Your Official Guide On How To Invest In Mutual Funds In Malaysia

In my post What Can You Invest With RM1000, I made a brief introduction on Mutual Fund. So what is Mutual Fund? Its a Professional Managed Fund that collects pool of money & invest in stocks, bonds & other securities.

Below are the Types of Mutual Fund that you can Invest in Malaysia :

  1. Equity Funds – They invest in the stocks of listed companies. Depending on which Fund you Invest, some Fund Manager invest in Foreign Country Stocks or some Invest in Local Stocks. Highest Risk among all Funds. (Risk Level : 8-10)
  2. Bond or Fixed Income Funds – They invest mainly in Government Securities & Bonds. Its less risky compare to Equity Funds. (Risk Level : 1-4)
  3. Balanced Funds – It combines both Equity & Fixed Income Fund. High risk compare to Fixed Income Fund but less risky compare to Equity Fund. (Risk Level : 5-7)
  4. Money Market Funds – Low Return & Low Risk Fund. They invest mainly in short term deposit with high liquidity investments. (Risk Level : 1-2)
  5. REIT Funds – Fund that fully focus in REIT Company. They will invest in few selected REIT Company. (Risk Level : 6-8)
  6. Islamic Funds – Islamic Fund is a Shariah Compliant-Fund where the investment are allowed within Islamic Principles. (Risk Level : 1-10)

Risk Level :
1. Low Risk : 1-3
2. Medium Risk : 4-7
3. High Risk : 8-10

wait-im-confused-now
Hang in there Grasshoppa. You might be confused now but lets explore further.

Lets start with the Pros & Cons of Mutual Fund :

Pros

  1. Professional Management – Mutual Fund are professionally managed by group of experts that oversees the fund performance on daily basis. Their experience will help the fund to grow.
  2. Diversification – Each Mutual Fund owns up to hundreds of stocks or securities. It helps to reduce overall market risk.
  3. Range of Options – You can choose low to high risk, countries or sector that suits your investment style. 
  4. Affordability – Investing in Mutual Fund can be as low as RM100 per month. Initial Investment usually cost around RM500. Its definitely affordable investment for everybody.

Cons

  1. No Control Over Your Fund – As Mutual Fund is fully control by the Fund Manager, the Fund performance will be based on the manager. Any bad decision or investment will cost your Fund to under perform.
  2. High Fees – There are multiple fees in Mutual Fund that might affect your ROI. Sales Charges / Load Fees is up to 2% & Annual Fees is up to 2%. Whether the Fund is performing or not, they will still charge the fees.
  3. Lack of Ownership – If you own stocks, you are consider part owner of the company. Owning a Mutual Fund does not make you part owner of the company as you dont have any voting rights or rights to attend their Annual General Meeting.

 Sample of Recommended Portfolio :

Recommended Mutual Fund Portfolio Malaysia

Deciding which Fund to buy now? You can refer below for my Buying Checklist before you decide which Fund to Invest in :

  1. Refer Fund Prospectus – It is really important to know what your potential Fund Managers are buying. By reading the Fund Prospectus, you will get some in depth information on how your Fund is managed.
  2. Identify Sales Charges / Load Fees & Annual Fees – Knowing how much the fees will help you to decide should you buy the Fund or not. By paying 2% Load Fees, you will have 98% of your Invested Money to start with. In order to break even, the Fund price must increase 2%. Watch out for the Fund Annual Fees too. It might take a toll on your Investment.
  3. Dont Rely on Past Historical Data – Some Fund might have great performance in the past. Will it perform well in the future? This is something that nobody knows.

How much minimum to invest?

Each Mutual Fund Initial Investment is between RM500-RM1000. Their Monthly Subsequent Investment is between RM100-RM200 minimum. You can invest within your comfortable amount.  My recommendation is to Invest based on “Dollar Cost Averaging” where you should invest consistently every month to obtain the average Fund value. It will minimize your Investment Risk.

Conclusion :

When I started to invest in Mutual Fund, the Load Fees is as high as 5%. It was really high at that point but thankfully Im still able to make a little money despite high Load Fees & high Annual Fees. After years of investing, I realized that paying High Fees will definitely affect my Return Of Investment. Worst part of all, there’s no app or advanced website to refer my Fund Performance. All I have to do is to wait for the Monthly Fund Statement to refer my Fund Performance.

After knowing the fact on how high Mutual Fund fees is, will you still buy it? Well, it really depend on what you want to achieve in your Investment. I only buy Foreign Fund as it is something Im not familiar with. Relying on Professional Fund Manager to Invest in Foreign Fund will help me to Diversify my Investment Portfolio. It is part of my Diversification plan as I do invest in Local Stocks. Investing in multiple Sector or Countries will help to reduce any potential market risk.

congratulations-you-made-itThanks for reading this Grasshoppa. I hope you enjoyed this & hopefully you are able to learn something from reading this.

OSS!

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