RM1,000 Investment Guide: Where Do You Invest?

RM1,000 Investment Guide: Where Do You Invest?

You may scoff at the idea of getting into investments with just RM1,000. You might think, “What can I do with that meagre amount?” A lot, actually. You’ll be surprised at how much you can gain in years to come if you invest that money right now.

You don’t need to invest hundreds of thousands up front to see a healthy return.  If you haven’t started investing, it is never too late to start by investing your first RM1,000.

Here’s a guide to where you can put your RM1,000 and see it grow.

1. Amanah Saham Bumiputera (ASB)

ASB is a premier unit trust investment specifically for Malaysian Bumiputeras. It is managed by Amanah Saham Nasional Berhad (ASNB), a wholly-owned subsidiary of Permodalan Nasional Berhad (PNB).

It is meant as a long-term investment. The longer you keep your money invested, the higher the possibility of better returns.

ASB has historically delivered stellar results, although its distribution rates have been declining in the past few years. Nevertheless, its relatively high returns make it one of the best low-risk investment vehicles in Malaysia.

Here are a few features of ASB:

  • Low risk – ASB’s price per unit is fixed at RM1; has never delivered negative returns
  • No sales or redemption charges
  • Maximum investment amount: RM200,000
Risk: Low

Returns: 4.25% to 10% per annum

2. Employees Provident Fund (EPF)

Historically, the EPF has delivered decent dividends. In the past five years, it has generated returns of 5% to 6.4% a year. It also guarantees a minimum of 2.5% dividend for conventional (i.e. non-Shariah) accounts.

As an employee, you may already be contributing to your EPF savings. But did you know that you could increase make additional contributions? You can increase your mandatory contribution rate (ask your company’s human resources department for more information) or make an additional self-contribution to your EPF account.

If you’re self-employed or you don’t earn a regular income, you can also contribute to your EPF account through i-Saraan.

Risk: Low

Returns: 5% to 6.4% per annum

3. Private Retirement Schemes (PRS)

The PRS is a voluntary investment scheme to help you save more for retirement. Under PRS, you can invest in approved unit trust funds that are managed by external PRS providers.

Like the EPF, it’s not easy to withdraw your investment funds. You can only withdraw for certain purposes, such as housing or healthcare – otherwise, you’ll incur an 8% tax penalty. However, this could help you avoid dipping into your investments.

The great thing about PRS is that you can claim tax relief of up to RM3,000 when you invest in PRS until 2025. Depending on your income bracket, you could save up to RM900 in taxes!

But when you invest through PRS, your investment returns aren’t guaranteed. There’s even a risk of losing money. PRS unit trust funds also come with upfront sales charges of up to 3%, as well as annual management fees of up to 5%.

Risk: Low to medium

Returns: Depends on unit trust fund; as of time of writing, the top eight PRS funds produced annualised returns of 7.96% to 11.52% p.a. in the past five years.

4. Real Estate Investment Trusts (EITs)

Want to invest in property, but don’t have the capital to buy them outright? Consider investing in real estate investment trusts (REITs). REITs are trusts are formed by companies that purchase and manage real estate using funds pooled from shareholders. REITs invest in all types of properties, such as residential, commercial, industrial and retail properties.

Investors generally favour REITs because they offer high dividend payouts (typically 4% to 8%) compared to regular stocks. They are incentivised to pay out high dividends, as they need to distribute at least 90% of their income to be exempt from income tax. You can also gain profit from them through capital appreciation.

Like most long-term investments, you’ll need to invest your money over a long period of time to see meaningful gains.

Risk: Medium

Returns: Depends on specific REIT

5. Unit trust funds

Unit trust funds are a form of collective investment. They allow investors with similar investment goals to pool their funds to be invested in a portfolio of securities or other assets. A professional fund manager then invests the pooled funds in a portfolio which may include cash, bonds and deposits, shares, properties and/or commodities.

If you have little capital, this is good news: it gives you the opportunity to invest in a diversified, professionally managed portfolio with (generally) a minimum of just RM1,000. With unit trusts, your return on investment usually comes in the form of income distribution and capital appreciation, derived from the pool of assets supporting the unit trust fund.

Investing in unit trusts usually involves costs like sales charges (up to 5%), platform fees, annual management charges, trustee fees and other charges. These charges can eat into your investment returns over the long run. However, investing via online platforms like Fundsupermart generally incurs lower charges.

Compare the performance of different funds to find the best one to invest on using our unit trust comparison page.

Risk: Low to high

Returns: Depends on portfolio and funds

6. Exchange traded funds (ETFs)

Exchange traded funds (ETFs) pool investors’ money to buy a group of stocks, bonds or other investments. Just like stocks, you can gain returns from ETFs through dividends and capital appreciation.

Similar to a unit trust fund, an ETF is a collective investment scheme that allows you to invest in diversified underlying assets.

However, unlike a unit trust fund, it is not actively managed by fund managers. Instead of selecting individual stocks or assets to invest in, the fund manager of an ETF tracks or replicates the performance of a benchmark index. This means that unlike unit trusts, the performance of an ETF does not depend on fund managers, or their forecast of how the market will perform over the short-term.

ETFs are ideal for beginner investors as you’ll get instant access to a diversified group of investments with relatively little money. ETFs also have relatively low fees (generally below 1% per year).

