Here’s What Happens to a RM200 Monthly Investment in Malaysia

What can you do with RM200 these days? Perhaps buy a week’s worth of groceries, or pay for a nice dinner for two, or get yourself a new pair of earbuds. With the current global economic uncertainty, it’s safe to conclude that RM200 is indeed useful, but may not be life-changing.

But what if we told you that it could make a huge difference in growing your wealth over time? If you do have excess RM200 lying around in your account after payday every month, here’s what you can do with it as a form of investment in Malaysia.

What happens when you invest RM200 monthly?

Investing consistently over several years, even if you can only put aside a bit of money, can help you grow your wealth significantly. Thanks to the power of compounding, your investment returns can generate their own returns over time. The more time you give your investments to grow, the greater this compounding effect will be.

For example, here’s how much a RM200 monthly investment in Malaysia can grow at 7% annual return (p.a or per annum) over several decades:

Based on the table above, and with only RM200 investment a month at 7% returns p.a., you would have saved a whopping RM479,124 in 40 years. That’s almost half a million Ringgit! If you’re looking for something short-term but still above the 6 digit range, perhaps the 25 or 30-year tenures might be better suited to your plans.

This can really boost your retirement fund, considering that 51.5% or 6.67 million of Employees Provident Fund (EPF) members under the age of 55 have account balances below RM10,000 as of the end of 2022, according to recent reports.

Investment in Malaysia does take a bit more effort than just saving your money in a bank account. But it does help you generate potentially higher returns. After all, fixed deposits may only offer around 1.5% to 2% returns per annum, and savings accounts typically offer even less.

Where do you make a RM200 monthly investment in Malaysia?

The following are a few ways you can invest your money for considerably profitable returns:

Stocks

It is possible to invest in stocks, even if you do not have much money to spare. Typically, you would need to only buy a minimum of 100 shares. However, your stock brokerage firm may charge a minimum brokerage fee every time you buy or sell.

In addition, other fees and charges such as clearing fees and stamp duty may apply. If the amount you buy is too small, the minimum brokerage fee may eat up a large percentage of your investment. You can get around this by saving up for a few months before making an investment. This way, you can spread the minimum brokerage fee over a big purchase amount.

However, you may still want to avoid investing directly in stocks. If you have limited funds, it could be hard to diversify - that is, spread your funds across different stock investments. When you put all your money in a single investment in Malaysia, you risk experiencing huge losses if said investment does not perform well.

On the other hand, having multiple investments minimises your losses if a single investment in your portfolio underperforms. The same pretty much applies to online stock investments.

Exchange-traded funds (ETFs)

An ETF is a group of investments (such as stocks, bonds or gold). This makes ETFs a good option for beginners with limited funds, as you can easily diversify into many investments at once. For example, if you invest in the FTSE Bursa Malaysia KLCI ETF, you would be making an investment in Malaysia with the 30 biggest public-listed companies. As your funds are spread out across several investments, an ETF can be less volatile than investing into a single asset.

ETFs are traded on the stock exchange too, so you will incur a brokerage fee and other charges when you buy and sell. The upside to being traded on the stock exchange is that ETFs are very liquid, meaning you can easily sell off your investments to access your funds.

Unit trust funds

Unit trust funds are like ETFs, in that they represent a group of investments. But instead of being traded on the stock exchange, you can invest in them through Fund Management Institutions (FMI) or through distributors like banks.

There are many different types of unit trust funds in the market, such as those that invest in a specific geographical area, or in certain types of assets. Unit trusts come with risk ratings, which essentially indicate that funds with higher risk ratings are more suitable for investors who can take on more risk and vice versa.

To invest in unit trusts, you’ll need a unit trust investment account. Typically, you will need to make an initial investment of RM1,000 for each unit trust fund. But after that, you can set recurring transactions of as low as RM100 per month, depending on the type of plan you opt for.

Unit trust fees can vary, depending on the type of unit trust (for example equity versus fixed income fund) and the sales agent.

How do you increase your monthly investment over time?

If you are finding it hard to set aside money to increase your monthly investment in Malaysia, here’s what you can do:

• Set up a recurring transaction. Automatically transfer money into a separate savings account the moment you get your salary and entrust the account access solely to a person you trust. This can help remove the temptation to spend it.
• Plan your meals. Advance planning can help reduce eating out regularly. Cooking more meals at home and for more people can significantly reduce food costs. It could even mean that you’re eating healthier.
• Switch subscription plans. Whether it’s your mobile or home broadband plan, consider switching to something more cost effective. Draw up a sheet to tabulate your monthly data usage and see if there’s anything you can chisel off by observing your data usage trends.
• Ditch the car. If you have just started working, you may be looking for your first car. But if you can get around by using alternative modes of transportation instead, it can be worth delaying the purchase as vehicle ownership can be quite pricey. It’ll also be a good way to start going green!
• Set aside a sum from your raise. If you receive a RM500 pay raise, try to set aside RM100 from that total amount for investment. The rest can still be used for your other spending or commitments.

By practising some or all of the above, you might be able to have spare change in your pockets, which you can channel into increasing your monthly investment in Malaysia over time. With RM200 as a start, you can be one step closer to achieving all those financial life goals.

Thinking of embarking on a profitable financial journey with a small monthly investment in Malaysia? Let our financial goal simulator tool do the maths for you!

💡 The information provided above is purely for educational purposes.