The world of stocks may be thrilling and terrifying for an investor or trader. However, it is crucial to understand what a stock is and how it functions before diving into the 3 types of stocks.
A unit of ownership in a firm is represented by a stock, also called a share. Purchasing a stock makes you a shareholder, giving you a stake in the company’s success or failure.
The stock price will typically increase if the business does well, allowing you to sell your shares for a profit. If the business performs poorly, the stock price could drop, and you could lose money.
Now you know what a stock is, let’s examine the 3 types of stocks and who they might be good for.
Investments in speculative stocks have a high risk/high reward ratio. These stocks are typically linked to tiny or fledgling businesses with great growth potential but entail many risks.
Investing in speculative stocks can include risk due to the fact that they are frequently unproven and don’t have a successful track record. However, there is a sizable chance for profit if the business succeeds.
Generally, speculative stocks are best suited for aggressive investors who don’t mind taking on more risk. This kind of investor is prepared to take the risk of substantial gains in exchange for the possibility of sizable losses.
Penny stock less than RM1 per unit, or even valued at just a few cents (hence the name penny), is more prone to speculation. Even though the fundamental of the company is not good, even though the company is making losses, these kinds of penny stocks can be manipulated and make huge returns in hours or days.
The next stock in the list of 3 types of stocks are called defensive stock. Compared to speculative stock, defensive stocks are more stable and less risky. These kinds of stocks are frequently found in sectors of the economy that offer goods or services that consumers will continue to utilise even when circumstances are hard.
Healthcare, utility, and consumer goods companies are a few examples of defensive stocks.
Typically, conservative investors who want to protect their wealth and produce stable, dependable income should stick with defensive stocks. These investors tend to be less risk-tolerant and are prepared to accept lesser returns in exchange for more security.
Cyclical stocks tend to perform well during periods of economic boom but poorly during periods of economic contraction since they are correlated with the performance of the general economy.
Construction, automobile, and travel-related businesses are a few examples of cyclical stocks.
Investors who have a solid grasp of the general economic cycle and are able to predict when certain industries are likely to perform well or poorly are the greatest candidates for cyclical stocks. These kinds of investors are prepared to assume some risk in exchange for the chance of greater profits.
In conclusion, a key component of becoming a good investor or trader is understanding the 3 types of stocks and who they are best suited for. You may allocate your resources wisely and create a well-diversified portfolio by understanding the risks and benefits of each type of stock.
Whether you favour defensive, cyclical, or speculative stocks, you must do your homework and make wise choices based on your unique investment objectives and risk tolerance.
Now that you know the 3 types of stocks, you can make a more informed decision.
Investing in the stock market can be a great way to grow your wealth over time. However, the process of buying stocks can seem daunting to many beginners. Fortunately, trading platforms have made it easier than ever to invest in the stock market from the comfort of your own home.
In this article, we will look at how to deposit money and buy stock on the trading platform. Whether you are a complete beginner or an experienced investor looking to switch to a new trading platform, it will provide you with the information you need to get started.
But before that, do you have a shares trading account? If you have yet to have an account, you are invited to open an account with one of the brokers available in Malaysia.
Don’t forget to key in PR1M495 in the Remisier Reference section. A designated Dealer’s Representative will attend and assist you with your account opening.
Now, let’s assume that your account has been created. Next of course you would like to know how to deposit money and buy stock on the trading platform.
2. Next, select your account and click ‘Online Cash Deposit’.
3. Select which bank you would like to transfer your money from, key in the amount and click ‘Confirm’.
4. Key in your Trading Pin and click ‘Submit’.
The money will be updated in your trust account on the following day. Please contact your Dealer/Remisier if you wish to buy stocks as soon as possible. Let’s move on to the next step on how to deposit money and buy stock on the trading platform.
Steps to Buy Stock in CGS-CIMB iTrade Platform
1. Key in the stock code or stock symbol to search for the stock.
2. Right-click on the stock name and click ‘Buy’.
3. Ensure the stock that you intend to buy is correct. Next, follow the steps below:
Insert quantity (in lot)
Insert price
Choose validity
Insert trading pin
Click buy
4. Under ‘Order Book’, select ‘Order Status’ to check on the order made.
5. If your order status shows ‘filled’, it means the order that you placed has been matched. The shares purchased will be showed in ‘Equities Portfolio’ under ‘Portfolio’.
