- Additional sections for the topic “How to Buy Stocks in Malaysia.”
- IG- The best stock trading platform from Malaysian traders
IG is one of the few well-known offshore stockbrokers that offer services in Malaysia. It is regulated and licensed by numerous regulatory bodies such as the FCA, FINMA, CFTC, MAS, FSA BaFin, FCSA and DFSA. In addition, clients’ funds are segregated and kept separate from the broker’s funds.
This broker requires an initial minimum deposit of MYR 1000 ($250), which you can deposit through PayPal, bank wire transfer and credit/debit cards. It offers a proprietary web-based trading platform that is intuitive with advanced trading tools, customizable layouts, and other indicators. There is also a mobile trading application for both Android and Apple devices.
Pros
- Integrated with the MetaTrader 4 (MT4) platform
- Offer a mobile app
- Wide range of payment methods
Cons
- Fundamental data is lacking
- AvaTrade – Offer competitive spreads
AvaTrade is a leading stockbroker with multiple trading platforms and very competitive spreads. It is regulated by various financial agencies such as ASIC, FSCA, FSA, FFAJ and FRSA. Moreover, your funds will be held in segregated accounts.
One of the most remarkable aspects of AvaTrade is the number of trading platforms available. There is literally a platform for everyone, whether you are a beginner or a professional trader. They include the proprietary AvaTradeAct platform, MetaTrader 4(MT4), MetaTrader 5(MT5), MetaTrader for Mac, MetaTrader for web and a mobile application.
The initial minimum deposit for opening an AvaTrade trading account is MYR 400 ($100). You can deposit the funds using payment methods such as e-wallets, credit/debit cards and bank wire transfer. Withdrawals should be made on the method used to deposit. AvaTrade trading fees are fair compared to the market average. For example, CFD fees for long positions start as low as 0.6 pips.
Pros
- Unique social trading features
- Extensive educational offering
- Intuitive trading platform
Cons
- Hidden fees
Ways to Buy and Sell Stocks
Investing in stocks is an excellent way to grow your wealth in the long run. Even when the market is not doing well, like it is right now, stocks can be an incredible long-term investment option because things will get better, and the prices will rebound again. Nowadays, there are various ways you can invest in stocks such as CFDs, Options, EFTs and Index funds.
- Invest in stocks or shares through EFTs and Index Funds
Both index funds and ETFs are securities that involve bundling together many assets into a single investment. They have become a popular choice for investors because they allow diversification. A few ETFs and index funds can result in a highly diversified portfolio. For instance, an S&P 500 based ETF will give you access to some of the biggest companies in the US.
The investments inside both index funds and ETFs are based on an index, which is a subset of the broader investing market. This is why it is possible to manage both securities passively. In contrast, actively managed funds require you to actively choose what to invest in, resulting in higher costs in terms of expense ratio.
Passively managed investments follow the trend of the index they are tracking and have historically shown positive results. For example, the S&P 500 annual return has averaged around 10% for a very long time. Nonetheless, actively managed funds can offer positive returns in the short-run because you will rely on the market conditions when making trading decisions.
The biggest difference between index funds and ETFs is the way they are bought and sold. While ETFs can only be traded throughout the day, index funds can only be traded for the price set at the end of the trading day.
- Investing in stocks through CFDs
A Contract for Difference (CFD) offers you an opportunity to gain from price movements without owning the stock. It is just a simple security that is calculated by looking at the asset’s price movement between trade entry and exit without considering the underlying value of the asset. This is done through a contract between you as the trader and the broker.
How does CFD work? For example, if the ask price of a stock is MYR 101.04 ($25.26) and you buy 100 shares, the cost of the transaction will be approximately MYR 10,104 ($2526), including fees and commissions. In a traditional broker, you will be required to raise a 50% margin, which equates to around MYR 5052 ($1263). However, a CFD broker will only require you to raise a 5% margin that translates to MYR 505.2 ($126.30).
A loss in a CFD trade is equal to the size of the spread at the time of executing the trade. For example, if a spread is 5 pips, the trade needs to gain more than 5 pips for the position to break even. While you will still have this gain if you owned the stock, you will have to pay commissions and incur other costs that will significantly affect your profitability.
