1st October 2021 - 5 min read
Times have certainly changed for Malaysian retail investors. In recent times, developments within the financial technology space has led to products that offer significantly greater access to investments that were previously only available to institutions and high net worth individuals.
At the same time, our cultural tendencies mean many Malaysians still prefer to rely on familiar or tried and trusted approaches that used to be the “best” in recent decades. There are signs though; Malaysians appear to be ready to ditch the deep-rooted mindset and embrace newer forms of investments that never existed in the previous generation.
A survey by Luno, Malaysia’s largest regulated cryptocurrency exchange, revealed that almost a third (31%) of Malaysian adults are more likely to be influenced by family members or peers when it comes to making investment decisions. Similarly, 34% of respondents also tend to seek advice from family members and peers for savings and investment strategies.
Hann Liew, CFP, CFA, Co-Founder & Director of Jirnexu, said: “Luno’s research highlights the typical Malaysian’s personal finance habits, especially on the over-reliance of informal forms of financial advice. The strong family-oriented culture prevalent within Malaysia means it is not unusual for Malaysians to first experience financial education through family members. Unfortunately, that’s where their financial literacy development stops.”
While traditional forms of investment have been proven to provide historically steady returns, the investment landscape today is vastly different from how it was decades ago. Where property investment used to be a safe and reliable way to generate passive income, the current overhang of unsold units and the sky-high prices of properties today no longer makes it as viable as it used to be.
At the same time, products previously accessible only to high net worth individuals are now available to a much larger group of investors. Thanks to fintech, any retail investor can invest in the global equity markets, bonds, and alternative assets with just a few taps on their smartphones. Not to forget, the barriers have been lowered so much that anyone can invest from just RM1, where it used to be multiple zeroes more.
And of course, there’s the new kid on the block – cryptocurrencies. The concept of decentralised finance and the various tokens that power it is barely over a decade old, yet this alternative asset class has the potential to provide substantial returns to investors. Based on Luno’s survey findings, it appears many Malaysian adults are crypto-friendly, marking a huge shift in investment mindset.
Already, the signs are prevalent that there is a considerable amount of Malaysians already invested in cryptocurrencies. With over 300,000 accounts, Luno is home to the largest group of local crypto traders and investors – and there’s data to suggest even more Malaysian adults would invest into crypto.
Luno’s survey results revealed that 37% of Malaysian adults believe that crypto is a viable long-term investment option, and 62% of respondents who are investors would consider cryptocurrencies to diversify their portfolios.
And, most tellingly, more than one in every three Malaysians who currently do not invest would likely start investing into cryptos if they have access to financial education on how to properly invest and trade in this asset class.
Speaking about the findings, Aaron Tang, Luno Malaysia Country Manager, said, “Our research clearly demonstrates that more work needs to be done, by both regulators and the industry, to better prepare retail investors for the cryptocurrency market. While it is a welcome sight to see that most understand the risks associated with cryptocurrency trading and try to mitigate them as best as they can, we still feel the number of investors who actually undergo such prudent measures is low.”
“As interest in digital assets becomes increasingly mainstream, it is now more important than ever to focus efforts in promoting financial literacy initiatives to better educate the general public on the potential benefits and use cases of cryptocurrencies, as well as the strategies that can be employed to minimize exposure to risk,” he added.
Despite the bullish perspectives among Malaysian investors on crypto, the Luno survey also found that a large majority of investors practice good risk management. For example, 57% of respondents stated that they would only invest what they can afford to lose, while 43% answered that they make sure to conduct thorough research prior to investing. Similarly, 42% of respondents also revealed that they only invest in cryptocurrencies from reputable and trusted exchanges.
According to Hann, a small allocation of crypto within an investment portfolio has the benefit of potentially increasing returns without increasing volatility – and even reduce it. “Having a little bit (of cryptocurrencies) actually reduces your portfolio volatility…because it is negatively correlated into things like stocks, bonds, property, etc.”
As to the ideal crypto allocation, Aaron believes it is impossible to recommend a single value or percentage for everyone because a licensed financial planner would be better equipped to provide a personalised investment portfolio. He did, however, share the observation that investors are increasingly using crypto to supplement their existing portfolios to make it perform better.
Despite the deep-rooted cultural attachments, Malaysian investors are slowly finding their own rhythm in the investing world. They have demonstrated a willingness to embrace new technologies, while still being prudent and responsible investors – resulting in a unique generation of savvy investors that challenges the norm and ultimately, shifting traditional mindsets.
About the Luno survey: All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 1015 Malaysian adults. Fieldwork was undertaken between 27th – 31st August 2021. The survey was carried out online. The figures have been weighted and are representative of all Malaysian adults (aged 18+).
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Invest in crypto in your own peril! i would rather just save money in your Maybank savings account for 0.1% PA.