Conclusion
Investing in the stock market can be a rewarding experience, but it requires knowledge, patience, and discipline. Through this article, we hope to have provided you with a comprehensive guide on how to deposit money and buy stock on the trading platform. Different trading platforms may have different layouts and user experiences.
An interactive trading platform may give a better user experience to the users.
Remember to always do your research, diversify your portfolio, and stay informed about market trends and news. By following these principles, you can make informed decisions and build a successful investment strategy.
With the right approach, investing in the stock market can help you achieve your financial goals and secure your future. But it all starts with the first step, which is how to deposit money and buy stock on the trading platform.
For an investor to start investing in Bursa Malaysia, they must open a CDS and share trading account. These two accounts serve different functions. Normally, when you open an account with any broker, these two accounts will be created together.
The whole application process can be done by completing physical offline forms or some brokers will provide online applications. With this online application process, opening a share trading account will be hassle-free.
But before we look at how to open a CDS and share trading account, read below for a deeper understanding of what is a CDS account and a trading account.
What Is A CDS Account?
Central Depository System (“CDS”) is a system that is fully owned and operated by Bursa Malaysia Depository Sdn Bhd (“Bursa Depository”), which provides central bookkeeping of securities and facilitates the settlement of securities transactions in a scriptless manner.
Putting it simply, a CDS account acts like a wallet where you keep the shares that you purchased.
Investors who wish to trade in securities listed on Bursa Malaysia Securities Berhad must open accounts on CDS. Securities bought or sold will be credited or debited into the CDS accounts of depositors accordingly.
There are a few ways you can open a CDS account such as walking into any investment bank/broker, registering online via a website and you can also open a CDS account via the Bursa Anywhere mobile app.
For those who are wondering, an individual investor is allowed to open only one CDS account with each broker. It means that you can have 1 CDS account with different brokers such as Maybank, CGS-CIMB, Malacca Securities, RHB, and many more.
However, a corporate investor may open multiple accounts with the same broker.
It is very easy to open a CDS and share trading account. You have to ensure you have the necessary documents, so the process can be smooth.
Required Documents
There are a few documents that you have to prepare in order to open a CDS and share trading account for an individual. You are required to provide:
Photocopies of NRIC/Passport
Latest 3 months’ bank statements
A copy of the latest 3 months’ payslip
Do you have a trading account? If not, you are invited to open an account with one of the brokers available in Malaysia.
Don’t forget to key in PR1M495 in the Remisier Reference section. A designated Dealer’s Representative will attend and assist you with your account opening. All the best in your investment journey!
Now you know how to open a CDS and share trading account? It is very easy, let’s get started today.
There are different types of traders, as you are aware, if you have ever traded stocks. You could belong to one of several groups of traders, depending on your risk tolerance level and financial objectives.
Before we begin looking at the different types of traders, let’s start by defining a trader and discussing how they differ from investors.
Someone who buys and sells stocks with the intention of making a quick profit is a trader. They achieve this by predicting how quickly stocks, currencies, and other financial assets will change in price.
In contrast, investors purchase securities to hold them for a long time and earn returns via dividends, interest, and capital growth.
Investors and traders are distinct in a number of ways. Their risk profiles are one of the key variations. Since they are attempting to capitalise on volatile short-term price movements, traders typically assume greater risk than investors.
On the other hand, investors have the financial resources to adopt a longer time horizon and is more tolerant to market swings.
The time horizon is another difference. Securities are often held by traders for far less time than by investors. Investors may keep onto a stock for years or even decades, whereas traders may just hold onto it for a few minutes or hours.
Finally, the kinds of stocks that traders and investors invest in vary. Since buying and selling quickly is simpler when a stock is highly liquid and has a high trading volume, traders frequently concentrate on these stocks.
Conversely, investors might be more drawn to stocks with solid fundamentals and the potential for long-term growth.
After knowing the difference between traders and investors, let’s look at the different types of traders.
1. Scalper
Traders that try to make tiny profits on many deals are known as scalpers. They often only keep stocks for a short period of time(a few seconds or minutes), and they frequently trade (dozens or even hundreds of times) in a single day.
Scalpers rely on minute price changes and utilise technical analysis to spot transient patterns.
2. BTST Trader
A “Buy Today Sell Tomorrow” (BTST) trader purchases equities today and sells them the following day. They use this to avoid having to take ownership of the shares, which would necessitate full payment.
BTST traders frequently focus on stocks with significant trading volume and solid momentum.
