Malaysia's Best Mutual Funds: Where To Invest?

A mutual fund, or unit trust fund, is a collection of company stocks or bonds managed by a professional fund manager. When considering which mutual fund to invest in, it is important to set clear objectives, such as whether you want to make money in the short term or long term. The riskier the fund, the higher the potential return. For example, equity funds are riskier than money market funds but offer a higher potential return. It is also important to do your due diligence and research before investing.

Top-performing funds for short-term investment

When considering short-term investments, it's important to understand the risks involved. Short-term investments are typically associated with higher volatility, meaning the value can fluctuate significantly over time, presenting a higher risk of losing money. To ensure you're making an informed decision, consult a financial advisor who can guide you based on your specific circumstances.

1-Month Performance

• Principal Lifetime Balanced Fund
• PMB Shariah Premier Fund
• AHAM World Series - Global Quantum Fund (MYR Hedged Class)
• Halogen Shariah Bitcoin Fund
• PMB Shariah Growth Fund

3-Months Performance

• Principal Islamic Small Cap Opportunities
• Kenanga Ekuiti Islam Fund
• Principal Lifetime Balanced Fund
• Principal Malaysia Enhanced Opportunities Fund
• PMB Shariah Dividend Fund

6-Months Performance

• Halogen Shariah Bitcoin Fund
• Principal Islamic Small Cap Opportunities
• PMB Shariah Tactical Fund
• Principal Islamic Malaysia Opportunities Fund
• PMB Shariah Small-Cap Fund

1-Year Performance

• PMB Shariah Small-Cap Fund
• Principal Islamic Small Cap Opportunities
• Principal Islamic Malaysia Opportunities Fund
• Principal Islamic Enhanced Opportunities

2-Years Performance

• KAF Core Income Fund
• PMB Shariah Tactical Fund
• Principal Islamic Small Cap Opportunities
• PMB Shariah Small-Cap Fund

These funds have demonstrated strong performance over the specified periods. However, it's important to remember that past performance does not guarantee future results, and conducting thorough research or seeking professional advice before investing is always recommended.

Top-performing funds for long-term investment

When considering mutual funds in Malaysia, it is important to remember that any type of investment carries a certain level of risk, and it is essential to do your research. If you are looking for top-performing funds for long-term investment (10 years or more), here are some options to consider:

Manulife India Equity Fund - MYR

This fund offers investment in Indian equities, providing exposure to the Indian market, which has experienced significant growth in recent years.

Manulife Investment U.S Equity

This fund focuses on investing in US equities, allowing investors to benefit from the performance of the US stock market, which is the largest and one of the most established in the world.

KAF Core Income Fund

The KAF Core Income Fund is a well-performing fund that aims to provide a steady income stream by investing in a diversified portfolio of fixed-income securities, including government and corporate bonds.

AmChina A-Shares - MYR

This fund provides investors with access to the Chinese market, specifically A-shares listed on the Shanghai and Shenzhen stock exchanges. Investing in China offers potential for high returns due to the country's rapidly growing economy.

AHAM World Series - Japan Growth - MYR Hedged

The AHAM World Series - Japan Growth fund offers a hedged investment in Japanese equities, providing a way to gain exposure to the Japanese market and benefit from the country's economic growth and stability.

These funds have demonstrated strong performance over the long term, but it is important to remember that past performance does not guarantee future results. It is always recommended to consult with a financial advisor to assess your specific circumstances and determine the most suitable investment strategies for your goals and risk tolerance.

Risks of mutual funds

While investing in mutual funds can be profitable, it is not without its risks. Here are some of the common risks associated with investing in mutual funds:

Market Risk

Market risk is the possibility of losses due to the poor performance of the market. This type of risk is inherent in any investment, including mutual funds. Factors such as natural disasters, inflation, recession, political unrest, and fluctuating interest rates can influence market performance and lead to potential losses. Diversifying your portfolio may not always protect against market risk, and investors may need to wait for market conditions to improve.

Concentration Risk

Concentrating a significant portion of your investments in a single scheme or sector is risky. While it may lead to substantial profits, it can also result in substantial losses. To minimise this risk, it is advisable to diversify your portfolio across different schemes and sectors. The more diverse your portfolio is, the lower the concentration risk becomes.

Interest Rate Risk

Interest rate risk refers to the possibility of losses due to changes in interest rates during the investment period. When interest rates rise, the price of securities tends to decrease, leading to potential losses. This is particularly relevant for fixed-income investments, such as bonds, where an increase in interest rates can cause a decline in their market value.

Liquidity Risk

Liquidity risk arises when there is difficulty in redeeming an investment without incurring a loss. This can occur due to lock-in periods or a lack of buyers in the market. For example, exchange-traded funds (ETFs) may suffer from liquidity risk if there are insufficient buyers, preventing investors from redeeming their investments when needed.

