What Is Micro-Investing, And How You Can Start In Malaysia

micro investing in Malaysia

Due to the rising cost of living, Malaysians are always on the lookout for new ways to bolster their income. Some turn to e-commerce and selling products on social media, while others participate in the gig economy with services like Grab and FoodPanda. 

Despite the uncertain economic conditions, more Malaysians have also started investing during this time.

Last year, retail investors investments outnumbered those placed by institutional investors on Bursa Malaysia. According to the Securities Commission Malaysia, the participation rate of Malaysian retail investors in 2020 averaged 32.4% compared to 20.8% in 2019. In fact, this trend is not unique to Malaysia but in general, many markets around the world also saw record participation by retail investors, who are non-professional investors like you and me.

But since the financial demands of traditional investments can be quite large, many beginners are looking for options that have lower barriers to entry.

What is micro-investing?

First things first, let’s talk about what micro investing is. 

It’s simple. Micro investing is actually just like normal investing, only done on a much smaller scale. Instead of using a large amount of money as the collateral, micro investing is done with smaller amounts of money like your spare change, literally. 

So, instead of tossing your spare change into your drawer, you can put it in an investment account where it can still earn interest, even if its just a few cents at a time. 

In Malaysia, you can now put your ‘virtual spare change’ into Raiz, a micro-investing mobile app that will round up your daily online purchases and invest the spare change into Amanah Saham Nasional Bhd’s (ASNB).

Why is micro-investing rising in popularity?

How much is spare change to you, RM5.00 or RM10.00 perhaps? With a starting amount as small as that, a lot of Malaysians can start dabbling in investing without much risk. 

But is micro investing really a good option to supplement your income? How much can you really earn by investing  RM5.00? You’ ll be surprised to find out!

If you start rounding up just RM2.00 a day from your online purchases when you are 25 years old, you will be surprised how much your spare change can grow with compound interest over 30 years.

Daily spare change round upRM2.00
Monthly spare change totalRM60.00
After 30 years at 6% annual interestRM58,471.00
Sample calculation from thecalculatorsite.com

While this amount alone may not be enough to support your retirement, having over RM50,000 is no small change either!

Key features of micro-investing you should know:

  • Little to no startup cost

If you ask anyone why they’re not looking at investment as a form of supplementary income, chances are most of them will answer that it’s too expensive to get started. And honestly, they’re right. For traditional forms of investing, the initial deposit itself can cost a lot.

For example, if you want to start investing using MyTHEO’s Robo Advisor, the minimum initial investment amount is set at RM100. This 3-digit sum can become a big hurdle for young adults just starting out in their career or even fresh graduates looking to jump on the investor bandwagon.

But almost everyone can afford to put aside RM5.00 to start investing. The low barrier to entry for micro-investing platforms makes it possible for more people to start investing in a way that is manageable for their budget.

  • Very little risk

Along with having low entry costs, micro investing also allows for low risk investing for their user.  After all, if there was no option for you to invest your spare change, it will most probably be rolling around in your bag, or sitting in your account unnoticed. 

However, it should be noted that there is no such thing as risk free investment. Micro investors are still subject to the same market forces as everyone else and could potentially make a loss. The only difference is that the size of the investment in this case limits the amount that can be lost.

  • Flexibility

Another benefit of micro investing is its flexibility. 

Once you’ve started getting your ball rolling and your funds have started growing, you can choose to make bigger investments if you want. This makes micro investing the perfect start for your investments to grow, and you can always move on to bigger things when you feel the need to do so.

But although micro investing does come with a lot of benefits, that doesn’t mean that there are no drawbacks whatsoever to micro investing.

  • Smaller returns

Due to the small amounts of investments one typically makes in a micro investing platform, that usually also means that the returns one gets from micro investing are minimal as well.

The limited returns make micro investing less effective for long term financial goals like retirement savings or wealth accumulation on its own. But while this investment option may not be enough, it can be combined with other investment options once you gain confidence in dabbling your toes in micro-investing and when your income grows, you can set your sights on bigger investments.

How to start micro-investing in Malaysia

For Malaysians who want to start delving into the world of micro-investing, the first step is to find a platform that fits you. Besides micro-investing, there are also robo advisors platforms. These are automated investment platforms that help you automatically create and balance your investment portfolio with none or minimal investment fee from RM10.00.

Best Online Investment Platforms In Malaysia

Check out our online investment page to find out more options for micro-investing and using robo advisor platforms to invest.

These platforms also allow you to access a wide range of investments from ASNB to local and global ETFs conveniently online.

These online investment platforms take a lot of the hard work out of getting started in investing. They are designed for micro and newbie investors in mind, and offer low start up costs with minimal fees. Micro-investing is suitable for people who want to start investing, but can’t really afford to risk too much and the minimal entry requirements allows you to get a feel of investing at minimal costs.

As the old adage goes, ‘never invest what you can’t afford to lose’.

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