashAway

StashAway's General Investing offers a streamlined solution for those aiming to grow their wealth effortlessly. This strategy utilizes globally-diversified portfolios that manage risk while aiming for optimal returns with an impressive 2023 returns of:

• Returns in USD: 6.68% to 18.16%
• Returns in MYR: 11.28% to 23.26%

These returns underscore StashAway's capability to effectively leverage global market dynamics for substantial investor gains. Besides that, here are also some of the key advantages of Stashaway General Investing:

1. Optimized Returns: Maintains a consistent risk level while maximizing potential returns for long-term growth.
2. Global Diversification: Provides broad exposure across multiple asset classes worldwide, aiming for superior risk-adjusted returns.
3. Low Costs: Benefits from an average expense ratio of just 0.2% per annum, with transparent, no-hidden-fee pricing.
4. User-Friendly: Easy to set up, no minimum balance or monthly requirements, with portfolios automatically managed by experts.

For investors looking for a hands-off approach with the potential for high returns, StashAway’s General Investing offers an attractive, hassle-free avenue for wealth management.

Private Retirement Scheme (PRS)

The Private Retirement Scheme (PRS) is a flexible and voluntary investment mechanism designed to bolster your retirement savings. Operating alongside traditional retirement funds like the EPF, PRS offers an additional avenue for Malaysians to secure their financial future through investments in approved unit trust funds, managed by licensed external PRS providers.

One of the distinctive features of PRS is its stringent withdrawal policy, mirroring that of the EPF to some extent. Funds invested in PRS are primarily intended for retirement and thus come with restrictions on early withdrawals. Accessing your funds for non-qualifying reasons attracts an 8% tax penalty, a safeguard that encourages investors to maintain their focus on long-term savings goals.

However, PRS is not just about restrictions; it comes with notable incentives. A standout benefit is the tax relief of up to RM3,000 available for contributions made to PRS, a policy in place until 2025. This tax incentive can translate to substantial savings, particularly for those in higher income brackets, potentially reducing your tax liability by as much as RM900.

Investing in PRS involves navigating market volatility, where returns are not guaranteed and fluctuate based on the performance of the chosen unit trust funds. This inherent uncertainty places PRS in the low to medium risk category, with the potential for both gains and losses. Additionally, it's important to be mindful of the costs associated with PRS investments, including upfront sales charges that can go up to 3% and annual management fees up to 1.8%, which can impact overall returns.

Despite these considerations, PRS has shown promising results, with the top eight PRS funds delivering annualized returns ranging from 6.63% to 9.94% over the past five years. 

Real Estate Investment Trusts (REITs)

Real Estate Investment Trusts (REITs) offer a way into property investment without the hefty capital usually required, by pooling money from multiple investors to buy and manage real estate. In Malaysia, REITs are a popular choice due to their high dividend payouts, typically between 4% to 8%, and potential for capital appreciation. These trusts invest in diverse property types, from residential to commercial and more, distributing at least 90% of their income to investors to enjoy tax exemptions.

Malaysian REITs are diverse, falling into five main categories:

• Retail REITs: Invest in shopping malls, offering exposure to retail property income.
• Hotel REITs: Focus on hotels and serviced residences, capitalizing on tourism and business travel.
• Office REITs: Specialize in office buildings, targeting income from corporate leases.
• Industrial REITs: Cover warehouses, logistics facilities, and data centers, serving the growing e-commerce and tech sectors.
• Healthcare REITs: Committed to hospitals and nursing homes, benefiting from the healthcare industry's resilience.

While REITs are considered as medium risk, with the potential for price fluctuations influenced by real estate market dynamics and economic conditions, they require a long-term investment horizon to achieve meaningful gains. This blend of income and growth potential, along with the opportunity to invest in specialized sectors, makes REITs an attractive option for investors seeking to diversify into real estate.

Some of the top REITs in Malaysia with their FY 2023 dividend yield include:

1. KLCC (5235SS.MY) = 5.36%
2. IGBREIT(5227.MY) = 6.02%
3. SUNREIT(5176.MY) = 6.12%
4. PAVREIT(5212.MY) = 7.04%
5. AXREIT(5106.MY) = 4.86%
6. YTLREIT(5109.MY) = 7.13%
7. CLMT(5180.MY) = 6.62%
8. IGBCR(5299.MY) = 3.61%
9. ALAQAR(5116.MY) = 6.27%
10. SENTRAL(5123.MY) = 8.46%

Unit Trust Funds

Unit trust funds offer a straightforward pathway for investors to pool resources towards a common investment goal under the stewardship of professional fund managers. This form of collective investment channels pooled funds into a diversified portfolio that can span across various asset classes including cash, bonds, shares, and even real estate or commodities. 

