How do you select ETFs in Malaysia?

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The performance of the stock market is often up and down. Many people decide to use Exchange Traded Funds (ETFs) to deal with this. ETFs are called ‘Exchange Traded Fund’ because it mirrors an index like a mutual fund but trade like a stock on an exchange. 

In Malaysia, three major players in the ETF industry provide a wide range of ETF products. They are PMETAWAX, METFund and TRIMS Malaysia Berhad. 

However, despite all these funds available for investors to purchase online, not everyone understands what they should look for when selecting their ETFs. This article will show you how to select the best investment product suited for you as an investor in Malaysia (browse this site for more info).

So how do you select ETFs in Malaysia?

Investors should consider some areas before investing in an ETF: Management Expense Ratio (MER), Spread and Issuer Credit Rating. These criteria are used by many top investment firms worldwide when selecting which ETF to distribute through their financial institutions. 

Every investor needs to perform thorough research on what makes a good product choice because investing in other securities has different levels of risk involved.

There are so many options available nowadays when choosing your investment portfolio, both locally and overseas. One can find information on funds easily over the internet, but not all sources provide accurate data to help investors make choices with confidence. 

Here are some essential things to look out for in an ETF.

Management Expense Ratio is a fee paid by investors that pass on fund costs associated with managing the investments or funds. This figure has been worked out by dividing all expenses in a year by the number of units held per investor. The average annual Management Expense Ratio is around 0.34% per annum so if you are interested in ETFs, be sure to understand how much it will cost you annually.

The Spread

The Spread is essentially the difference between what people are willing to buy units and what they are willing to sell them at, which is quoted every trading day of the week. Most Malaysia -based ETF issuers offer differing spreads, which can affect performance significantly, and the unit price will move in tandem with the underlying index.

Issuer credit rating

Issuer credit rating measures an issuer’s ability to repay interest and principal debt obligations. A high rating indicates that the issuer is more likely to pay you back if you invest your money with them. In contrast, a low number means taking on more risk when purchasing securities from that particular company.

High ratings

High ratings do not guarantee against losses but generally projects that market fundamentals are solid. On the other hand, issuers with lower credit ratings usually have higher yields because they potentially offer greater risk to potential investors. In this way, one can see how important it is for investors to look into these criteria before deciding which type of investment product they want for themselves.

Like selecting ETFs, traders also have to look at other factors before opening an account with any broker house. Of course, the first thing to consider would be the platform you are most comfortable with, whether via mobile phone or computer applications. Next would be research quality provided by their team, which includes fundamental, technical and analyst reports for various types of securities.

Customer service

Then there is also customer service responsiveness and reliability of execution time once your trades are processed. Most brokers in Malaysia let potential investors try out demo trading accounts to get more information on how everything works before putting their hard-earned money onto these platforms.

In conclusion

For many people looking for new investments, an ETF may not be the solution right now because of high MER fees, whereas mutual funds are traditionally favoured over ETFs. However, ETFs are becoming accepted because they have lower MER fees, and more people are starting to purchase financial products regularly. Understanding different types of investments are essential for investors. Still, please make sure you gather all the necessary data before making any decisions on where to put your money.


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