Exchange-traded funds (ETFs) are a popular investment vehicle that has recently gained popularity due to their simplicity, flexibility, and low cost. An ETF is a type of investment fund traded on a stock exchange, similar to a stock. It is designed to track the performance of a specific market index, such as the FTSE Bursa Malaysia KLCI or the MSCI Malaysia Index.
ETFs, offer several advantages over other investment vehicles, such as mutual funds and individual stocks. They provide investors with a low-cost way to invest in a diversified portfolio of assets that can be bought and sold throughout the trading day. This article will look at some of the reasons why you need to invest in ETF.
Why You Need To Invest In ETF#1 Diversification In Portfolio
One of the main advantages of investing in Malaysia’s ETFs is that it allows investors to gain exposure to a diversified portfolio of assets that would be difficult or expensive to acquire individually.
For example, MyETF MSCI Malaysia Islamic Dividend or MyETF-MMID aims to provide investment results that closely correspond to the performance of the Benchmark Index, which is a price return index comprising 16 to 30 Shariah-compliant securities listed on Bursa Securities, with higher than average dividend yield that is deemed both sustainable and persistent by MSCI.
With an ETF, you will own multiple shares with only one purchase!
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Why You Need To Invest In ETF#2 Exposure to Malaysia’s Fast-Growing Economy
Another advantage of investing in Malaysia’s ETFs is that it allows investors to gain exposure to a fast-growing emerging market. The Malaysian economy has been growing consistently over the years, and the country is known for its export-oriented industries, such as electronics, palm oil, and petroleum.
The Malaysian government has also been implementing various initiatives to attract foreign investors, such as providing tax incentives and streamlining regulations.
To encourage investors to invest in the ETF, the Malaysian government has exempted Stamp Duty of 0.1% until 31 December 2025.
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Why You Need To Invest In ETF#3 Cost-Efficient
Investing in Malaysia’s ETFs is also a cost-effective way to invest in the Malaysian stock market. ETFs are passively managed, which means that they track a particular market index rather than being actively managed by a fund manager.
As a result, ETFs typically have lower management fees than actively managed funds, making them an attractive investment option for cost-conscious investors. For example, the MYETF Dow Jones U.S 50 (METFUS50) has a total expense ratio of 0.62%, which is relatively low compared to other actively managed funds.
In other actively managed funds, the minimum cost usually involves around 2% to 5% annually for management fees. Some mutual funds also will charge you a performance fee when your investment outperforms the market or the benchmark.
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Why You Need To Invest In ETF#4 High Liquidity
ETFs are also highly liquid, meaning they can be bought and sold on a stock exchange throughout trading. This gives investors great flexibility and control over their investments, as they can buy and sell their ETF holdings anytime.
Additionally, because ETFs are traded on a stock exchange, investors can buy and sell them at market prices, which means they can take advantage of price movements throughout the trading day.
Investors can consider several ETFs on the Bursa Malaysia stock exchange. In addition to the two ETFs mentioned above, other ETFs provide exposure to specific sectors of the Malaysian economy.
For example, the TradePlus Shariah Gold Tracker (0828EA) tracks the London Gold Fixing PM price performance. The MyETF MSCI South East Asia Islamic Dividend (0825EA) or MyETF-MSEAD is an ETF that tracks the performance of the MSCI South East Asia IMI Islamic High Dividend Yield 10/40 Index, which objectively and passively represents the dividend yield opportunity within South East Asia’s Shariah equity markets.
Read: What Is Halal Investing And Why Is It Important?
Now You Know Why You Need To Invest In ETF?
Investing in Malaysia’s ETFs can expose investors to a fast-growing emerging market and a diversified portfolio of assets. ETFs are also cost-effective, highly liquid, and easy to invest in. However, as with any investment, it is important to conduct thorough research and seek professional advice before investing in Malaysia’s ETFs or any other investment vehicle.
