Here’s What You Need To Know Before You Start Trading On The Stock Market

Stock trading

Ready to start stock trading? You’ll first need a stock brokerage account.

Here’s how to open an account to buy shares in the Malaysian stock market or in international stock markets.

Direct CDS vs nominee account

Before you open a stock brokerage account, you’ll have to decide if you want a direct Central Depository System (CDS) account or a nominee account.

What is a CDS account?

The CDS is operated by Bursa Malaysia. It’s like a registry that keeps a record of all your stock holdings. When you buy shares of a public-listed company, they will be credited into your CDS account. When you sell these shares, they will be transferred out of your account.

What is a nominee account?

Alternatively, you can open a nominee account. This means that your nominee (i.e. your bank or stock brokerage platform) will hold the shares that you buy, although you will still be the actual owner. Your nominee will help you handle any paperwork relating to owning these shares.

Here are the differences between a CDS and nominee account at a glance:

Direct CDSNominee
Account nameUnder shareholder nameUnder nominee
IPO applicationsEligibleNot eligible
Corporate exercises (stock splits, mergers, etc.) paperworkHandled by shareholderHandled by nominee (upon instruction; may charge fee)
DividendsCredited directly to shareholder’s accountCredited to trust account; nominee may charge fee for processing dividend payments
Annual general meetings (AGM)Eligible to attendEligible, but need a Proxy Letter from nominee
Annual reportsSent directly to shareholderSent to nominee; have to be requested
Share transfersHandled by shareholder; can transfer to own or relative’s accountHandled by nominee (may charge fee); can only transfer to own account

If you’re new to stock trading, it may be easier to sign up for a nominee account, as your bank or stock brokerage platform will handle the paperwork or administrative tasks for you.

But if you want more control over your investments, go for a CDS account. Your stock brokerage platform will help you open a CDS account when you sign up with them. If you open a second trading account with another platform, you’ll need to set up another CDS account.

Cash vs margin account

Generally, stock brokerage platforms offer two types of accounts: a cash account or a margin account.

What is a margin account?

A margin account allows you to borrow cash from your broker to buy shares. The amount you can borrow may be based on the value of your cash or shares that you use as collateral (e.g. borrowing up to 2x the cash you have in your account). When you trade on a margin, you can potentially earn more gains because you’ve borrowed money to buy more shares. But on the flip side, if your share prices go down, you’ll also experience more losses.

What is a cash account?

A cash account is simpler: it only allows you to invest using the money you have in your account. When you want to buy shares, you’ll need to deposit cash into your account to complete the trade. As a beginner, it’s probably best to minimise your risk by going for a cash account.

Comparison of stock brokerage fees in Malaysia

Next, it’s time to choose a stock brokerage platform. You’d want to consider how much fees the platform charges for executing a transaction (you’ll be charged once when you buy shares, and once again when you sell them). Here’s a comparison of fees for online transactions of stock brokerage platforms in Malaysia:

PlatformUp to RM100kAbove 100kMin fees
Affin Hwang Capital0.08%0.05%RM5
BIMB Securities0.3%0.2%RM14
CIMB Clicks Trader0.0388%0.0388%RM8.88
HLeBroking Value Trade0.38%0.18%RM8
KenTrade by Kenanga0.42%0.21%RM28
M+Online (M+ Silver)0.08%0.05%RM8
Maybank0.42%0.21%Not Stated
Mercury Securities0.42%0.21%RM12
Public Bank0.15%0.15%Not Stated
Rakuten Trade<700: 1%
700-10k: RM 9
310k-100k: 0.10%
RHB Trade Smart0.42%0.21%RM28
SJ Securities0.42%0.35%RM12
TA Online0.35%0.18%RM12
UOB KayHian0.3%0.2%RM8

Besides these fees, you’ll also have to pay a 0.03% clearing fee (up to maximum of RM1,000 per contract) and a RM1 stamp duty for every RM1,000 in transaction value (up to a maximum of RM200 per contract).

Based on our comparison, Affin Hwang Capital seems to offer the lowest fees, starting at 0.08% with a minimum transaction fee of RM5. While the price differences can seem minimal – it’s just a few ringgit, after all – if you’re making one or two transactions per month for an entire year, the savings can add up.

To open an account with one of these brokers, just visit their website and register online. They will typically ask you for the following:

  • A RM10 fee for opening your CDS account
  • Latest bank statements, EPF statement, pay slips or EA form
  • Copies of your NRIC or passport

Once your application has been approved, you can start trading.

Can you buy international stocks through local brokers?

You can buy international stocks with local brokers, but it can get expensive. Local brokers can charge a minimum of US$25 for buying US stocks. This makes international stocks inaccessible if you don’t have a lot of money to invest. For example, say you want to invest RM5,000 – a US$25 charge would mean paying around RM100, or 2%, in fees. And if you have even less money? Investing RM1,000 would mean paying 10% in fees!

A good alternative is Rakuten Trade. You can now trade US stocks and ETFs on the New York Stock Exchange (NYSE) and NASDAQ at an affordable entry cost.

Malaysian investors have the added flexibility and choice to trade in either MYR or USD at low brokerage rates of RM7-RM100 or USD1.88 – USD25.

For overseas stock purchases, it could be cheaper to buy them through an international stockbroker account. They generally charge much lower fees – if you’re buying US stocks, your broker might even charge zero commission.

But before you start trading…

Investing directly in stocks has its upsides: you’ll have more control over your investments and you’ll pay minimal fees (you don’t pay fund managers or other third-party platforms to manage your investments).

But buying individual stocks has a steep learning curve. You’ll need to analyse each stock to determine if it’s a good purchase, keep up to date with company news and possess nerves of steel to withstand market shocks.

As a beginner, you could start by focusing on ETFs, which allow you to buy a group of stocks at once. By spreading your money across many different stocks at once, you’ll reduce the risk in your portfolio. You can also invest via unit trusts, which are similar to ETFs, but are bought through financial institutions or platforms instead of on the stock market. Alternatively, you could even invest via a robo advisor like StashAway, which handles investment decisions for you. Whichever route you choose, just make sure that you’re not going in blindly, and that you’re not taking on more risk than you can afford.

This article has been updated on April 16, 2024.

Get free weekly money tips!

*Free of charge. Unsubscribe anytime.
newsletter image