Investment Guide: Where Do You Invest RM10,000? | Investment Series

How Do You Invest with RM10,000?

You may laugh at the concept of entering into investing with merely RM10,000. You may wonder, “What can I accomplish with such paltry amount?” A much, honestly. You’ll be astonished at how much you may make in years to come if you invest that money right now.

You don’t need to spend hundreds of thousands up front to achieve a significant return.

Here’s a guide to where you may invest your RM10,000 and watch it grow.

1. Amanah Saham Bumiputera (ASB)

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

It is designed as a long-term investment. The longer you keep your money invested, the greater the likelihood of increased returns.

ASB has generally achieved great performance, however its distribution rates have been dropping in the previous several years. Nevertheless, its comparatively good returns make it one of the greatest low-risk investment vehicles in Malaysia.

Here are a few aspects of ASB:

• Low risk - ASB’s pricing per unit is set at RM1; has never provided negative returns
• No sales or redemption costs
• Maximum investment amount: RM200,000

Risk: Low

Returns: 4.25% to 10% per year

2. Employees Provident Fund (EPF)

Historically, the EPF has paid fair payouts. In the previous five years, it has provided returns of 5% to 6.4% a year. It also provides a minimum of 2.5% dividend for traditional (i.e. non-Shariah) accounts.

As an employee, you may already be contributing to your EPF savings. But did you realise that you might increase make more contributions? You may raise your obligatory contribution rate (contact your company’s human resources department for further details) or make an extra self-contribution to your EPF account.

If you’re self-employed or you don’t receive a regular income, you may also contribute to your EPF account using i-Saraan.

Risk: Low

Returns: 5% to 6.4% per year

3. Private Retirement Schemes (PRS)

The PRS is a voluntary investing plan to help you save more for retirement. Under PRS, you may invest in authorised unit trust funds that are managed by external PRS providers.

Like the EPF, it’s not straightforward to withdraw your investment money. You may only withdraw for particular objectives, such as housing or healthcare - otherwise, you’ll pay an 8% tax penalty. However, this might assist you avoid tapping into your assets.

The amazing thing about PRS is that you may claim tax reduction of up to RM3,000 when you invest in PRS till 2025. Depending on your income level, you might save up to RM900 in taxes!

But when you invest via PRS, your investment returns aren’t guaranteed. There’s even a chance of losing money. PRS unit trust funds also come with upfront sales costs of up to 3%, as well as yearly 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 achieved annualised returns of 7.96% to 11.52% p.a. in the last five years.

4. Real Estate Investment Trusts (REITs)

Want to invest in property, but don’t have the means to purchase them outright? Consider investing in real estate investment trusts (REITs) (REITs). REITs are trusts are founded by firms that acquire and manage real estate using monies pooled from shareholders. REITs invest in many sorts of assets, such as residential, commercial, industrial and retail buildings.

Investors often like REITs because they provide substantial dividend distributions (about 4% to 8%) compared to conventional equities. They are incentivized to pay out substantial dividends, since they need to share at least 90% of their profits to be free from income tax. You may also earn profit from them via capital appreciation.

Like other long-term investments, you’ll need to invest your money over a lengthy period of time to achieve considerable rewards.

Risk: Medium

Returns: Depends on specific REIT

5. Unit trust funds

Unit trust funds are a kind of communal investing. They enable participants with similar financial aims to aggregate their cash to be invested in a portfolio of securities or other assets. A professional fund manager then invests the pooled money in a portfolio which may comprise cash, bonds and deposits, shares, properties and/or commodities.

If you have little cash, this is excellent news: it allows you the option to invest in a diversified, professionally managed portfolio with (usually) a minimum of only RM1,000. With unit trusts, your return on investment normally comes in the form of income distribution and capital appreciation, drawn from the pool of assets backing the unit trust fund.

Investing in unit trusts normally entails expenditures including sales charges (up to 5%), platform fees, yearly management charges, trustee fees and other charges. These expenses might eat into your investment earnings over the long haul. However, investing through online platforms like Fundsupermart often incurs cheaper expenses.

Compare the performance of several funds to discover 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) aggregate investors’ money to acquire a collection of stocks, bonds or other assets. Just like stocks, you may receive profits from ETFs via dividends and capital appreciation.

Similar to a unit trust fund, an ETF is a collective investment strategy that enables you to participate in diverse underlying assets.