3. Swing Trader
Swing traders try to profit from swift market changes by holding onto securities for a few days or weeks. They employ fundamental and technical analysis to find equities that are likely to experience quick increases.
More risk is typically assumed by swing traders, as compared to scalpers and BTST traders.
In order to achieve long-term gains, position traders keep onto securities for weeks or even months. They frequently concentrate on stocks with solid fundamentals and prospects for long-term growth.
Position traders are more interested in the company’s overall health than they are in short-term price fluctuations.
4 Different Types Of Traders
In conclusion, there are many different types of traders, each with a distinctive strategy for the market. Regardless of whether you are a scalper, swing trader, position trader, or BTST trader, it’s crucial to know your risk tolerance and investment objectives before you begin.
By doing this, you can create a trading strategy that suits your needs and contributes to your market success.
Making investment decisions as an investor requires having a solid understanding of a company’s financial statements. A company’s financial health is captured in its financial statements, giving important information on its profitability, liquidity, and overall financial performance.
As an investor, here are the three things to look for in financial statements, so you know how to use them to make wise investment decisions.
1. Income Statement/Statement Of Profit Or Loss
One of the first things to look for in financial statements, is to look at income statement. It is the one of the most important things to look for in financial statements.
The income statement provides an overview of a company’s revenues and expenses for a given time period. The financial statement details the company’s revenue and operational costs, taxes, and interest payments. Net income, a gauge of a company’s profitability, is the difference between sales and expenses.
Investors should pay particular attention to the income statement’s revenue and net income data. A company’s revenue should be consistently rising as this shows that its goods and services are in high demand. A higher net income is also encouraging because it shows the business is making more money.
Investors should, however, consider the margins, which reflect how much profit the company makes in relation to its revenue, such as the gross profit margin and net profit margin. A business with poor margins can have trouble controlling costs or face fierce competition.
The second in the number of things to look for in financial statements is the balance sheet. The balance sheet is the second financial statement that investors ought to study.
A company’s assets, liabilities, and equity are shown on the balance sheet at a particular time. The financial statement reveals the firm’s assets and liabilities and the percentage of equity shareholders own in the business.
The balance sheet’s sections for assets and liabilities should catch investors’ attention. The assets section lists the company’s possessions, including real estate, machinery, and cash. Along with their valuation, investors should consider the asset’s composition. For instance, a business with a lot of cash and liquid assets might be more financially stable than one with a lot of fixed assets that might be challenging to sell fast.
The company’s debts are listed under the liabilities section, including loans, accounts payable, and taxes. Investors should take note of the liabilities’ makeup as well as their maturities. For instance, a business with a lot of short-term debt can be more susceptible to cash flow issues than one with long-term debt that can be repaid over time.
The third on the list of things to look for in financial statements is the cash flow statement. The cash flow statement details how much money the business has made and spent during a given time period. Operating, investing, and financing operations are the three areas into which the cash flows are divided in the statement.
Investors should concentrate their attention on the statement of cash flows’ operating operations section. The amount of cash the company has made from its core business operations is displayed in this section. A company’s operations produce cash when there is a positive cash flow from operating activities, which is a good sign. A corporation may burn cash to fund its operations if its cash flow is negative.
The statement of cash flows’ sections on investing and financing operations deserve special attention from investors. The amount of money the company has spent on investments and capital expenses, such as buying property and equipment, is displayed under investing activities.
The amount of money the company has acquired or paid back through debt and equity financing is displayed in the financing activities section. Investors should consider whether these actions align with the company’s overall strategy and financial objectives.
In conclusion, it is critical to comprehend a company’s financial statements before making investing choices. In particular, those are the three things to look for in financial statements: Income Statement, Balance Sheet and Cash Flow Statement.
It offers important information about a company’s profitability, liquidity, and overall financial performance. Investors should concentrate on the company’s revenue, net income, margins, assets, and liabilities.
The US dollar is the world’s most widely used currency, accounting for about 60% of global trade transactions. However, the dollar has been losing ground against other major currencies such as the euro, the yuan and the ruble in recent months. This has raised some concerns among investors who hold dollar-denominated assets or trade with dollar-based partners.
So you are wondering how to invest in a volatile dollar market? In this article, I will explain why the dollar has been weakening, how it affects different asset classes such as gold and stocks, and what strategies you can use to protect your portfolio and take advantage of the opportunities in a volatile dollar market.