One of the biggest advantages of investing in stocks through CFDs is the higher leverage involved. In most cases, CFDs offer higher leverage than traditional trading. However, the standard leverage in CFD trading is subject to regulations.
Another advantage of investing in stocks through CFDs is access to the global market from a single platform. Most CFDs brokers offer stock assets in all the world’s major markets, which allowed around the clock trading. You can trade CFDs on a rich selection of over 4,000 products from worldwide markets.
- Trade stocks with Options
Options are financial securities that derive their value from the underlying asset like stock. They can give you the right but not the obligation to trade an underlying stock at a set price and can be purchased like most other asset classes.
They are popular among investors because they can enhance the portfolio through added leverage, income and even protection. Regardless of the situation, there is always an option scenario that will match your goal. For example, you can use options to hedge against a falling stock market to minimize loses. Furthermore, they can be used for speculative purposes like staking on the direction of the stock.
Just like other types of investments, there are certain risks associated with options trading that you should be aware of before you start investing. This is the reason why most brokers give a disclaimer that options trading are not suitable for everyone because of the risks involved.
Options belong to a broader category of securities known as derivatives. A derivative is derived or depends on the price of something else. For example, as wine is a derivative of grapes, a stock option is a derivative of a stock. Options are derivatives, and their value depends on the price of other financial securities such as stock.
There are two types of options: the call option and the put option. The call option gives you the right to buy a stock at the predetermined price, commonly known as the strike price. Conversely, the put option gives you the freedom to sell the stock.
How do you Buy Stocks in Malaysia?
To start your stock investing journey in Malaysia, you will need first to open a Central Depository account (CDS). This is an account to buy and sell shares as well as track their movements. Go to an authorized depository agent to open the CDS account where you will be required to provide a copy of your government-issued ID card and MYR 10. Also, you will be required to open a trading account with a regulated stockbroker. Some brokers might need you to pay a deposit or hold a minimum balance to start using the account.
What is the best time to buy stocks in Malaysia?
In the morning, stock prices and the market can go wild because of the news released in the previous day before the closing of the bell, which can cause volatility. If you are a skilled trader, you should be able to identify appropriate patterns that can result in profitability. However, due to the high volatility, a novice trader can suffer severe losses. Therefore, if you a less skilled trader, you should avoid trading in these hours.
The mid-morning hours are ideal for the day trading strategy because there are significant movements in the shortest amount of time. Most professional traders stop trading around noon, as it is when volatility and stock volume tend to reduce. After this time, the trades take longer and moves are significantly small with less capacity.
How to Buy Stocks Online Without a Broker?
The high brokerage fees deter most people from investing in stocks. However, there are certain ways you can buy stocks without opening a brokerage trading account, such as direct investment plans. If your aim is to only invest in a single company’s stock, the following plans will help achieve your goal.
- Direct stock plans- The easiest way to buy stocks without going through a broker is by participating in a direct stock plan (DSP) that allow you to purchase shares directly from a company.
- Dividend reinvestment plans- Some companies offer dividend reinvestment plans (DRIPs), which are similar to DSP except that the process of buying shares is automated.
What Regulations are in Place for Buying Stocks in Malaysia?
The Securities Commission Malaysia (SCM) is the regulatory agency responsible for the stock market and all the brokers that offer services in Malaysia. It was established by the Securities Commission Act of 1993 and is under the Minister of Finance.
What Risks are involved with Buying Stocks in Malaysia?
The stock market offers an excellent opportunity to invest your money and make profits. However, there are certain risks associated with investing in stocks. For example, factors affecting the overall performance of the market can cause experience losses. Stock market crashes and bubbles are examples of intensified market risks. Liquidity risk is another major risk that is common in stock trading. It arises when a stock cannot be traded quickly enough to minimalize a loss. Fortunately, you minimize this risk by diversifying.
What Factors should you Consider When Buying Stocks?
- Historical financial performance
Before buying a share of any company, you must look at its financial performance and compare it with its historical data, which is done using financial ratios. You can obtain the financial analysis data from the financial statements of the company such as cash flow statements, balance sheet and income statement. Some on the key ratios that you should concentrate on are liquidity ratios, profitability ratios, efficiency ratios, valuation ratios and leverage ratios.