However, unlike a unit trust fund, it is not actively managed by fund managers. Instead of picking particular stocks or assets to invest in, the fund manager of an ETF monitors or replicates the performance of a benchmark index. This implies that unlike unit trusts, the success of an ETF does not rely on fund managers, or their projection of how the market will perform over the short-term.

ETFs are perfect for newbie investors since you’ll have rapid access to a broad set of investments with very little money. ETFs also feature relatively cheap fees (usually < 1% per year).

Risk: Low to high

Returns: Depends on particular ETF

7. Blue chip stocks

Blue chip firms relate to reputed and financially solid enterprises, providing high-quality, and generally acknowledged goods and services. These firms are recognised to weather downturns and operate financially in the face of bad economic circumstances, which serve to contribute to their lengthy record of consistent and dependable growth.

Many blue chip companies also pay out dividends. They are often given out on a predetermined timetable (quarterly, annually, etc). (quarterly, yearly, etc.). This is appropriate for those who seek consistent income from their stock investments.

However, if you’re risk averse and not well educated, stocks should not be utilised as a short-term investment in order to earn a significant profit. This is not investment, but just gambling. As Warren Buffett famously observed, “If you aren’t prepared to buy a stock for 10 years, don’t even think about owning it for ten minutes.”

You should also avoid making modest, short-term trades with stocks. This might lead to significant investing expenses owing to numerous brokerage and transaction fees. Stock trading businesses normally charge 0.05% to 0.5% in transaction fees, with a minimum price of roughly RM7 to RM12. This implies that if you invested merely RM100 and paid a cost of RM10 every transaction, 10% of your investment money would go to fees!

Risk: Medium to high

Returns: Depends on market and company

8. Equity crowdfunding

Crowdfunding is another option that firms utilise to generate money to finance their expansion or operations. There are a number forms of crowdsourcing, including equity crowdfunding. This refers to when people invest in firms in return for a portion of ownership or profit.

Equity crowdfunding platforms in Malaysia include Crowdo, pitchIN and Leet Capital. If you’re searching for a Shariah-compliant crowdfunding site, you might also explore Ethis. The minimum investment amount vary on each campaign.

The beautiful thing about equity crowdfunding is that it enables you to invest in early-stage enterprises and startups. In the past, only high-net-worth people had access to these chances.

When you invest via equity crowdfunding, you receive returns when there’s a successful ‘exit’ - this occurs when the firm is listed for an initial public offering (IPO), or if it’s bought by another company, enabling you to sell your shares for a profit. The corporation could also provide you other types of returns, such as dividends or discounts on its goods and services.

However, refunds are not guaranteed. If the company fails, you might lose your whole principal. As the firms listed on these platforms are relatively early stage, you’d be taking on a lot of risk. It might potentially take years for you to see any profits.

Risk: High

Returns: Depends on campaign

9. P2P lending (or debt-based crowdfunding)

P2P lending is also another kind of crowdsourcing. Unlike equity crowdfunding, where you contribute cash in return for a portion of ownership, P2P lending includes loaning money to companies. In return, you’ll obtain interest returns until the debt is paid off.

With potential returns of approximately 10% p.a., P2P lending often yields greater returns than bonds, blue chip stocks and other forms of investments. However, you’ll be taking on additional danger as well. Companies that raise financing via P2P lending tend to be startups and small firms that are not well-established. There is a chance that they might fail on their repayments, leading you to lose your money.

Some of the most well-known Malaysian P2P funding platforms are Funding Societies, Fundaztic and B2B Finpal. Generally, these platforms would ask you to deposit a minimum of RM1,000 into your account to start investing - but, each campaign that you loan your money to may demand a lesser minimum.

Risk: High

Returns: Depends on P2P platform; normally approximately 10% p.a.

10. Robo advisor

Does investing jargon make your temples throb? Wish you could simply give over your money to someone and have them invest it for you?

If so, you may want to explore investing via a robo adviser. Robo adviser systems employ algorithms to automate your investing portfolio. When you join up under a robo adviser platform, you’ll complete a questionnaire that will measure your risk tolerance and investing time horizon. The platform will then employ particular algorithms to automatically invest your money (typically in ETFs), and regularly rebalance your portfolio in response to market circumstances.

Robo advisers are useful if you want a set-it-and-forget-it approach to investing. They also have lower management costs (around 1%) than unit trusts, which will eat away less of your potential earnings over time.

They’re also highly accessible, since you can start investing with only a few ringgit.

In Malaysia, robo adviser platforms include StashAway, Wahed Invest, Akru and others.'

Happy Investing! 😉