Invest In A Volatile Dollar Market: Why Is The Dollar Weakening?
Before we look at how to invest in a volatile dollar market, we should look at what causes the dollar to weaken. The dollar’s weakness can be attributed to several factors, including:
The Federal Reserve’s accommodative monetary policy, which has kept interest rates near zero and expanded its balance sheet through quantitative easing. This has increased the supply of dollars and reduced their value relative to other currencies.
The fiscal stimulus measures enacted by the US government to support the economy during the COVID-19 pandemic, which have increased the budget deficit and the public debt. This has raised doubts about the long-term sustainability of the US fiscal position and its creditworthiness.
The recovery of the global economy from the pandemic-induced recession, which has boosted the demand for riskier assets such as emerging market currencies and commodities. This has reduced the demand for safe-haven assets such as the dollar.
The geopolitical tensions between the US and its rivals such as China and Russia, which have undermined the confidence in the US leadership and its role as the global reserve currency.
Invest In A Volatile Dollar Market: How Does A Weak Dollar Affect Different Asset Classes?
A weak dollar has different implications for different asset classes, depending on their exposure to currency fluctuations and their sensitivity to inflation. Here are some examples:
Gold
Gold is traditionally seen as a hedge against inflation and currency devaluation, as it retains its purchasing power over time. Therefore, gold tends to benefit from a weak dollar, as it becomes cheaper for foreign buyers and more attractive as an alternative store of value. However, gold is also influenced by other factors such as supply and demand dynamics, investor sentiment and opportunity cost.
For instance, gold underperformed the dollar in 2022, despite high inflation, due to lower demand from central banks and investors who preferred higher-yielding assets. Gold performed slightly worse than the US Dollar in 2022, with a return of -0.22%, while the US Dollar outperformed Gold by +7.87%. However, YTD performance has been impressive for Gold, as it gained +9.06% while the US Dollar lost -1.88%.
Stocks
Stocks are generally positively correlated with a weak dollar, as it boosts the earnings and competitiveness of US companies that derive a large portion of their revenues from overseas markets. It also makes US stocks more attractive for foreign investors who can buy them at a lower price. However, not all stocks benefit equally from a weak dollar.
For instance, companies that rely heavily on imported inputs or face strong competition from foreign rivals may suffer from higher costs and lower margins. Moreover, stocks are also affected by other factors such as earnings growth, valuation and market sentiment.
Bonds
Bonds are generally negatively correlated with a weak dollar, as it erodes the real value of their fixed income streams and makes them less appealing for foreign investors who face currency risk. It also increases the likelihood of higher inflation and interest rates, which reduce the present value of future cash flows and lower bond prices. However, not all bonds react similarly to a weak dollar.
For instance, short-term bonds are less sensitive to interest rate changes than long-term bonds. Moreover, bonds are also influenced by other factors such as credit quality, duration and liquidity.
What Strategies Can You Use To Invest In A Volatile Dollar Market?
Given the uncertainty and volatility in the currency market, it is important to adopt a diversified and flexible approach to investing. Here are some strategies on how to invest in a volatile dollar market, so that you can use to protect your portfolio and take advantage of the opportunities:
Diversify your currency exposure
One of the ways to invest in a volatile dollar market, is by holding assets denominated in different currencies or investing in currency-hedged funds or ETFs. This lets you reduce your exposure to currency risk and benefit from diversification benefits. You can also use currency derivatives such as futures or options to hedge your existing positions or speculate on currency movements.
The US Dollar has been weak this year, with a year-to-date (YTD) performance of -1.88% as of April 2023. This contrasts with the same period last year (Jan – Apr 2022), when the US Dollar appreciated by +6.03%. The overall performance of the US Dollar in 2022 was strong, as it gained +7.87% in value.
Adjust your asset allocation
Next on how to invest in a volatile dollar market, is by adjusting your allocation among different asset classes or sectors based on their relative performance and outlook in a weak or strong dollar environment, which lets you enhance your returns and reduce your risk. For instance, you may want to increase your exposure to gold or commodities if you expect further dollar weakness or inflationary pressures. Conversely, you may want to reduce your exposure to bonds or emerging markets if you expect a stronger dollar or higher interest rates.
The weakness of the US Dollar has benefited other major currency pairs, such as the EUR/USD, which rose by +2.94% (YTD) as of April 2023. This is a reversal from the same period last year (Jan – Apr 2022), when the EUR/USD fell by -5.78%. The overall performance of the EUR/USD in 2022 was poor, as it declined by -5.86% due to inflationary pressures on the Euro.
