\n There is no guarantee you will make money with this provider. <\/div>\n <\/div>\n <\/div>\n <\/div>\n <\/div>\n <\/div>\n\n \n
Step 2: Learn How Buying Stocks Works in Malaysia<\/h2>\n
Before you start trading with your new brokerage account, it\u2019s important to understand how to buy stocks in Malaysia. Here, we\u2019ll cover the most important things you need to know to get started.<\/p>\n
How Do You Buy Stocks in Malaysia?<\/h3>\n
To start your stock investing journey in Malaysia, you will first need to open a Central Depository System (CDS) account. This is an account that you can use to buy and sell shares as well as track their price movements.![\"CDS](\"https:\/\/learnbonds.com\/my\/wp-content\/uploads\/sites\/3\/2020\/06\/Capture-300x161.jpg\")
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Go to an authorized depository agent to open the CDS account. You will be required to provide a copy of your government-issued ID card and pay MYR 10. Also, keep in mind that you still need to open a trading account with a regulated stockbroker, in addition to your CDS account.<\/p>\n
Ways to Buy and Sell Stocks<\/h3>\n
When you buy stocks, you invest in a small portion of a company. You can invest in shares of top companies in Malaysia or around the world. If the company does well and the price of the stock rises, you could potentially sell your stock for a profit or hold onto it and collect dividend payouts. Of course, you could also lose money when buying stocks if the company fares poorly. So, it\u2019s important to understand how this market works before you invest.<\/p>\n
One of the best things about buying stocks is that there are multiple ways to go about it. Let\u2019s take a look at the different ways you can buy stocks.<\/p>\n
Buying traditional stocks<\/h4>\n
The traditional way of buying and selling stocks remains the most popular. Here, you\u2019re investing your money in a single company. This may be a penny stock, which is a small company\u2019s stock that trades for less than $5 per share, or it may be a blue-chip stock, which are large companies with extensive market capitalization and expensive stocks.<\/p>\n
The aim when buying and selling stocks is to earn money, and this can be done in a number of ways. Firstly, you can sell the stocks for higher than you bought them for. You can also earn dividends, which are portions of a company\u2019s profits that are paid out to shareholders, typically annually.<\/p>\n
You can buy stocks on a short term or long term basis. Short term traders typically look to buy and sell stocks at a quick profit and aren\u2019t entitled to dividends. Long-term investors aim to keep the stocks for a number of years with the intention of earning dividends and seeing the value of the stock rise.<\/p>\n
Investing in Stocks or Shares through ETFs and Index Funds<\/h4>\n
Both index funds and ETFs are securities that involve bundling together many assets into a single investment. They have become a popular choice for investors because they allow diversification. A few ETFs and index funds can result in a highly diversified portfolio. For instance, an S&P 500 based ETF will give you access to some of the biggest companies in the US.<\/p>\n
The investment options inside the index funds and ETFs are based on an index, which is a subset of the broader market. This is why it is possible to manage both securities passively. In contrast, actively managed funds such as mutual funds require you to actively choose what to invest in, resulting in higher trading costs.<\/p>\n
Passively managed investments follow the trend of the index they are tracking and have historically shown impressive results. For example, the S&P 500 annual return has averaged around 10% for almost a decade. Nonetheless, actively managed funds can offer positive returns in the short-run because you will rely on the market conditions when making trading decisions.<\/p>\n
The biggest difference between index funds and ETFs is the way they are bought and sold. While ETFs can only be traded throughout the day, index funds can only be traded for the price set at the end of the trading day.<\/p>\n
Investing in Stocks through CFDs<\/h4>\n
A contract for difference (CFD) offers you an opportunity to gain from price movements in the market without owning the stock. It can be calculated by looking at the asset\u2019s price movement between the trade entry and exit points, without considering the underlying value of the asset. This is done through a contract between you as the trader and your stockbroker.<\/p>\n
For example, if the ask price of a stock is MYR 101.04 ($25.26) and you buy 100 shares, the cost of the transaction will be approximately MYR 10,104 ($2526), including fees and commissions. In a traditional broker, you will be required to raise up to 50% margin, which equates to around MYR5052 ($1263). However, a CFD broker will only require you to raise around 5% margin that translates to MYR 505.2 ($126.30).<\/p>\n
A loss in a CFD trade is equal to the size of the spread at the time of executing the trade. For example, if a spread is 5 pips, the trade needs to gain more than 5 pips for the position to break even. While you will still have this gain if you own the stock, you will still incur commissions and other costs that will significantly affect your profitability.<\/p>\n
One of the biggest advantages of CFD trading<\/a> is that you can trade with leverage, meaning you borrow capital from a broker to make larger trades. CFDs also allow you to go short on stocks, meaning you can speculate on the price going down as well as up.<\/p>\nAnother advantage of investing in stocks through CFDs is that it gives access to the global market from a single platform. Most CFDs brokers offer stock assets in all the world\u2019s major markets, which allow 24-hour trading. You can trade CFDs on a rich selection of over 4,000 products from worldwide markets.<\/p>\n
Trading Stocks with Options<\/h4>\n
Options are financial securities that derive their value from underlying assets like stocks. They give you the right but not the obligation to trade an underlying stock at a set price and purchase stocks like most other asset classes.<\/p>\n
They are popular among investors because they can enhance your portfolio through added leverage, income and even protection. Regardless of the situation, there is always an option scenario that will match your goal. For example, you can use options to hedge against a falling stock market to minimize losses. Furthermore, they can be used for speculative purposes like staking on the direction of the stock.<\/p>\n
Similar to other types of investments, there are certain risks associated with options trading that you should be aware of before you start investing. Options belong to a broader category of securities known as derivatives. A derivative is derived or depends on the price of something else. For example, as wine is a derivative of grapes, a stock option is a derivative of a stock. Options are derivatives, and their value depends on the price of other financial securities such as stocks.<\/p>\n
Lastly, there are two types of options: call option and put option. The call option gives you the right to buy a stock at the predetermined price, which is commonly known as the \u2018strike price.\u2019 On the other hand, the put option gives you the right to sell the stock.<\/p>\n
Options are less than commonly offered than CFDs, ETFs and index funds and are generally less popular among new traders learning how to buy stocks in Malaysia for the first time.<\/p>\n
What is the Best Time to Buy Stocks in Malaysia?<\/h3>\n