ETF in Malaysia
What are the ETF in Malaysia?
Source: http://www.bursamalaysia.com/market/securities/equities/products/exchange-traded-funds-etfs/#
In Malaysia, there are only 11 ETF. ETF is still not very popular compared with other country like United States.
As of March 2019, there are more than 5,000 exchange traded products (ETPs) trading in the U.S.
For investor who don't have time to carry out in-dept analysis of a stock, ETF probably is the best way to invest. In the long term, investor will surely gain profit from ETF without carry out proper research on stock.
The reason is, ETF's portfolio is always follow the index's portfolio. For example, the portfolio in FBMKLCI-ETF (0820 EA) is constitute of FBMKLCI 30 constituents companies. The constituent companies in FBMKLCI will always change according to its representation and market value. This means that there are only strong companies can become one of FBMKLCI 30 constituents companies. The weak companies will be removed from FBMKLCI index if its financial condition has become weaker.
Hence, in the long term, due to the law of jungle (the strong companies will survive) and inflation, it is high likely that investor can profit from investing in ETF.
Comparison of return of ETF with KLCI or respective index
Let us look at whether the actual return of FBMKLCI-EA is same with its underlying index, FBMKLCI index.
FBMKLCI Index
On 21 June 2016, the lowest price for FBMKLCI is 1630.3.
On 20 April 2018, the highest price for FBMKLCI is 1896.03.
The changes is 265.73 points or 16.3%.
FBMKLCI-EA
On 21 June 2016, the lowest price for FBMKLCI-EA is 1.74.
On 20 April 2018, the highest price for FBMKLCI-EA is 1.945.
The changes is RM0.205 or 11.78%.
The changes in percentage are not in line. This is probably due to less trading activity in FBMKLCI-EA due to unpopularity in Malaysia.
Is it worth to invest in ETF?
Nevertheless, although ETF is still not as popular as the other active fund in Malaysia, it is still a very efficient investment tool for people who has no investment background.
It is suggested that investor to implement periodically buying strategy when investing in ETF. Investor should buy more when the index has dropped to certain threshold, and buy less when the index has exceed the threshold.
Source: http://www.bursamalaysia.com/market/securities/equities/products/exchange-traded-funds-etfs/#
In Malaysia, there are only 11 ETF. ETF is still not very popular compared with other country like United States.
As of March 2019, there are more than 5,000 exchange traded products (ETPs) trading in the U.S.
For investor who don't have time to carry out in-dept analysis of a stock, ETF probably is the best way to invest. In the long term, investor will surely gain profit from ETF without carry out proper research on stock.
The reason is, ETF's portfolio is always follow the index's portfolio. For example, the portfolio in FBMKLCI-ETF (0820 EA) is constitute of FBMKLCI 30 constituents companies. The constituent companies in FBMKLCI will always change according to its representation and market value. This means that there are only strong companies can become one of FBMKLCI 30 constituents companies. The weak companies will be removed from FBMKLCI index if its financial condition has become weaker.
Hence, in the long term, due to the law of jungle (the strong companies will survive) and inflation, it is high likely that investor can profit from investing in ETF.
Comparison of return of ETF with KLCI or respective index
Let us look at whether the actual return of FBMKLCI-EA is same with its underlying index, FBMKLCI index.
FBMKLCI Index
On 21 June 2016, the lowest price for FBMKLCI is 1630.3.
On 20 April 2018, the highest price for FBMKLCI is 1896.03.
The changes is 265.73 points or 16.3%.
FBMKLCI-EA
On 21 June 2016, the lowest price for FBMKLCI-EA is 1.74.
On 20 April 2018, the highest price for FBMKLCI-EA is 1.945.
The changes is RM0.205 or 11.78%.
The changes in percentage are not in line. This is probably due to less trading activity in FBMKLCI-EA due to unpopularity in Malaysia.
Is it worth to invest in ETF?
Nevertheless, although ETF is still not as popular as the other active fund in Malaysia, it is still a very efficient investment tool for people who has no investment background.
It is suggested that investor to implement periodically buying strategy when investing in ETF. Investor should buy more when the index has dropped to certain threshold, and buy less when the index has exceed the threshold.
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