Gaining Exposure to Bursa Malaysia (part 3)

[_ari]

It has been 11 days since I post Part 1. FBM KLCI was down to 1370 points 2 days after the post but it went up to 1450 points today. We have not seen the bottom yet.

TNB paid another dividend (20 sen) making the total dividend this year 38 sen. Some were mentioning that they bought TNB at 9+ so I guess it is a little consolation. I bought at RM 9.20. I plan to buy more when it went below RM 8 but it did not. It then traded higher and the highest it was traded till then is RM 8.40 just today.

In the comments of Part 1, I was trying to get a tool to hedge against depreciating MYR. I just find out that I can buy and hold USD in my Rakuten account. I do not have to use the USD to buy US stock. Is it a good time to buy USD? Who knows.

I read The Little Book of Common Sense Investing by John C Bogle over the 3 days weekend. He was the founder of The Vanguard Group and pioneered the first index fund. The book demonstrates how investing in index fund is superior.

But here's the thing. I read The Big Secret for the Small Investor by Joel Greenblatt the weekend before that. Joel Greenblatt argues that index fund is not perfect and introduces a method to select the stock instead of relying market capitalization weightage. To be fair, John C Bogle also touched on the imperfection of index fund and the different ways other fund managers put a weightage other than market capitalization. I ordered 3 other books written by Joel Greenblatt to study this further.

Where am I going with this? Stock picking is a loser's game, according to John C Bogle. Indexing is superior, he said. But he stressed that it is important to keep the cost down and in Malaysia, I haven't seen a low cost Index Fund of FBM KLCI. Let me know if you find any.

Thank you for coming to my TED Talk.

Previous post : Part 2

 

[taylorjr94]

@_ari My personal investing strategy is.... Maybank, PBB, Tenaga.

I occasionally dabble in smaller speculative positions, but 90% of my money is in these 3 companies, with Maybank comprising more than 75% of my portfolio.

I reckon Maybank's the closest anyone can get to a Msia GDP proxy.

 

[grampster]

@taylorjr94 I like these 3 counters.

 

[ineedadvice101]

@taylorjr94 Sound solid. Strong fundamentals, bank and utilities.

Can't expect insane profits, slow and steady strategy.

 

[echo73]

@_ari Well, the FOMC meeting next week is and analysts expect US interest rates to be increased by another 50-75 basis points. If BNM does not follow suit, expect USD to appreciate even more against the MYR.

Seeing that USD is the world's reserve currency, i do not expect the MYR to appreciate anytime soon against the USD especially with the fed aggressively trying to cool inflation by increasing interest rates. Soon we might even see rates hitting 4.85-5.00 by the years end if BNM does not take measures and the fed continues to hike their rates.

I might be wrong here, take it with a pinch of salt.

 

[georgiew]

@_ari The Bursa-listed FBMKLCI ETF has an ER of 0.5%, which matches the 0.5% ER of EWM ETF listed on the NYSE. It's about as good as it gets for Malaysia ETFs. There are many reasons why they can't go lower than that, among others the lower liquidity and maturity of the Bursa. Lower ER products will not exist for our market until Bursa Malaysia or the SC decide to reduce the fees floor. At RM5 to RM8 per trade, that's equivalent to USD 1+ to USD2. Even comparing to fee structure available to IBKR retail investors of $0.35 per trade, it costs almost 3x as much to trade in Malaysia on transaction fees alone (this is relevant to EWM because it is trading and holding Bursa-listed stocks).

As for index investing, it'd be worth it to understand that the authors you're reading about are talking in the context of the US market. The KLCI consisting of 30 stocks is no where near as diversified as the 500 companies of the S&P 500. The economic drivers of Malaysia are also not as diversified as the US. More recent adoptions of index investing advocate for global diversification.

On market cap weightages, it is the most market-neutral way of holding an equities portfolio. You make no bets on the direction of the market, because you recognize that you do not know better than the market, and have resolved to let the market do its thing. Market-cap weightage is also the most passive way to invest, because no further action is needed to adjust your portfolio beyond the initial purchase. The constituents expand and shrink as per it's market cap weightage by its own price action.

 

[peacefulrestlessness]

@georgiew FBMKLCI actual expense ratio is more than 0.5%. You can check it in their annual report, the ER is more than 1%...

 

[georgiew]

@peacefulrestlessness You are absolutely right. Silly me for trusting their info page. Their TER hasn't been below 1% for several years already lol.

Though the performance vs the KLCI isn't actually that bad. Just scrubbing through on TradingView compare, the ETF seems to outperform the index from time to time, probably due to no price action/discovery as a result of low liquidity (the price being stuck until the next trade happens).

 

[nc6041]

@_ari Sad to say bursa doesn't have that many strong counters. My advise, don't touch any stock related to the government or politics