Income investing on Bursa Malaysia

Bursa Malaysia. The worlds worst performing stock market

I have decided to invest in Bursa Malaysia as part of my plan to become financially independent.

I wonder if this is a good idea – not that there is much better alternative available to me nowdays as far as I know. Or is there?

If anyone asks me “What’s the most important thing when it comes to investing?”, my answer will definitely be:

“Decide clearly, your goal in investing”

Of course, I know first hand that this is a lot more difficult than it sounds and if you’ve been into investing and/or trading long enough, I suspect you can sympathise.

Even before I started my journey of financial literacy and stepping into the world of investing and trading, I had already decided on the answer to this question.

Well… I didn’t think of it in financial terms (I hadn’t been financially enlightened yet at the time), but I did have an inclination of what I wanted to achieve.

For me then, and even now, what I really want is ‘to be debt free, to actually own a comfortable house and a good car (meaning without a mortgage or debt), and to have a steady, predictable source of income that can sustain my family and I indefinitly’

Property investment was the first option that came to me. I didn’t know about stocks or options or forex at the time, and back in 2013 when I reached a stage in life where I could and really had to seriously think about such things, bitcoin and crowdfunding and P2P lending weren’t a big thing yet.

I did some reading (I didn’t know of youtube yet then and the data plans in those days would have made me broke anyway if I wanted to learn from youtube), some simple calculations, a bit of pondering and a lot of searching and traveling and I decided that my best shot was to invest in a large plot of empty land, develop it into several bungalow lots and sell that.

Admittedly, a large contributor to this decision was the fact that this form of investment was sort of in trend at the time. A sensible person would know that going with the flow is not always the best thing to do but I did do my due diligence.

About two years after I invested into a 1.3 acre plot of land, in 2016 I was introduced to the stock market and a new potential source of wealth to accomplish my financial aim.

I kinda lost my way though…

The stock market promised a rapid and massive growth in wealth. Trading the stock market promised this; investing – not so much.

And so I became a trader – and lost 50% of my portfolio in the span of 2 years. In my third year, in 2018, I was introduced to options trading, but that’s a story for another time…

For four years, I knew what I wanted, but my eyes were clouded by a plethora of technical indicators, cool fundamental (analysis) concepts, streams of news and opinions and of course – the possibility of great wealth.

I’m not saying that technical (TA) and fundamental (FA) analyses have no value – on the contrary I believe in both of them and use a combination to make my investment decisions. The real problem was that I wasn’t perfectly clear about my investment aim, and this led me to make some silly decisions. Silly from the point of view of my investment aim, but not necessarily from a TA or FA point of view.

Indeed some of my silliest decisions were made based on sound TA and FA analyses combined. One such case that always comes to mind and is a source of much regret for me is DRBHCOM (1619)… And then there’s PENTA (7160) and DUFU (7233).

The (US) stock market plunge in 2018 and the ensuing volatility throughout the rest of the year and continuing into 2019 brought some sense back into me. The fact that I had little money left in my global trading accounts (I use Saxo TraderGO and Tastyworks and for a short time MT4) also helped.

I took a short breather – which is one of the wisdoms of a trader that I picked up – and did some serious soul searching and re-learning some of the things that I already knew. This, plus the fearful market sentiments, overpriced US stock prices and the possibility of a recession helped me re-discover my original investment goal and decide on income investing on the Bursa Malaysia (The Malaysian Bourse).

What is my logic for this decision?

Well, other than that income investing – or rather, building a portfolio that focuses on producing regular income along with growth and catching rare opportunities – is what I actually want to achieve from investing and trading, there is also the annoying fact of cost.

Available historical data supports chosing US dividend growers to build an income portfolio. Simply picking any of the dividend aristocrats would give a nice fat yield on initial investment after a decade or two. Your portfolio would look perfect if you can disregard any price fluctuations (fall in the value of your stock price), a practice that I learned from PPCIAN and which I think is not an inappropriate practice for very certain income investors.

My ideal portfolio should definitly include US dividend kings and aristocrats. The cost of building up and maintaining a diverse US stock and ETF portfolio though would cancel out most or all of the dividend income and then some.

Then there is the issue of convenience. Transfering money into a foreign brokerage account is unfortunately still too much of a hassle today. Too money procedures, too many steps each of which chips out a bit of the value of my investment.

Using a Malaysian broker is just as annoying. Even my Maybank remiser discourages me from using their global investment services because of the inconvenience to both me and him. Other Malaysian brokers seem to be just as inconvenient and inefficient.

I’m currently looking into TD Ameritrade as an option though I haven’t completed the sign up process yet. It’s recent acquisition by Charles Schwab gives me a bit more confidence although seeing as it is a publicly traded company in the first place (I only found that out after reading about the take over), there wasn’t much to worry about in the first place.

Saxo Investor also seems like a good option. Unfortunately it’s not available in Malaysia (yet?).

And so… the only workable and logical method left to me if I want to invest for income from stocks, is Bursa Malaysia.

While (most of) the rest of the world has enjoyed a nice bull market for the past 5 years since I got in, the Bursa Malaysia hasn’t been doing so great. At least not if you try to time the market.

I started out around end of 2015 and took a breather in 2017… Talk about bad timing
DJ was doing much better in 2015-2018. I got in January 2018 though haha

Hmm… Now that I look back on it… My timing and luck totally sucked. I traded the KLCI during the worst time, missing out on the DJ’s nice bull run. And entered the US market at a crappy peak!

Some investor (I think it was Charlie Munger) said “It’s not about timing the market, what’s really important is your time in the market”.

The ‘time’ here I suspect is several years or even decades – or maybe even forever – rather than a few months or even a year or two… That’s something to think about if you’re going to take this piece of advice. I’m taking it with this in mind.

The fact that the Bursa has been on a downtrend for a while and is around an area of potential support is another reason that I decided to begin chipping in a bit for my income-focused portfolio.

Of course, “What went down can fall even further and that which has gone up can shoot up higher” and if we look a bit further back, the KLSE has actually had its share of bull run.

That double top and the long fall below it look pretty scary…

This I guess is another case for income investing, and (psychologically) ignoring the price movement. At least, as part of a bigger investment portfolio.

Staying side-lined is also an option, again as part of a portfolio. Staying totally side-lined from the stock market is not a great idea in my opinion because we’d be missing out on compounding and potential growth.

An important question for me, and I think for other potential investors is: how reliable is the income from KLSE?

The answer to this question I think, require that we look at individual stocks. In the following posts, I’ll be sharing the stocks that I have chosen to invest in for income, as well as the ones that I am planning to invest in for growth in my income portfolio.

So is income investing in Bursa Malaysia a good idea? Why is it good or otherwise? Are there better options, and if so, what are they? I’m constantly trying to improve my investment portfolio and any ideas, suggestions and constructive comments is very welcomed.

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