How to buy ETFs from Malaysia and Singapore?

By periodically investing in an index fund, the know-nothing investors can actually outperform most investment professionals.- Warren Buffett

Indexing is boring and only for lazy investors, some argue. After making numerous mistakes in the stock market, I decided to do index funds investing. Unfortunately for Malaysians, low-cost index funds are not readily available. The next best thing I could do would be to invest in ETFs.

If you are interested to know the difference between ETFs and index funds, you can read more HERE.

You might think you can pick winning individual stocks and make a consistent return by timing the market, but don’t make the same mistakes as most investors. Market timing is a myth.

COVID-19 proved uncertainty reigns supreme. No one can predict the future and the direction of the stock market. The only way you can make money in the stock market is by waiting patiently after investing in an index fund.

If you are interested to do ETFs /index funds investing like me, follow the steps outlined below.

1) Open a Trading Account

I use Interactive Brokers (IBKR) to buy my USD ETFs. The reasons for using a foreign trading account were explained in my previous post HERE. If you sign up for an IBKR account using my link, you could get up to USD 1000 worth of IBKR shares. If you prefer a local brokerage account, be prepared to pay higher commissions. The minimal monthly (inactivity) fee for IBKR is USD 10 if your portfolio is less than USD100k.

2) Fund Your IBKR account

You can either fund your account using MYR or SGD. If you are a Singaporean, it is quite straightforward to fund your IBKR using FAST transfer to IBKR bank account in Singapore. You can convert SGD to USD in the IBKR platform and the exchange rate is very competitive. For Malaysians, convert your MYR to USD via Wise ( previously TransferWise) and InstaRem is a wiser choice. By doing so, you save a lot of effort and time going to the bank plus saving a few bucks from a better exchange rate. I have outlined clearly how to transfer money using this method HERE and HERE.

3) Decide your Asset Allocation

I allocate 15% of ETFs to bonds and 85% to equities. You have to sit down and think properly about how much you want to allocate in each asset. Different people have different risk appetites and financial muscles. A typical allocation will be 70-80% in equities and 20-30% in bonds.

No one would know how to react when the market crashes. The important message to remember here would be selling during a bear market is never an option. If you think you would be running for life during a big market correction, allocate more money into bonds. Individual resilience and emotional triggers differ. More allocation into bonds would make your portfolio less volatile ( of course less return as well in long term) but certainly gives you a better sleep during a bear market. Read my post on asset allocation HERE.

4) Choose the ETFs you want

There are thousands of ETFs out there for you to buy. For equities ETFs, I would suggest you buy an ETF that tracks S&P 500 , US total stocks, or total world stocks. Due to withholding tax of 30% in the US market, I opted for ETFs that are listed in the London Stock market that is domiciled in Ireland. The tax implication is lower at 15%. There are only three ETFs that I am buying actively at this moment- VUSD ( tracks S&P500), VWRD ( tracks total world stocks), and IGLO ( government bonds).

Another consideration you might need to think over is whether buying a distributing )dividends distributed) or an accumulating ( dividends reinvested) ETF which is listed in the London stock market. However, all US-listed ETFs are distributing ( giving dividends).

At this moment, I am buying more VWRD, the reasons are discussed HERE.

5) Check your ETFs NAV

One of the differences between an ETF and an index fund is ETF is traded like a stock with price fluctuation once the market is open. Therefore it is a good idea for you to check the ETF NAV ( Net Asset Value) before deciding what price you want to buy. I always buy at NAV when the market opens.

6) Buy until you reach your number

Buy your ETFs according to your asset allocation and rebalance them at least once a year. Keep on buying until you reach your retirement number. Never panic sell your portfolio during a market downturn. Invest every month and build up your portfolio, the earlier your start, the better!

Conclusion

By investing in an index fund or ETF, you are going to beat more than 80% of all investors and actively managed funds. And yes with zero headache and minimal fees involved.

Don’t waste your money in unit trusts investing, at the end of the day, you are only enriching the unit trust agents and companies and NOT yourself.

Addendum (9/7/2021):

Starting from July 2021, IBKR is longer charging inactivity fee of USD 10 per month for portfolio less than 100k.

• By clicking the links above, I might make some commissions if you sign up eventually.