How to Buy ETF in Malaysia: A Beginner’s Guide

Exchange-traded funds, commonly known as ETFs, have become an increasingly accessible investment option for investors in Malaysia. An ETF allows investors to gain exposure to a basket of shares, bonds, commodities, or other assets through a single exchange-traded product. Bursa Malaysia explains that ETFs can track different underlying assets and are traded similarly to stocks. 

If you are wondering how to buy etf in malaysia the process is relatively straightforward once you understand brokerage accounts, CDS accounts, ETF selection, trading costs, and the risks involved.

What Is an ETF?

An ETF is an investment fund that tracks a particular index, commodity, market, or other underlying asset. Instead of buying every security individually, investors can purchase units of an ETF and obtain exposure to the assets included in that fund.

For example, an ETF may provide exposure to Malaysian equities, US companies, Asian markets, bonds, or gold. Bursa Malaysia lists ETFs covering several strategies and asset classes, including equity, fixed income, commodity, and Shariah-compliant ETFs.

Because ETFs are traded on an exchange, their prices can move throughout the trading session.

Why Invest in ETFs in Malaysia?

One of the main attractions of ETFs is diversification. A single ETF can provide exposure to multiple securities, which may be more convenient than purchasing individual stocks separately.

Investors can also use ETFs to access markets or asset classes that may otherwise require more research and transactions.

For Malaysian investors, ETFs can potentially be used as part of a diversified investment portfolio, depending on individual financial objectives and risk tolerance.

How to Buy ETF in Malaysia

The basic process involves several steps.

1. Open a Trading Account

To buy an ETF listed on Bursa Malaysia, you generally need a trading account with a stockbroking company.

You will also need a Central Depository System (CDS) account for securities traded on Bursa Malaysia. Bursa Malaysia states that individual investors can open a CDS account through an Authorised Depository Agent, which includes stockbroking companies. 

Some brokers also provide online account-opening facilities.

2. Choose an ETF

Once your trading account is ready, research the ETFs available to you.

Start by identifying what you want exposure to. You could consider ETFs focused on:

• Malaysian equities
• International equities
• Fixed income
• Commodities
• Gold
• Shariah-compliant investments
• Specific regions or markets

Bursa Malaysia’s ETF materials recommend considering the underlying index, transaction costs, tracking difference, currency, liquidity, and expense ratio when comparing ETFs. 

3. Check the ETF’s Underlying Index or Asset

Understanding what an ETF actually tracks is essential.

An ETF’s name alone does not tell you everything about its investment strategy. Check the underlying index or assets and review the fund’s investment objective.

For example, two ETFs may both provide international exposure but follow completely different indexes and therefore have different holdings and risk profiles.

4. Compare Fees and Costs

Before buying an ETF, check all relevant costs.

These can include:

• Expense ratio or management fee
• Brokerage commission
• Bid-ask spread
• Clearing fees
• Exchange-related charges
• Currency conversion costs for overseas ETFs

Bursa Malaysia specifically highlights transaction costs and expense ratios as factors investors should review when selecting ETFs. 

A low-cost ETF can be attractive, but investors should consider fees alongside liquidity, tracking quality, and the fund’s overall strategy.

5. Check Liquidity

Liquidity refers to how easily an ETF can be bought or sold at reasonable market prices.

Bursa Malaysia notes that the availability of a market maker is an important consideration because market makers help maintain active buy and sell quotations during trading hours. 

Before investing, look at the ETF’s trading activity and bid-ask spread rather than assuming that every ETF will have the same level of liquidity.

6. Place Your Buy Order

After selecting an ETF, you can log into your brokerage platform and search for its ticker or trading symbol.

You will generally need to enter:

• The ETF’s ticker
• Number of units
• Order type
• Price, if using a limit order

A market order attempts to execute at available market prices, while a limit order specifies the maximum price you are willing to pay.

Understanding the difference between order types can help you make more informed trading decisions.

7. Monitor Your Investment

After purchasing the ETF, you can monitor its market price and review the fund’s performance.

However, monitoring does not necessarily mean making frequent trades. The appropriate approach depends on your investment strategy and financial objectives.

It can be useful to periodically review whether the ETF continues to match your investment goals.

How Much Money Do You Need to Buy an ETF?

The amount required depends on the ETF’s market price, minimum trading unit, brokerage costs, and other applicable charges.

Rather than focusing only on the price of one ETF unit, consider the total amount required for the transaction, including fees.

Some investors prefer investing gradually rather than committing a large amount at once. The appropriate approach depends on individual circumstances and investment objectives.

Types of ETFs Available in Malaysia

Investors researching how to buy ETF in Malaysia will find several types of ETFs.

Equity ETFs

These ETFs invest in shares and may track Malaysian, regional, or international equity indexes.

Bond and Fixed-Income ETFs

These provide exposure to bonds or other fixed-income securities and can be used by investors seeking diversification beyond equities.

Commodity ETFs

Commodity-focused ETFs can provide exposure to assets such as gold or other commodities, depending on the fund.

Shariah-Compliant ETFs

Malaysia also has Shariah-compliant ETFs. Bursa Malaysia explains that i-ETFs track benchmarks whose constituent companies comply with Shariah requirements. 

ETF Risks You Should Understand

ETFs are not guaranteed investments.

Bursa Malaysia notes that ETFs are subject to market ups and downs and that their performance can be affected by the performance of the underlying assets.

Important risks can include:

• Market risk
• Currency risk
• Liquidity risk
• Tracking differences
• Sector concentration
• Interest-rate risk for certain bond ETFs
• Commodity-price risk for commodity ETFs

The level of risk depends heavily on the specific ETF you choose.

Malaysian ETF vs. Overseas ETF

Investors in Malaysia can encounter ETFs listed locally as well as investment products providing exposure to overseas markets.

A Malaysian-listed ETF may be simpler from a local trading perspective. Overseas ETFs can provide access to a much wider range of markets and strategies, but may introduce additional currency, brokerage, regulatory, and tax considerations.

If you are considering a foreign-listed ETF, carefully check whether the product is available through your broker and understand the applicable rules before investing. Malaysia’s Securities Commission maintains regulatory guidelines for ETFs and foreign funds. 

How to Check Whether an Investment Platform Is Authorised

Before opening an account or sending money to an investment provider, verify that the entity is authorised to provide the relevant capital-market services.

Malaysia’s Securities Commission provides an Investment Checker that allows investors to check whether an individual or entity is authorised to offer, promote, or sell capital-market products and services in Malaysia. 

This is an important step when comparing online investment platforms.

Tips for First-Time ETF Investors

If you are buying an ETF for the first time, avoid choosing a fund solely because it has recently performed well.

Instead, consider:

• What the ETF invests in
• The underlying index
• Expense ratio
• Tracking difference
• Liquidity
• Currency exposure
• Dividend policy
• Trading costs

)Your investment timeframe

• Your ability to tolerate losses

Bursa Malaysia also recommends reviewing the ETF’s investment objective, underlying assets, dividend policy, fees, trading information, and management company before investing. 

Conclusion

Learning how to buy ETF in Malaysia starts with understanding the ETF, choosing an appropriate fund, opening a suitable trading and CDS account, comparing costs, and placing an order through a brokerage platform. ETFs can provide convenient diversification across shares, bonds, commodities, and different markets.

However, every ETF carries its own risks and costs. Before investing, research the underlying assets, liquidity, fees, currency exposure, and investment strategy. Most importantly, verify that your chosen broker or investment provider is properly authorised and make sure the ETF fits your financial goals and risk tolerance.