BURSA MALAYSIA: HOW WEALTH-BUILDERS INVEST
EVERYONE has a financial goal. Aside from savings and/or fixed deposits, insurance-linked investments or unit trusts and property, one of the best options is still the stock market – for better returns in a shorter timeframe. Is it risky, hard to learn, and too expensive? Not really, if you understand the fundamentals of what you’re doing.
What kind of investor should you be?
Generally, there are two extremes – on one end, there are investors who depend on technical readings and technology to trade frequently, and then there are those who buy and hold shares for the long term. Both methods can be profitable, and many investors are a mix of both.
You don’t need a lot of money to begin.
Low Chern Hong, head of operations and certified trainer of 8VIC Malaysia Sdn Bhd, adds, “You can start with only RM100. The secret formula is Time + Savings + ROI (return on investment). Before you invest, do your research; go online and read books and articles on finance; understand it thoroughly.”
You need to open a CDS account, and any registered broker can help you. At first, it is natural to want to spend every minute watching the market – like an active trader who buys and sells with every movement. Although they can generate high returns quickly, always remember this truism – the higher the potential returns, the higher the risk.
What if you’re not a full-time investor?
If you don’t have the time, or the appetite for such risk, consider the “Value Investing” strategy – as used by famous investors such as Warren Buffet, Charlie Munger, Walter Schloss and Sir John Templeton. Essentially, they look to invest in three things – a great business model, a company with good management and a good price.
It is slower and less exciting, but their gains can be outstanding. According to Benjamin Graham, a famous value investor, “The real money is made from dividends, and from long-term increases in value.”
So many choices. Which companies should you invest in?
Do your research. Read their annual reports, understand their business models and environment, and look at their track record of dividends and share price history.
You can start with Bursa Malaysia’s top 30 stocks – companies in the banking, oil and gas, property and telecommunications sectors. They are “blue-chip” stocks that pay regular dividends, and can deliver strong gains if you buy them at a good price.
Or you can start with Exchange Traded Funds (ETFs). An ETF is a basket of stocks that represents a sector of the market. If the market goes up, so does the ETF and vice versa. There are various types of ETFs for you to choose from. Real Estate Investment Trusts or REITS are similar – except that they represent the business per-formance of a group of properties.
Once you’re more advanced, you can look at Bursa Malaysia’s Derivatives Market for products that can potentially deliver gains no matter which way the market is moving. Although riskier, they offer better potential gains.
As always, you should balance your investment portfolio. We recommend diversifying – spreading your capital over a variety of investment options and sectors to protect yourself.
Bursa Malaysia can help.
It’s important to always keep learning. Billionaire investor Warren Buffet spends many hours a day reading. He says, “Risk comes from not knowing what you are doing.” Rather than trade on emotion, tips or rumours – do your own objective research, understand the risk involved and stay within your risk profile.
At Bursa Malaysia, we provide access to tools and the knowledge to help you. Beyond your capital, the real investment lies in your efforts to educate yourself, and to develop the patience and tenacity that it takes to be a successful investor.
For further information, visit www.bursamarketplace.com or download the BursaMktPlc app, a one-stop investment portal for market knowledge, insights, trading ideas and to improve your financial literacy. There’s also a full schedule of the investment seminars and workshops – do join us.
Part of a series of articles by Bursa Malaysia to educate, develop and empower everyday investors.