Seek professional advice
Final tip on how to invest in a volatile dollar market, is by consulting with a qualified financial advisor or planner who can assess your risk profile, investment objectives and time horizon. All this so you can get personalized recommendations on how to invest wisely in a volatile dollar market. You can also benefit from their expertise and access to various tools.
Smart investor should diversify their portfolio and allocate their assets according to their risk appetite and profit potential with such traditional assets. Financial literacy is essential for an investor to grow their wealth.
Mukhriz Mangsor, ACSI, MSTA, CFTe is currently the Head Global Market Strategist at Quantdynamic Research Company. His expertise includes financial education, financial institutions, and property trading with clients, including Brunei, Canada, Malaysia, Singapore, and the United States firms.
Initial Public Offering (IPO) is the process of selling shares of a private company to the public for the first time. Companies usually go public to raise funds for their expansion or to provide an exit opportunity for their early investors.
IPOs are highly sought after by investors because they can offer significant returns, especially if the company is successful. However, getting an allocation in an IPO can be a challenging task, but you can increase your chances of getting an IPO via MITI.
But What Is MITI?
The Malaysian government, through the Ministry of International Trade and Industry (MITI), provides a special avenue for Bumiputera investors to apply for IPOs. This special avenue is called the MITI Application, and it is only available to Bumiputera investors.
Source: Oppstar Prospectus
Bumiputera investors who apply for IPOs through MITI have a higher chance of getting the IPO via MITI application than through the normal public application process. The allocation of shares for Bumiputera investors through MITI is usually around 12% of the total shares allocated for all investors.
In contrast, the allocation for public applications is typically around 2.5% to 5%.
When applying for IPOs through MITI, Bumiputera investors can enjoy several benefits. Firstly, they can apply for IPOs first and pay later. This is because MITI allows investors to secure their allocation before making any payments, which is particularly advantageous if they do not have enough funds available at the time of application.
Secondly, Bumiputera investors only compete among themselves, which reduces the level of competition for the shares. This increases their chances of getting an allocation, particularly for popular IPOs that tend to be oversubscribed.
Thirdly, they can apply for IPOs earlier than through the normal application process, which means that they have a higher chance of securing shares at a lower price. Lastly, the higher allocation of shares for Bumiputera investors through MITI increases their chances of getting an allocation compared to applying through the public application process.
Disadvantages Of Applying IPO Via MITI Application
However, there are also some disadvantages to applying for IPO via MITI application. Firstly, investors cannot read the final prospectus of the company before applying. This can be a disadvantage because the prospectus contains important information about the company’s financials, business strategy, and risks, which can be useful for making informed investment decisions. Investors may have to rely on the preliminary prospectus, which may not contain all the relevant information.
Secondly, some IPO prices may not be available when applying for IPO via MITI application. This means that investors may not know the final price of the IPO until after they have applied. This can be a disadvantage if the final price significantly differs from the initial price range, affecting the investor’s investment decision.
Thirdly, the waiting time for the IPO shares to be allocated is usually longer than the normal application process, which can be a disadvantage if the investor needs the funds for other purposes or if the market conditions change significantly during the waiting period.
Lastly, investors who do not proceed with their application after being allocated shares may be subject to penalties, which can affect their creditworthiness and investment reputation.
In conclusion, the IPO via MITI application is a special avenue for Bumiputera investors to apply for IPOs in Malaysia. Applying through MITI can increase their chances of getting an allocation compared to the normal public application process. However, there are some disadvantages to applying through MITI, such as not being able to read the company’s final prospectus before applying and longer waiting times for the IPO shares to be allocated.
Investors should weigh the benefits and disadvantages before deciding to apply for IPO via MITI application or through the normal public application process.
A wonderful option to invest your money and increase your wealth is through the stock market. Success is not always simple to achieve, though. Despite their best efforts, many investors continue to lose money.
Here’s five reasons why we lose money in the stock market.
1. A Lack Of Study
The primary reason why we lose money in the stock market, is because we don’t conduct enough research before making an investment. Without thorough study, it’s possible that we won’t fully comprehend the business in which we are investing in, the sector in which it works, or the risks associated with it.
The more information you have about the business, the more prepared you will be to make wise investment choices.