For those starting with a modest capital, unit trusts present an appealing option. With an entry point as low as RM1,000, investors gain access to a broad spectrum of investments that might otherwise be out of reach due to high minimum investment requirements. This diversification is crucial for managing risk while striving for a balanced return through both income distribution and capital appreciation. 

However, the cost of investing in unit trusts is an important consideration. Charges such as sales fees (which can reach up to 5%), platform fees, annual management fees, switching costs and other associated costs can significantly impact the net returns of your investment. 

The risk associated with unit trust funds ranges from low to high, depending on the specific assets included in the fund's portfolio. Similarly, the returns are variable and directly linked to the performance of the underlying assets. This variance underscores the importance of thorough research and possibly consulting a financial advisor to choose the right fund that aligns with your investment objectives and risk tolerance. Read up our comprehensive guide on unit trusts to know more about the best funds to choose from.

Exchange Traded Funds (ETFs) 

Exchange Traded Funds (ETFs) in Malaysia combine the benefits of stocks and mutual funds, allowing investors to earn dividends and appreciate capital by pooling money into a diversified portfolio. Unlike actively managed unit trusts, ETFs typically track a benchmark index, offering a passive investment strategy that often results in lower fees.. 

ETFs appeal to beginners for their easy access to a broad investment spectrum without requiring a large initial investment. However, risk and returns vary across different ETFs, ranging from low to high depending on the specific product. 

In Malaysia, several issuers offer a variety of ETFs, catering to diverse investor interests. These include 

• AHAM Asset Management Berhad
• AMFunds Management Berhad
• i-VCAP Management Sdn Bhd
• Kenanga Investors Berhad
• Principal Asset Management Berhad
• Value Partners Asset Management Sdn Bhd

Their offerings provide exposure to various markets and asset classes, allowing investors to tailor their portfolios to their specific financial goals and risk tolerance.

Blue Chip Stocks

Blue chip stocks represent shares of well-established, financially robust companies known for their high-quality, widely accepted products and services. These companies typically have a proven ability to weather economic downturns and maintain profitability, contributing to their reputation for stable and reliable growth. 

Investors often favor blue chip stocks for their regular dividend payouts, which are usually distributed on a predictable schedule such as quarterly or annually. This characteristic makes them appealing for those seeking consistent income from their investments. 

These are some of the top blue chip stocks with dividend payouts from 4.2% to 6%  in 2023:

• Malayan Banking Berhad (MAYBANK) (Bursa: 1155)
• Public Bank Berhad (PBBANK) (Bursa: 1295)
• CIMB Group Holdings Berhad (CIMB) (Bursa: 1023)
• Tenaga Nasional Berhad (TENAGA) (Bursa: 5347)
• Petronas Chemicals Group Berhad (PCHEM) (Bursa: 5183)

However, blue chip stocks are not suitable for short-term trading, especially for the risk-averse or less informed investors. Engaging in short-term speculation with stocks is often likened to gambling, a sentiment echoed by investment mogul Warren Buffett who advised, “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.” Frequent trading can also incur substantial costs due to brokerage and transaction fees, which can erode profits, particularly on smaller investments. 

The risk associated with blue chip stocks ranges from medium to high, largely dependent on broader market conditions and individual company performance. For those considering investing in blue chip stocks, a long-term perspective is crucial for mitigating risks and maximizing potential returns.

P2P Lending

Peer-to-peer (P2P) lending, also known as debt-based crowdfunding, offers an alternative investment avenue by enabling individuals to lend money directly to businesses in exchange for interest payments. Unlike traditional investments or equity crowdfunding, P2P lending does not provide a share of ownership in the company but instead offers a potential return through interest earned on the loans. 

In Malaysia, P2P lending can yield returns of approximately 10% per annum, often surpassing the typical returns from bonds or blue chip stocks. This higher potential return, however, comes with increased risk. Many businesses seeking funding through P2P platforms are startups or small enterprises that may lack a long track record of stability or profitability. This raises the possibility of default, where a borrower fails to repay the loan, potentially leading to a total loss of the invested capital. 

Well-known P2P lending platforms in Malaysia, such as Funding Societies, Fundaztic, and B2B Finpal, facilitate these investments. These platforms generally require a minimum deposit of RM1,000 to start investing, although individual campaigns might allow smaller contributions. The accessibility of these platforms makes P2P lending an attractive option for investors looking to diversify their portfolios with higher-risk, higher-return opportunities. 

However, due to the high-risk nature of P2P lending, it's crucial for investors to conduct thorough due diligence on the platforms and the specific campaigns they choose to invest in. Understanding the risk management measures and recovery processes in place is also important to mitigate potential losses.

Equity Crowdfunding

Equity crowdfunding (ECF) offers a vibrant pathway for individual investors to directly engage with startups and early-stage companies by purchasing shares for ownership or a portion of the profits. This fundraising method has opened up investment opportunities that were previously available mainly to high-net-worth individuals or institutional investors.