Credit Risk

Credit risk is associated with the creditworthiness of the issuer of the scheme. It refers to the possibility that the issuer may be unable to pay the promised interest or principal amount. This risk is common in debt funds, where fund managers may include lower credit-rated securities to pursue higher returns, increasing the overall credit risk of the portfolio.

Risk of Capital Loss

As markets fluctuate, there is always a risk that the value of your mutual fund investments may decline, potentially resulting in a partial or total loss of your principal amount. This risk is inherent in any market-linked investment and underscores the importance of understanding your risk tolerance and investing in funds that align with your risk profile.

It is important to note that not all mutual funds are susceptible to the same types of risks. Different types of funds, such as equity funds, fixed-income funds, and money market funds, carry varying levels of risk. Additionally, the level of risk can also depend on the specific fund's investment strategy and the economic environment. Therefore, it is crucial to carefully consider your investment goals, time horizon, and risk tolerance before investing in mutual funds.

How to buy mutual funds

Mutual funds are a great way to build wealth over time and are one of the best ways to invest for the long term. They are a relatively cheap and simple way to invest, thanks to the many trading apps and online brokerages available nowadays.

• Set an investing goal: First, identify what you are investing for. Are you saving for retirement, buying a home, or paying for a child's education? Knowing your goal will help you determine the right investment strategy.
• Decide on an account type: There are several account options available, such as a standard brokerage account, a retirement account (401(k)), or an individual retirement account (IRA). The choice will depend on your specific goals and needs.
• Decide on the asset mix: Determine what percentage of your portfolio will be invested in stocks, bonds, or other assets. This decision will depend on your goals, investment horizon, and risk tolerance.
• Pick an investment strategy: Decide whether you want to pay a portfolio manager to actively pick market-beating stocks or if you are happy with returns that match the market. Active funds tend to be more expensive due to research costs, while passive funds aim to deliver returns that match market benchmarks.
• Research mutual fund companies: Choose a reputable mutual fund company that aligns with your investment goals and strategy. Some well-known companies include Vanguard and Fidelity.
• Research mutual funds: Study the menu of options offered by your chosen fund provider. Consider factors such as fees, historical performance, and investment strategy when selecting a specific fund.
• Open an investing account: After deciding on the mutual funds and determining a strategy, it's time to open an account and start investing. You can open an account through a brokerage firm, directly with the fund company, or through a financial advisor.
• Buy mutual fund shares: Some mutual funds have investment minimums, while others may not. Keep in mind that mutual funds only allow investors to buy once per day at the closing price of the market.
• Be a good long-term investor: Avoid trying to time the market and focus on being a successful long-term investor. Don't make investment decisions based on fear or short-term market fluctuations.
• Don't forget about taxes: Understand the tax implications of investing in mutual funds. Mutual funds may distribute capital gains to investors, which are taxable, even if you don't sell your shares. Dividends received from mutual funds are also taxable.

When investing in mutual funds, it is important to consider your financial goals, risk tolerance, and investment horizon. Conduct thorough research on the different mutual fund companies and specific funds available before making any investment decisions. Remember that investing in mutual funds carries certain risks, but it can also be a great way to build wealth over the long term.

Mutual funds vs other investment options

Mutual Funds vs. Other Investment Options

Mutual funds are a good option for investors looking to diversify their portfolios. They are a safer and less complicated investment option that allows investors to avoid the complicated decision-making involved in investing in stocks. Mutual funds are also a good choice for those who would prefer to leave the research and decision-making to someone else.

Mutual Funds vs. Stocks

Stocks offer a potentially valuable way to grow your wealth, but they also come with the possibility of large losses. Mutual funds, on the other hand, provide instant diversification and lower risk. While stocks are easy to trade and have low trading costs, mutual funds can also be low-cost, especially passively managed index funds. Additionally, some brokerages offer their own funds without trading fees.

However, mutual funds may have sales "loads", high expense ratios, and may not be tax-efficient. Actively managed mutual funds have also typically underperformed passive funds over long time periods.

Mutual Funds vs. Bonds

Bonds are fixed-income investments that are mainly invested in corporate or government bonds. Bond funds generate monthly income by investing in government and corporate bonds, as well as other debt instruments. While mutual funds may include bonds as part of their portfolio, investing directly in bonds is a more stable option as it does not carry the same fees and potential losses as mutual funds.

Mutual Funds vs. Real Estate

Real estate is another investment option that can provide stable income and potential for capital appreciation. It is a more hands-on investment that requires active management, but it can be a good option for those looking for a long-term investment. Real estate investments can also provide tax benefits and leverage through mortgage financing. However, it is important to note that the real estate market can be volatile and subject to various economic factors.

Mutual Funds vs. Money Market Accounts

Money market accounts are invested in domestic cash and cash equivalents, making them relatively risk-free and highly liquid. They are a good option for those looking for a safe and flexible investment. While mutual funds can provide diversification and professional management, money market accounts offer a guaranteed return and easy access to funds.

Frequently asked questions