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.

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

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Amanah Saham Bumiputera (ASB)

Risk: Low

Returns: 5.5% to 10% per annum

Example: If you had invested RM1,000 at the beginning of 2009, it would have grown to RM2,329 by the end of 2019.

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 makes 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

Real Estate Investment Trusts (REITs)

Risk: Medium

Returns: The Bursa Malaysia REIT Index grew 4% in the year 2019

Example: If you had invested RM1,000 in Sunway REIT at the start of 2014, it would have grown to around RM1,400 (including dividends) by the end of 2019.

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 (4% to 8%) compared to regular stocks. 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.

Unit trust funds

Risk: Low to high

Returns: Depends on portfolio and funds

Example: If you had invested RM1,000 in Kenanga Growth Fund in November 2014, it would have grown to RM1,299 in November 2019 (29.9%).

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.

ETFs

Risk: Low to high

Returns: Varies depending on the ETF

Example: If you had invested RM1,000 in the CIMB FTSE China 50 ETF at the start of 2015, you would have had an annualised return of 6.75%, growing your initial capital to RM1,386 by the end of 2019.

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). For example, the MyETF Dow Jones Islamic Market Malaysia Titans 25 has a total annual fee of 0.49% a year.

Blue chip stocks

Risk: High

Returns: Depends on market and company

Example: If you had invested RM1,000 in Public Bank Berhad at the start of 2010, it would have grown to around RM2,400 (including dividends) by the end of 2019.

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. 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!

Crowdfunding/P2P lending

Crowdfunding is another way that companies use to raise money to fund their growth or operations. There are a few types of crowdfunding, but as an investor with minimal capital, debt-based crowdfunding might be of most interest to you. Debt-based crowdfunding, or peer-to-peer (P2P) lending, involves pooling money from investors to lend to businesses.

With potential returns of 10% p.a. or higher, crowdfunding 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 crowdfunding 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.

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.

In Malaysia, robo advisor platforms include Stashaway and MYTHEO. Stashaway has no minimum deposit required, while MYTHEO requires a minimum starting capital of RM100.

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 July 2014 and has been updated for freshness, accuracy and comprehensiveness.

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