Exchange-Traded Funds, or ETFs, have become increasingly popular among Malaysian investors for good reason.
These investment vehicles offer a simple, cost-effective way to gain exposure to a diversified portfolio of assets, all through a single investment.
For beginners especially, ETFs are an appealing choice because they combine the best features of stocks and mutual funds, providing both flexibility and variety without the high fees often associated with traditional investment funds.
In Malaysia, ETFs are particularly attractive because they allow investors to tap into both local and global markets with ease, providing opportunities to diversify and grow wealth.
This guide is crafted to give you a straightforward, beginner-friendly overview of how to get started with ETF investing in Malaysia.
How Do You Make Money from ETFs?
Investors can profit from ETFs in two main ways:
Capital appreciation: When the price of an ETF increases over time, you can sell it for a profit.
Dividends: Some ETFs distribute dividends either quarterly, half-yearly, or annually. Dividend-paying ETFs pass on earnings from the stocks they hold to investors, as stated in their prospectus.
How Are ETF Prices Determined?
ETF prices fluctuate based on:
Net Asset Value (NAV): This is calculated as (total assets – liabilities) ÷ number of shares outstanding. NAV reflects the value of the assets the ETF holds.
Market price: Since ETFs are traded on the stock exchange, their price is determined by supply and demand. However, the price usually stays close to the NAV due to market mechanisms like arbitrage.
Types of ETFs Available
Equity ETFs
These invest in company stocks and can be categorized based on:
Region:
- Malaysia: MyETF Dow Jones Islamic Market Malaysia Titans 25 (0821EA)
- Asia: NikkoAM-StraitsTrading Asia ex Japan REIT ETF (CFA)
- US: iShares Core S&P 500 ETF (IVV), Vanguard S&P 500 ETF (VOO)
- Global: Vanguard Total World Stock ETF (VT)
Industry:
- Technology: Invesco QQQ Trust (QQQ), Global X Cloud Computing ETF (CLOU)
- Healthcare: iShares Global Healthcare ETF (IXJ)
- Financial Services: Financial Select Sector SPDR Fund (XLF)
Fixed Income ETFs
Invest in bonds or sukuk, offering lower risk and more stability than equity ETFs.
- Malaysia: EQ8 MSCI Malaysia Islamic Dividend ETF (0824EA)
- Global: iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
- Sukuk: iShares MSCI World Islamic UCITS ETF (ISWD) (tracks shariah-compliant global investments, including sukuk)
Leveraged ETFs
Use borrowed money to amplify potential gains—but also increase risk.
- ProShares Ultra S&P 500 (SSO) – 2x leverage on S&P 500
- Direxion Daily Technology Bull 3X Shares (TECL) – 3x leverage on tech stocks
Inverse ETFs
Designed to profit when an index declines, making them useful for hedging against market downturns.
- ProShares Short S&P 500 (SH) – Moves opposite to the S&P 500
- ProShares UltraShort QQQ (QID) – 2x inverse exposure to Nasdaq-100
Commodity ETFs
Track the price of commodities like gold, silver, or oil, allowing investors to gain exposure without directly buying the asset.
- Gold: SPDR Gold Shares (GLD)
- Silver: iShares Silver Trust (SLV)
- Oil: United States Oil Fund (USO)
Pros and Cons of Investing in ETFs
Pros:
- Low fees compared to actively managed funds.
- Diversification with just one investment.
- Liquidity: Can be easily bought and sold like stocks.
- Passive investment strategy: Requires minimal effort while still tracking market growth.
Cons:
- Market-matching returns: ETFs won’t outperform the index they track.
- Limited control: You don’t get to pick individual stocks within an ETF.
Understanding ETF Investment Fees
Brokerage fees: Charged when buying and selling ETFs, similar to stocks.
Expense ratio: Covers management, trustee, and administrative costs, usually lower than unit trusts.
Cost advantage: Over time, the lower fees of ETFs can lead to higher overall returns compared to actively managed funds.
How to Invest in ETFs in Malaysia
1. Through Bursa Malaysia (Local Stock Brokers)
Open a stock trading account with a local brokerage.
Browse the list of ETFs available on Bursa Malaysia.
📌 Want a hassle-free way to start? Check out my review of Rakuten Trade, a beginner-friendly brokerage in Malaysia.
2. Through International Brokers
Gain access to global ETFs like the S&P 500 (VOO, IVV) or tech-focused ETFs like QQQ, ARKK.
3. Through Robo-Advisors
Platforms like StashAway and Wahed automate ETF investments, making it easy for beginners to invest without actively managing their portfolios.
📌 Curious about how StashAway works? Read my full review of StashAway Malaysia.
Who Should Invest in ETFs?
ETFs are a great investment choice for many types of investors. Here’s how to determine if they’re right for you:
1. Beginner Investors
If you’re just starting out and want an easy, low-cost way to invest, ETFs are a great choice. They provide instant diversification, reducing the risk of picking individual stocks.
2. Passive Investors
Do you prefer a hands-off approach to investing? ETFs track market indices automatically, meaning you don’t have to monitor your investments daily.
3. Investors Seeking Diversification
With just one ETF, you can invest in hundreds or even thousands of stocks or bonds across different industries and regions. This helps spread risk compared to investing in single stocks.
4. Cost-Conscious Investors
ETFs typically have lower fees than mutual funds and unit trusts. If you want to grow your wealth while minimizing costs, ETFs can be a more cost-effective option.
5. Long-Term Investors
ETFs work well for those looking to build wealth over years or decades. Since they track broad markets, they generally provide steady growth over time.
6. Investors Looking for Liquidity
Unlike unit trusts, ETFs trade on stock exchanges just like stocks. This means you can buy and sell them at any timeduring market hours, giving you more flexibility.
Who Should NOT Invest in ETFs?
- If you prefer picking individual stocks for higher potential returns (but also higher risk).
- If you want a highly active trading strategy—ETFs are best suited for long-term investing rather than frequent buying and selling.
📌 New to investing? Learn more about trading stocks in Malaysia: 👉 How to Invest in Stocks in Malaysia
Conclusion
Investing in ETFs in Malaysia offers a unique opportunity to build wealth in a diversified, cost-effective, and accessible way.
With a wide range of options, from local market ETFs to international funds, you can create a balanced portfolio that aligns with your financial goals and risk tolerance.
By following a clear investment strategy—selecting the right ETFs, diversifying, practicing dollar-cost averaging, and regularly reviewing your portfolio—you’re setting yourself up for long-term success.
Now that you understand the basics of ETF investing, why not take the first step? I’d love to hear about your experiences and any questions you may have!
Drop a comment below to share your thoughts, or feel free to reach out directly to me via email [email protected]
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