Exchange Traded Funds in Malaysia

An entrepreneur must understand finance. He does not need to necessarily understand it like an accountant or investment banker, but he must understand the principles and behavior of finance.  And just as much as he needs to know about making profits and giving back returns on his/her shareholders investments, he/she needs to understand about making the investment itself.

And today I would like to share about a simple unit trust fund that is listed on Bursa Malaysia, an exchange-traded fund or ETF for short.

And yeah, it is just a unit trust fund and if you have lived in Malaysia (and have EPF deposits) chances are you would have been approached by unit trust agents explaining to you about the benefits of investing in unit trust funds. Well, I am not going to do that here, if you need one, just print out your EPF statement and stand by the corner of the road....just kidding.

I like ETF, for the fact that it is a tracker fund and hence it is supposed to be very efficient, both in terms of cost and performance. Index fund allows you to take a position (buy and index) without having to pay a fortune by either going to the futures market or building your own portfolio.

I present below (thanks to Bloomberg.com), the FMB index and its ETF (FBM30).

In the very log run, it seems to track the index well. However, in the medium (see below) and shorter term, there are tracking gaps. These gaps are not necessarily bad if you know how to handle them.






Anyway, this is not to entice or invite you to trade in ETF. It is to invite you to find out more about this beast by either from reading the prospectus or consulting your wealth adviser. Hopefully you would become healthier, wealthier and wiser.

Oh, before I go, there is an shariah compliant alternative to FBM30 ETF, it is the DJIM25 ETF (or MyETF) managed by iVCAP. It seems to be tracking the KLCI index pretty well too. See below.



Not a perfect match (because MyETF is supposed to track the Dow Jones Islamic Index Malaysia Titan 25) but looks to be there.

Salam :-)