The Equity Crowdfunding Framework, revised by the Securities Commission Malaysia (SC) on November 15, 2022, introduces standardized practices for ECF, ensuring a well-structured and secure investment environment. A critical aspect of this framework is the categorization of investors, which dictates the amount one can invest in a venture through ECF. The categories are as follows:

• Sophisticated Investor: Includes High Net Worth Individuals with assets exceeding RM3 million or High Net Worth Entities like corporations with net assets over RM10 million. This group faces no investment restrictions.
• Angel Investor: Tax residents in Malaysia with personal assets over RM3 million or annual incomes of at least RM180,000. Angel investors are allowed to invest up to RM500,000 within a 12-month period.
• Retail Investor: Individuals who do not qualify as angel or sophisticated investors. They are limited to investments of RM5,000 per venture, with a total not exceeding RM50,000.

This framework aims to protect less experienced investors from high-risk exposures while allowing seasoned investors to commit more substantial funds. Equity crowdfunding bridges the gap between innovative ventures seeking capital and potential investors, enabling ordinary individuals to partake in investment opportunities traditionally reserved for the affluent.

Currently, there are nine SC-licensed equity crowdfunding platforms in Malaysia, including:

1. Ata Plus
2. iPivot
3. Crowdo
4. Ethis
5. Eureeca
6. Alta
7. Leet Capital
8. MyStartr
9. pitchIN

The minimum investment varies significantly depending on the campaign and company seeking funding. Investing in ECF can yield various returns, from capital gains through successful exit strategies like an IPO or company acquisition, to dividends or discounts on products and services. 

However, it's crucial to recognize the high risks involved. The uncertainty of startup success and the potential for total capital loss, combined with the often lengthy wait for returns, make ECF a high-risk, potentially high-reward investment. This makes it suitable for those looking to diversify their portfolios into new and innovative business ventures.

Cryptocurrency

Cryptocurrency has become so popular that the market cap of cryptocurrency has grown by almost 10 fold from 200 billion USD to 2 trillion USD in just 5 years! 

The world of cryptocurrency is also known for its high volatility and speculative nature. Significant price swings are common, as evidenced by Bitcoin's price dropping over 30% in a single week earlier this year. Moreover, the concentration of Bitcoin ownership suggests susceptibility to market manipulation, adding to the investment risk.

Given these risks, personal finance experts typically advise limiting cryptocurrency investments to a small portion of your portfolio—specifically, no more than 2% of your total investable assets. This strategy is intended to minimize potential losses while allowing for exposure to the crypto market's upside.

For those interested in exploring cryptocurrency investments in Malaysia, platforms like Luno, SINERGY, MX Global, and Tokenize are authorized by the Securities Commissions Malaysia. These platforms provide a regulated environment for buying, selling, and holding cryptocurrencies.

Overall, while the potential for high returns exists, the risk associated with cryptocurrency investment is considerable. It requires careful consideration and a willingness to accept the possibility of losing your entire investment. Hence, it is often recommended only to invest what you can afford to lose.

Understanding long-term investment

Long-term investing involves holding assets for an extended period, typically several years or even decades. This strategy is endorsed by some of the world’s most successful investors because it allows individuals to withstand market volatility, harness the power of compounding, and reduce costs related to taxes and trading.

Historical evidence supports the merits of this approach. For example, the S&P 500 Index has historically returned an average of 7-10% annually over 10-year periods. By committing to long-term investments, you allow your assets to grow through the ups and downs of market cycles, benefiting from the overall upward trajectory of the economy.

Moreover, a study by J.P. Morgan Asset Management highlights the risks of short-term trading: investors who missed just the 10 best market days from 1997 to 2016 saw their returns nearly halved compared to those who remained fully invested.

Benefits of Long-Term Investment

1. Reduced Impact of Volatility

Markets can fluctuate dramatically over short periods, but historical trends have shown that volatility diminishes over longer intervals. Long-term investments tend to provide more stable returns, as the effects of market dips are mitigated by subsequent recoveries.

2. The Power of Compounding

Compounding can significantly boost the growth of your investments. For instance, a $10,000 investment at a 6% annual return grows to nearly $43,000 over 25 years without any additional contributions. In the context of Malaysian investments, whether it’s a unit trust or a blue chip stock, allowing your earnings to compound over time can result in substantial wealth accumulation.

3. Tax Efficiency

Holding investments for the long term often results in lower tax liabilities on gains. In many places, including Malaysia, long-term capital gains are taxed at a lower rate than short-term gains, enhancing your overall returns.

4. Lower Transaction Costs

Regular trading incurs significant fees and charges, which can eat into your investment returns. By adopting a long-term investment strategy, you minimize these costs, ensuring a larger portion of your earnings remains invested and continues to grow.

As you consider where to place your first RM1,000, integrating these principles of long-term investing into your strategy can lead to more effective and rewarding outcomes.