Up till now, the best investment plan in Malaysia has been quite a closed one. Local fund managers are in a way “protected”, and thus have not been tested. The middling performance of global equity funds in Malaysia is one such example. It would be fair to say that this is likely to change when there are more alternatives vying for the investor’s attention.
Under the framework, Malaysians will have direct access to retail investment schemes from two key markets in the region, namely Singapore and Thailand. These foreign unit trusts will have the same kind of market access as local funds.
The increased competition can only mean one thing. The funds that can offer superior value and performance will stand a better chance of capturing the market.
Benefits For Investors
Suffice to say, the Asean CIS framework will be a boon to investors. In a nut shell, investors will be spoilt for choice, as there will be more choices in each asset class. There will be more country, regional and global funds on the table and the pool of fund managers will be significantly increased, with notable and reputable international names such as JP Morgan, Fidelity, Schroder, First State, Allianz and Legg Mason, among others. In my experience, Malaysian investors feel that the local unit trust industry is not attractive because it lacks world-class players.
There will also be more currencies to park our investments in, including the Singapore dollar, Thai baht, US dollar, Australian dollar and the euro. All this bodes well for diversifying our investments.
Investors can also expect lower fees. Due to the increased competition, the upfront fees charged by investment funds are likely to be reduced. Compare this with the current charges in Malaysia, where upfront unit trust fees can go up to 6%, while in Singapore it peaks at 5%. Thailand, on the other hand, has lower upfront fees of up to 2%.
With so much on the table, greater access, more quality players and declining upfront fees, investors should seize the opportunity to grow and further diversify their investments.
With good news often comes the bad. The downside is that there may be a price to pay as investors may be exposing themselves to unknown risks.
Take for example a client of mine, who used to perceive bond fund investing as a stable and not very volatile investment instrument. However, what he did not know was that the perception is only true for Malaysian bond funds. He got the shock of his life when the global bond fund he invested in dropped more than 50% of its original value.
This goes to show that investors will need more in-depth knowledge about the financial products they choose to invest in, to truly understand the risks and inherent benefits.This calls for the best investment plan in Malaysia for asset allocation, selection and monitoring. To benefit from a changing investment environment, investors must adopt a holistic approach as oppose to a tactical one.
To offer a familiar example, this is just like what we do when shopping for groceries. We compare different shops in terms of the freshness, quality and prices of their produce before we make a purchase.
Similarly, an informed investor must do their homework before investing. They must compare the performance of the funds from the participating countries, analyse the track record of the fund managers, the charges levied on the investor and so on.
In an open market investing landscape such as the Asean CIS Investment framework, it is even more crucial for investors to sharpen their best investment plan in Malaysia in order to cope with the growing complexity of the market. To do this, they will need to closely monitor the funds’ performance, market conditions and alternative investments in order to respond to new developments. The passive method of investing that some people practise, especially those who do not have the necessary skill sets, will no longer be suitable anymore.
If you invest in unit trusts, a good test of your investing skills is to ask yourself these three questions honestly:
1. Do you know the name of your unit trust funds?
2. Do you know what asset classes your unit trust funds invest into?
3. Do you know how your unit trust funds compare to their peers? For example, how does your Malaysia equity fund perform compared to the rest of Malaysia’s equity funds in the market?
If your answer is “no” to more than one question, you are subjecting your monies to great risks unknowingly and you may not be ready to capitalise on the upcoming opportunities in an open investing market.
In conclusion, a change can only become an opportunity if we are equipped with the right knowledge to benefit from it. Otherwise, we should remember that an opportunity for others could be a risk to us if we don’t know what action to take.
As a general principle, we should ask ourselves how ready are we to spread our investments to other jurisdictions? The opportunity for gain is there, but are we equipped for the experience?