5 Low-Risk Investments In Malaysia (That Aren’t Fixed Deposits)

Want to invest but don’t want to take a lot of risk? Maybe you are nearing retirement or you need a safe place to store your money for the next few years. Maybe the thought of volatile market conditions is giving you heart palpitations.

The good news is that there are a number of ways to invest without incurring a lot of risk. Here are some of the less risky ways to make your money grow.

1. Employee provident fund (EPF)

EPF has a strong track record of performance, offering annual returns of 5% to 6% over the past several years. For conventional accounts, the EPF also guarantees a minimum annual dividend of 2.5%.

Historical EPF returns

Year
Simpanan shariah
Conventional savings
2015
6.40%
2016
5.70%
2017
6.40%
6.90%
2018
5.90%
6.15%
2019
5.00%
5.45%

Even if you currently contribute to your EPF savings through employment, you can still supplement your savings through the self-contribution scheme, up to a maximum of RM60,000 per year. If you are not officially employed, you can contribute via EPF i-Saraan.

However, you cannot access your EPF savings at all times. You can only withdraw your investments when you turn 50, or if you need them for a specific purpose, such as buying a house, paying for medical bills, or financing your child’s education.

2. Amanah Saham Bumiputera (ASB) / Amanah Saham Malaysia (ASM)

ASB and ASM are unit trust funds managed by Amanah Saham Nasional Berhad, a subsidiary of the government-linked investment company Permodalan Nasional Berhad (PNB). Only Malaysian Bumiputeras can invest in ASB, while non-Bumiputeras can invest in ASM.

Although ASB has been criticized for delivering its lowest distribution on record last year, these two funds still offer decent returns:

Year
Amanah Saham Bumiputera
(Bumiputera investors)
Amanah Saham Malaysia
(Non-bumiputera investors)
2015
7.75%
6.60%
2016
7.25%
6.30%
2017
7.25%
6.00%
2018
7.00%
6.25%
2019
5.50%
5.50%

Unlike conventional unit trust funds, which can have sales charges of up to 5%, these funds have no sales charges. It means spending more money to build wealth, not to pay the fees.

These funds are also guaranteed in capital, so there is no risk that you will lose your initial investment. The price of each unit is always fixed at RM1.

3. High yield savings account

Using a savings account is one of the easiest and least risky ways to grow your money. But it is also one of the slowest. Basic savings accounts can provide returns of around 0.2% to 1.5%, which is barely enough to beat inflation.

This is where high yield savings accounts come in. They offer much higher returns – if you qualify. Here are some examples:

Maximum interest rate pa
How to reach the maximum interest rate
Citibank AcceleRate Savings Account
4.88%
– Base interest rate of 0.50%
– 4.38% on your additional balance compared to the average balance of the previous month
Standard charter privilege on average
4.60%
– Base interest rate of 0.10%
– 1.50% if you deposit RM3,000
– 1.50% if you spend RM 1,000 on your credit card
– 2.00% if you invest RM1,000 through Bancassurance / Bankatakaful or a regular unit trust savings plan
UOB Hidden Account
3.05%
Progressive interest rates; 3.05% if you deposit between RM100,001 and RM200,000
OCBC 360 Account
2.45%
– 0.05% on your total balance
– 0.80% if you deposit RM500
– 0.80% if you pay at least three invoices online
– 0.80% if you spend at least RM500 on your OCBC card (s)

There are a few hurdles you need to overcome to get the best rates. They are also generally applicable up to a certain deposit amount only.

On the upside, your funds will be extremely liquid – you will be able to access them immediately if you need to. You also have little or no risk of losing your capital, and in the unlikely event that your bank goes bankrupt, Perbadanan Insurans Deposit Malaysia (PIDM) will reimburse you with the money you deposited (up to RM250,000). .

4. Money market or cash management fund

These unit trust funds invest in “money market instruments” which include short-term debt that is loaned to banks and government. These funds also hold fixed deposits with banks. Since these funds invest in high quality investments that mature quickly, the risk is very low.

Here are some money market or cash management funds in Malaysia:

Product
5-year annualized returns
Eastspring Investments Islamic Income Fund
3.57%
Nomura i-Cash Fund
3.54%
Pacific Cash Fund
3.48%
RHB 2 Cash Management Fund
3.34%
RHB Money Market Fund
3.33%

Source: Fundsupermart; accessed September 8, 2020

With a return of around 3% per year, these funds offer similar returns to fixed deposit accounts. But they do have an advantage: with fixed deposits, you can lose some or all of your accrued interest if you withdraw before your term expires. With these funds, you can withdraw at any time without incurring a penalty.

You can invest in these funds through a fund management institution (IMF) or an online platform like Fundsupermart.

Instead of investing directly in these funds, you can also invest through StashAway Simple, a cash management portfolio that invests in the Eastspring Investments Islamic Income Fund. StashAway Simple has a projected return rate of 2.4% per year.

StashAway also offers an investment portfolio, which you can benefit from at reduced fees when you sign up through this link. But as always, remember to do your own research before investing.

5. Obligations

A bond is a debt obligation (much like a formal IOU) issued by governments or companies that wish to raise funds. When you buy a bond, you lend money to the issuer. In return, the issuer promises to pay a predetermined interest rate at specific intervals (eg twice a year).

Although bonds are low risk investments, they may carry a higher risk than money market funds, depending on the issuer. Each bond receives a rating that takes into account the probability that the issuer will be able to repay the bond.

However, the cost of buying a bond directly is quite high – if you are going to a bank, you would need a minimum of RM250,000. It’s easier to invest in an exchange traded bond fund (ETF) or bond unit trust fund, where your money will be pooled with that of other investors to invest in a group of bonds. or other money market instruments. You just need to invest a minimum of RM1,000 in unit trust funds and buy at least 100 shares of an ETF.

There is only one bond ETF available in the Malaysian stock market, but there are many bond funds. Here are some examples:

Type
Product
5-year annualized returns
AND FABF Malaysia Bond Index
6.02%
Unit Trust FundAmDynamic Bond
6.94%
AmanahRaya Syariah Trust Fund
6.76%
AmTactical Bond – Class B (MYR)
6.58%
RHB Bond Fund
6.31%

Source: Morningstar and Fundsupermart; accessed September 9, 2020

You can invest in unit trust funds through an IMF or through Fundsupermart, while ETFs can be bought and sold like stocks in the stock market.

Should you invest in low risk investments?

Investing in these low risk options makes sense if:

  • you need to reduce the risk of your portfolio
  • you are approaching retirement
  • you must use your money in the next few years

But if you have a high tolerance for risk and don’t need money anytime soon, consider allocating money to high risk investments as well. This is because while low risk investments may be “safer”, the trade-off is that you could get potentially lower returns. The key is to balance the risk and the reward with your financial goals.

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Jothi Venkat

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