- Dividend payout
One of the biggest benefits of dividends is the steady flow of income over time. Most well-established companies tend to increase dividend payouts from year to year. In fact, there are certain companies that have continuously increased their dividends for even more than twenty years.
One of the biggest issues with stock investing is the market risk or the inherent risk. Stock prices constantly move up and down, and there is no guarantee that the value will increase. While purchasing shares from a company that offer dividends is not a guarantee of profitability, dividends provide a guaranteed return on investment (ROI).
- Professional share forecast
You need to forecast the review and growth of a company to project its stock’s future growth. For instance, if a company has a positive growth rate over several periods, it is likely to control multiples that surpass the market multiple. When the multiple forward increases, the stock price should rise, which will result in more returns. You should only use reliable and accurate data.
- Economic factors
There are many economic factors that influence the stock market. For example, while a pandemic can cause the market to drop, a company innovating a new technology can cause the market to soar. One of the major economic factors that you should look out for is inflation. This is the rate at which the price of goods and services increases, which has an adverse effect on the stock market. A drop in inflation, also known as deflation causes a surge in selling stocks. Conversely, an increase in inflation is characterized by a decrease in revenue, resulting in a drop in the stock market.
- Additional sections for the topic “eToro Malaysia.”
Fees
Joining eToro to trade cryptocurrencies is free, and it does not charge commissions. Instead, it derives its revenues from spreads, which is the difference between the bid and the ask price. Also, there might be other fees involved depending on the crypto asset and the time of trading. For example, the minimal spread for Bitcoin is 0.75%.
On the other hand, eToro has a unique scheme for stock. On the website, the broker has indicated that all spread for stocks has been unified. Nonetheless, there is a fixed 0.9% spread applies to both sides of the trade.
What risks are there when using eToro in Malaysia?
- Security risk
Just like when performing any financial transaction, trading online pose security risks. Regardless of the security and privacy measures applied by the broker, there is no guarantee that a malicious hacker won’t find a way into your trading account and steal your funds and vital information. If you are involved with trading large volumes, you are at a bigger risk to lose a significant amount of your money. Make sure you use a reliable broker, use a strong password and change it regularly.
- Exchange rate risk
This risk is mostly associated with forex trading and is caused by changes in the currency’s value. It is based on the endless and volatile shifts in supply and demand of currencies. Since currencies will always move based on all possible factors that can happen at any time around the world, this risk can be substantial. Also, because Forex exchange is unregulated, there are no price limits like in regulated exchanges. The movement in the market is purely based on technical and fundamental factors. Some of the techniques you can use to reduce the exchange rate risk include position limit, loss limit, reward ratios, etc.
- Interest rate risk
This is another risk you will face when trading on the eToro platform. It refers to the profit and loss produced by the changes in the forward spreads as well as the maturity gaps among transactions and forward amount mismatch. This risk is mostly associated with futures, options and currency swap. A common approach to minimize the interest risk is to separate the mismatches based on their maturity dates.
- Credit risk
Credit risks a common risk in forex trading where an open position may not be repaid as agreed, because of the intentional or unintentional action of the counterparty. It is mostly associated with corporations and banks while the credit is low for retail traders trading on a margin. Through the SCM, the Malaysian government has vowed to continue cracking unregistered brokers that offer services in the country. The government goes further to caution Malaysians traders against trading with the unregistered broker.
- Transaction risk
This risk is associated with the time difference between the start of a contract and when it ends. The Forex market is active throughout the day, which can result in changing the exchange rates before the trade has settled. In addition, currencies can be traded at different prices in different regions during the trading hours. The bigger the time difference, the higher the transactional risk. These time differences cause you to face increased or erroneous transaction cost.
Which Regulators Govern eToro in Malaysia?
Since eToro is a securities trading platform, it is regulated by the Securities Commission of Malaysia (SCM). Other regulatory bodies involved with online trading include the Malaysian Investment Development Authority (MIDA), the Sharia Advisory Council and the Finance Accreditation Agency.