Spend time studying the companies and their financials before investing in any stocks. To determine how financially stable it is, look at its balance sheet, income statement, and cash flow statement. Get a sense of the company’s overall performance and prospects for the future by reading news articles, analyst reports, and industry publications.
The next reason why we lose money in the stock market is because we tend to make rash decisions and allow emotions to control them. It’s simple to get sucked into the hoopla around a hot stock or to freak out when the market declines.
But making investment decisions based on feelings rather than logic can be disastrous. Instead, make conclusions based on study and analysis while maintaining composure. Create a long-term investing plan and adhere to it, even when the market is declining.
Keep in mind that stock market investment is a marathon, not a sprint.
3. A Lack Of Diversity
Investing all of one’s capital in one or a small number of stocks is a common error made by novice investors. This technique has huge risks as well as high potential returns. You run the risk of suffering a substantial financial loss if the stock(s) you buy perform poorly.
Reducing stock market risk requires diversification. Invest in a variety of stocks from various sectors and companies, as well as in other asset classes such as bonds and real estate. This way, you have backup investments in case one doesn’t do well.
Another typical error that can contribute to why we lose money in the stock market, is by attempting to time the market. Investors may attempt to purchase low and sell high, but doing so is very challenging, if not impossible.
Focus on the long term rather than trying to time the market. Invest in businesses you are confident in and that have a proven track record of expansion. If you’ve made investments in strong companies with sound fundamentals, they’re likely to recover over the long run even if the market declines temporarily.
5. High Brokerage Fee
The final reason why we lose money in the stock market, is due to the exorbitant fees that might reduce our investment returns and cause losses. For trading, account maintenance, and other services, some brokers and investing platforms charge a certain fees.
Research costs are charged by various platforms and brokers before you invest. Look for inexpensive choices that lets you make investments with few costs but provide excellent services.
Some brokers have different products with different fee structures, so make sure you choose the right product that is suitable to your trading strategies and style. Not all cheap brokerages are good and not all expensive brokerages are useful to you.
In conclusion, investing in stocks can greatly increase your wealth, but you should proceed carefully and adopt a long-term perspective. To reap the rewards, do your homework, don’t make snap decisions, diversify your investments, keep an eye on the long term, and hunt for affordable options. You may improve your chances of making money and preventing losses in the stock market by paying attention to these suggestions.
Now you know why we lose money in the stock market, let’s do our best to avoid it.
The Securities Commission Malaysia (SC) has introduced a framework that will benefit dealer’s representatives (DRs) in the capital market. The new framework, which took effect on 14 April 2023, will allow them to expand their scope of activities and roles beyond just dealing in securities.
The SC recognises the importance of promoting competition and enhancing the quality of services in the capital market. In this regard, this framework will also provide DRs greater flexibility to develop their careers and meet the evolving needs of investors.
In addition to facilitating share transactions for their clients, DRs who meet certain requirements can apply for additional licenses to engage in a variety of activities, such as investment advice, financial planning, restricted dealing in unit trust and dealing in private retirement schemes. The new framework also removes the requirement for DRs to be employed on a full-time basis.
These flexibilities are only available to DRs who have been licensed for more than five years and meet the competency requirements for the relevant regulated activity. To ensure effective supervision and oversight of DRs performing these additional regulated activities, they are required to be undertaken within the same broking firm or within its group of companies.
The expansion of DRs permitted activities is facilitated through amendments to Chapter 4 of the Licensing Handbook. The Licensing Handbook and accompanying FAQ are available on the SC website here.
About the Securities Commission Malaysia
The Securities Commission Malaysia (SC), a statutory body reporting to the Minister of Finance, was established under the Securities Commission Malaysia Act 1993. It is the sole regulatory agency for the regulation and development of capital markets. The SC has direct responsibility for supervising and monitoring the activities of market institutions, including the exchanges and clearing houses, and regulating all persons licensed under the Capital Markets and Services Act 2007. More information about the SC is available on its website at www.sc.com.my. Follow the SC on twitter at @SecComMy for more updates.
In the first article in our series, we took a closer look at the current financial attitudes and behaviours of millennials and Gen Z Malaysians. Based on findings from ICMR’s nationwide survey, we highlighted that the investment behaviours of young investors could be grouped into three categories linked to differences in their income, financial knowledge or confidence, and risk tolerance.
Beyond these individual differences, it is also important to understand how broader social trends and structural issues could shape investment preferences and behaviours. This includes media consumption trends, as young investors increasingly turn to digital sources of information, which could impact how they make financial and investment decisions.
