KUALA LUMPUR: Some level of financial literacy, like understanding the different types of investment and risks involved, is an important prerequisite before investing in the capital market.
For novice investors, the first step is to identify whether the investment instrument is recognised by the authorities including Securities Commissions Malaysia and Bank Negara Malaysia before pursuing in any form of investments.
In addition, investors should also be aware of how the local stock market, Bursa Malaysia, operates and have basic knowledge of stock trading, which are under strict rules, regulations and guidelines.
“There are different stock counters and products offering different rates of possible risks and returns, which can translate into good value growth. For instance, the financial sector, representing the banking stocks, grew 6.9 per cent over the last eight months,” said Bursa Malaysia chief executive officer Datuk Seri Tajuddin Atan.
As at July 31, 2018, 1.9 million individual central depository system (CDS) accounts - used to trade in shares - were registered with Bursa Malaysia.
Bursa Malaysia Bhd launched 'Invest Bursa, Invest in You' campaign in September to encourage Malaysians to invest in the capital market and grow the value of their savings for their future.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said however, one needs to be equipped with knowledge and the right attitude.
"The knowledge can be accessed through various reading material and training programmes offered by the stock market specialists, who are currently widely available,” he told NST Business recently.
According to Farringdon Group, a private wealth management and personal tax planning solutions provider, the stock market has potential for higher growth compared to an FD which gives provides a lower fixed rate of return.
“The benefit of the investing into stocks would be the potential for higher growth which comes with higher level of risk,” said Farringdon Group chief executive officer Stuart Yeomans.
Rakuten Trade Sdn Bhd vice president Vincent Lau said investment in equities on Bursa Malaysia has proven to provide better and consistent returns than FDs in the longer term perspective.
“FD can be treated as ‘savings’ because you can withdraw (sell) at any point of time,” he said.
Lau said investment has its inherent risk and having a diversified portfolio helps investors to minimise those risks.
“The current volatility in the emerging markets coupled with the trade tension between US and China presents a good opportunity for investors with a longer term view to start investment,” he said.