Now let's talk about one of the most common investment vehicles that many Malaysians are introduced to when they first start investing — Mutual Funds.
At its core, the concept is very simple. A fund manager pools money from thousands or even millions of investors and invests that money into various assets such as stocks, bonds, money market instruments, REITs, commodities, and other investment products. Instead of directly selecting and managing your own investments, you are essentially hiring someone else to do it on your behalf.
Today, there are many ways to access these types of funds.
Government-Backed Alternatives
- KWSP / EPF
- ASNB
- ASM
Digital Investment Managers (Robo-Advisors)
- StashAway
- KDI
- MooMoo
- Wahed
- Versa
Direct Bank Portals
- Maybank Investment
- CIMB Investment
- Hong Leong
- Public Bank
Independent Asset Management Companies
- Public Mutual
- Principal
- Kenanga
- Eastspring
- Affin Hwang
Insurance Companies
- Investment-Linked Funds
- Savings and investment plans
Digital Wallets & Digital Banks
- RYT Bank
- Touch 'n Go
- Shopee
- Versa Cash
Generally speaking, these products are more suitable for capital preservation, diversification and lower volatility. Most are designed for long-term investing. You are unlikely to become rich overnight, but you are also less likely to lose sleep over them.
For many people, these instruments can play an important role in a portfolio, especially for:
- Passive investors
- Conservative investors
- Portfolio diversification
- Stability and capital preservation
There is absolutely nothing wrong with using them. In fact, for many beginners, they are often a good starting point.
However, since this series is about sharing my personal perspective, I will also share why I am personally not a huge fan of relying too heavily on them.
Firstly, I prefer having more control over my investments. To me, a true investor develops the ability to analyse opportunities, make decisions, manage risk and allocate capital. With most mutual funds, your outcome is heavily dependent on market performance and the decisions made by fund managers. In other words, you are outsourcing your decision-making process.
Secondly, there are often multiple layers of fees, intermediaries, commissions and management costs involved. Having spent time in the financial industry myself, I understand how these systems work. Many financial advisors are good people with good intentions, but many are also salespeople representing products. The challenge arises when someone only knows how to talk about their company's products and positions every solution as the "best investment." Naturally, this creates bias.
Thirdly, many long-term buy-and-hold funds perform well during strong bull markets but struggle to protect capital during severe bear markets and economic downturns. When markets are rising, almost everyone looks like a genius. The real test comes when markets are falling.
Another reason is that most mutual funds do not generate meaningful cash flow for investors. You are largely relying on capital appreciation and NAV growth. In many cases, it remains a paper asset until you decide to sell.
Personally, I believe people should spend some time learning financial education and understanding different asset classes directly. The more knowledge you have, the better decisions you can make. If someone has no interest in learning about investing, markets, businesses, economics or wealth creation, then sticking to basic mutual funds may be perfectly fine. But personally, I don't want you guys to remain there forever.
I would rather see you gradually learn how the financial world actually works.
With that being said, if I had to choose a few places for beginners to start, these would be my preferred options.
1. KWSP (EPF)
This would probably be my top pick for most Malaysians. The returns have been decent over many years, the structure is strong, the underlying assets are diversified and the fund continues compounding every year. Personally, I believe it is highly likely to continue performing reasonably well because of its scale, governance and long-term investment mandate.
The only downside is liquidity. You generally cannot access most of the money until retirement age.
And to be honest, I don't personally subscribe to the traditional idea of waiting until 60 years old to start living life. Many people reach retirement with insufficient funds. Many reach retirement without enough health. Many spend their best years postponing experiences for "one day."
That is something worth thinking about.
2. Digital Banks & Cash Management Funds
You can also consider products offered by newer digital banks such as RYT Bank. Because these platforms are still growing, they often provide attractive promotional returns, bonuses and incentives to attract customers.
Personally, I see these as useful tools for liquidity management. You maintain flexibility while still earning a reasonable return on idle cash. As long as you understand the terms and conditions, there can be opportunities worth taking advantage of.
At the time of writing, some of these platforms are offering returns of up to 6% p.a. on selected funds with no fees. For money that is sitting on the sidelines waiting for deployment, I think that is not a bad place to park it temporarily.
3. Robo-Advisors, ASNB & ASM
These are probably most suitable for beginners, young working adults and people who are just starting their financial journey.
The biggest advantage is simplicity. You can start with relatively small amounts and gain exposure to diversified portfolios without needing extensive knowledge.
However, here's my honest view.
Historically, many of these products generate around 4% to 6% annually. While that's respectable, it doesn't necessarily create a life-changing difference for most people. Especially when inflation continues rising year after year.
If inflation is running at a meaningful pace and your returns are only slightly above that, your purchasing power isn't improving dramatically.
Personally, I often view these products as temporary parking places for money rather than vehicles that will significantly accelerate wealth creation.
For me, the purpose of investing is ultimately to create wealth, generate meaningful cash flow, create options and improve the quality of life. I want investments to eventually help me buy things I enjoy, travel more, support causes I care about, build businesses and experience life more fully.
When returns are modest, the impact can sometimes feel limited unless very large amounts of capital are involved.
At times, this creates what I call the illusion of investing.
You feel like you're investing because money is moving somewhere every month. You feel productive because your portfolio value is increasing slowly. But when you zoom out and ask whether it is meaningfully changing your life, the answer is often no.
It may simply keep you participating in the traditional cycle of working, saving, investing, and waiting until retirement. This is why I encourage people to gradually expose themselves to different asset classes and financial markets.
Learn.
Observe.
Participate.
Make mistakes.
Gain experience.
Even if you lose a little money through mistakes, the education may become more valuable than the returns themselves. Because ultimately, knowledge compounds too.
Personally, I would rather spend time understanding businesses, stocks, property, markets and opportunities directly than outsource every decision forever. I would rather learn how to identify quality opportunities myself and develop the skill of capital allocation over time.
That skill can potentially serve you for the rest of your life.
That's all my take on mutual funds.
To me, they are one step away from real assets. A useful starting point, but not necessarily the destination.
Stay tuned. I'll continue sharing my thoughts on other asset classes, how they work, and where they may fit within an overall portfolio.
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