Online Channels Are Preferred Sources
The Internet or online resources are the most popular source of information on investment products, reported by 69% of respondents in ICMR’s survey. Within this group, Facebook/Instagram (75%), websites/blogs (68%), and YouTube (65%) are the most frequented online platforms. The preference for online sources of information is particularly more prevalent among those under 30 years old.
These findings are unsurprising as the younger generations grew up during the Internet age and feel more comfortable conducting their online lives. Millennials generally led the adoption of new technology, and a McKinsey study in the Asia Pacific found that 50 to 60% of the primary influence in brand decisions for Gen Zs comes from social media and online sites.
Figure 1: Source of Information (Data Source: ICMR)
But while online platforms like Instagram and YouTube provide an opportunity to reach out directly to millennials and Gen Zs, they do not always reach those who, ironically, may need this information the most. Although the Internet is abundant with resources catered for different levels of financial literacy, most of these resources still require users to seek out this information actively.
“I know there [are] a lot of videos out there, but I find most of it boring or too long. I tune out after a few minutes. I just want something easy to understand. It helps if I don’t have to seek it out actively.”
– Haris, 25, journalist
Confirmation Bias In New Social Networks
In contrast to other social platforms, TikTok delivers content to its users using a recommendation system. What users see on their TikTok feed is less determined by who they follow but curated by an algorithm based on their interests. Some respondents interviewed by ICMR mentioned they came across financial education videos on TikTok even without actively seeking financial information online.
Social networks that deploy recommendation systems thus provide a promising opportunity to reach target segments that do not actively seek out financial information. Nonetheless, these same segments might not have the right skills or knowledge to assess the trustworthiness of all the financial content they come across and determine the most suitable information for themselves.
For instance, the #fintok hashtag on TikTok (which has had more than 500 million views at the time of writing) includes everything from basic budgeting tips to advice on specific stock picks. Just as too little information can impact decision-making, too much information can lead to selective information filtering due to confirmation bias or the tendency to reinforce pre-held beliefs.
“I’ve never looked for financial information before, I don’t consider myself very financially literate. But I saw a TikTok video on money-saving tips and then slowly started watching more personal finance content there. My friends and I also started talking about property investments and passive income after watching it on TikTok.”
Farish, 30, Cafe manager
#FinTok, also known as Financial TikTok, is a subcommunity of TikTok users who provide advice, education, and discussions on personal finance via short video clips (Image Source: SECCL)
By applying behavioural concepts to financial decision-making, we can better understand how investors become susceptible to scams. Social preferences refer to the notion that community members’ and peers’ savings and investment decisions have a causal effect on individual decisions through social interactions or pressures for conformity, acceptability, and social identity.
Leveraging social preferences might help engage investors but can make them more susceptible to misinformation and herding behaviour. Herding behaviour is when people do what others do instead of using their information or making independent decisions. This could lead to individuals being involved in scams, misled, or creating investment bubbles.
For example, Malaysia’s Ombudsman for Financial Services (OFS) said in 2020 that the rise of financial scams is due to scammers using social engineering tactics to exploit victims’ financial insecurities during the pandemic. Since social networks provide access to a wealth of personal information, scammers use this data to target and manipulate consumers with higher vulnerability easily.
In behavioural economics, social preferences describe the human tendency to care about not only one’s material payoff but also the reference group’s payoff (Image Source: iStock / oatawa)
Developing Financial Literacy As The Way Forward
In today’s fast-paced and information-overloaded environment, it is becoming more important for young investors to improve their financial literacy proactively. The rise of non-traditional and unregulated sources of information means investors need to take ownership of their financial decisions with the right skills, knowledge, and tools to make better investments.
Fortunately, many online financial courses and training are available for individual capacity-building. Leveraging behavioural insights can also provide new ways to think about managing finances. Developing an awareness of their biases and how they can be exploited can help young investors build safer, more strategic long-term investing habits.
This article is part of a content series by the Institute for Capital Market Research (ICMR). Follow ICMR’s Facebook page to stay updated on behavioral tips and insights for better investing habits. To learn more about ICMR’s research on millennials and Gen Z, visit www.icmr.my or download the full report.
About the Authors
Datin Aida Jaslina Jalaludin, Head of Research, ICMRNadhirah Ibrahim, Research Analyst, ICMR