Risk: Low to high

Returns: Depends on specific ETF

7. Blue chip stocks

Blue chip companies refer to reputable and financially sound companies, selling high-quality, and widely accepted products and services. These companies are known to weather downturns and operate profitably in the face of adverse economic conditions, which help to contribute to their long record of stable and reliable growth.

Many blue chip stocks also pay out dividends. They are typically paid out on a predictable schedule (quarterly, yearly, etc.). This is good for investors who want regular income from their stock investments.

However, if you’re risk averse and not well informed, stocks should not be used as a short-term investment in order to make a big profit. This is not investing, but pure gambling. As Warren Buffett once said, “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”

You should also avoid making small, short-term transactions with stocks. This can lead to high investment costs due to various brokerage and transaction fees. Stock brokerage firms generally charge 0.05% to 0.5% in transaction fees, with a minimum fee of around RM7 to RM12. This means that if you invested only RM100 and paid a fee of RM10 per transaction, 10% of your investment capital would go to fees!

Risk: Medium to high

Returns: Depends on market and company

8. Equity crowdfunding

Crowdfunding is another way that companies use to raise money to fund their growth or operations. There are a few types of crowdfunding, including equity crowdfunding. This refers to when individuals invest in companies in exchange for a share of ownership or profit.

Equity crowdfunding sites in Malaysia include Crowdo, pitchIN and Leet Capital. If you’re looking for a Shariah-compliant crowdfunding platform, you could also consider Ethis. The minimum investment amount depends on each campaign.

The great thing about equity crowdfunding is that it allows you to invest in early-stage companies and startups. In the past, only high-net-worth individuals had access to these opportunities.

When you invest through equity crowdfunding, you generate returns when there’s a successful ‘exit’ – this happens when the company is listed for an initial public offering (IPO), or if it’s acquired by another company, allowing you to sell your shares for a profit. The company might also issue you other forms of returns, such as dividends or discounts on its products and services.

However, returns are not guaranteed. If the business fails, you could lose your entire principal. As the companies listed on these platforms are very early stage, you’d be taking on a lot of risk. It can also take years for you to see any returns.

Risk: High

Returns: Depends on campaign

9. P2P lending (or debt-based crowdfunding)

P2P lending is also another form of crowdfunding. Unlike equity crowdfunding, where you invest funds in exchange for a share of ownership, P2P lending involves loaning money to businesses. In return, you’ll get interest returns until the loan is paid off.

With potential returns of around 10% p.a., P2P lending typically delivers better returns than bonds, blue chip stocks and other types of investments. However, you’ll be taking on higher risk as well. Companies that raise funds through P2P lending tend to be startups and small businesses that are not well-established. There is a risk that they could default on their repayments, causing you to lose your money.

Some of the more well-known Malaysian P2P financing platforms include Funding Societies, Fundaztic and B2B Finpal. Generally, these platforms will require you to deposit a minimum of RM1,000 into your account to start investing – however, each campaign that you loan your money to may require a smaller minimum.

Risk: High

Returns: Depends on P2P platform; typically around 10% p.a.

10. Robo advisor

Does investment jargon make your temples throb? Wish you could just hand over your money to someone and have them invest it for you?

If so, you may want to consider investing through a robo advisor. Robo advisor platforms use algorithms to automate your investment portfolio. When you sign up under a robo advisor platform, you’ll complete a questionnaire that will gauge your risk tolerance and investment time horizon. The platform will then use certain algorithms to automatically invest your money (usually in ETFs), and periodically rebalance your portfolio in response to market conditions.

Robo advisors are good if you prefer a set-it-and-forget-it approach to investing. They also charge lower management fees (below 1%) than unit trusts, which will eat up less of your potential profit over time.

They’re also very accessible, as you can start investing with just a few ringgit.

In Malaysia, robo advisor platforms include StashAway, Raiz, Wahed Invest, Akru and others. Check out our robo advisor comparison to find out which platform you should go with.

Risk: Low to high

Returns: Depends robo advisor platform and portfolio risk

11. Cryptocurrency

Is cryptocurrency even considered an investment?

An investment refers to something you purchase with the expectations that it will increase in value of generate income. This seems applicable to cryptocurrencies – if you had invested US$1,000 in Bitcoin in July 2011, it would have grown to US$2,785,738 in July 2021.

However, cryptocurrencies are highly speculative and volatile. Earlier this year, Bitcoin prices fell over 30% in a single week. Critics also point out that Bitcoin ownership is highly concentrated, making it susceptible to market manipulation.

So be careful when investing in cryptocurrency. Personal finance experts suggest only investing under 2% of your total investable assets in crypto, or investing an amount that you can afford to lose.

If you’d like to give it a shot, you can invest through Luno, SINERGY, MX Global or Tokenize – these are currently the only platforms that are authorized by the Securities Commissions Malaysia.

Risk: High

Returns: Depends on cryptocurrency

Invest for the long term

No matter which investment vehicle you pick, it should have a long-term flavour. That way, you don’t get eaten alive by trading fees on a relatively small amount of money invested, and there can potentially be higher return on your money.

For most people who are struggling to save money to invest, remember, it can always be done over time. You can top up your investment in various investment vehicles as and when you have the funds. If you keep at it over time you will gradually build up a pretty secure and diverse investment portfolio. It’s always good to start early!

This article was first published in January 2020 and has been updated for freshness, accuracy and comprehensiveness.

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