Share certificate is the proof of shareholder investing in a particular company, they will enjoy the profit earned via distribution of dividend while at the same time share the risk of operation failure by the management. In Malaysia, public can become a shareholder for listed companies, which normally denoted as Berhad through Bursa Malaysia. Want to start your first investment but have no idea where to start? Let's find out what you should know before starting your very first investment!
# Open an Account
The very first step to invest in stock market is opening a CDS account (Central Depository System) and a Trading account. All you need is just a copy of your identity card (NRIC for Malaysians and permanent residents or Passport for Foreigners) and your saving account statement. You can visit to any bank or broker to open trading account. Some broker allow online application which save you the hassle of travelling. Normal service charge for opening account is RM10 and the minimum age for application is 18 years old.
# Type of CDS Account
There are 2 types of CDS account, namely Direct CDS and Nominee CDS. Direct CDS will show your name as the shareholder of the company on their register while Nominee will show the name of broker as the shareholder. Shares acquired under both accounts belong to you, but your broker will help you to manage your account under Nominee CDS. In case the companies invested have any dividend distribution or right issue, Nominee CDS's broker will save you the hassle of all the paperworks. We will describe their differences in detail in next paragraph.
# Direct CDS
As mentioned above, your name will be listed in the register as the shareholder of the company, which provides you more secure feel. You still holding the company shares even your broker stopped operation or bankrupt. Direct CDS provides you more flexibility as you can change your broker or trading platform as you wish without any service charge. Besides, you have the right to attend company's Annual General Meeting (AGM) and your voting right. Furthermore, choosing Direct CDS will allow you to acquire shares for newly listed companies, which well known as Initial Public Offering (IPO). IPO's shares price is fixed and normally is undervalued. This is the advantage that Nominee CDS couldn't provide.
# Nominee CDS
On the other hand, Nominee CDS is not as flexible as Direct CDS. You will need to pay for service charge if you want to change your broker. This is because the shares is registered under former broker's name. In the process of share transfer, unfortunately you can't do any buy sell transaction. Your broker will represent all his nominees to attend the AGM, but you still can attend if you wish. You just need to follow the broker procedure applying to attend the meeting. If you wish to vote in AGM, sorry you don't have the right to vote in the meeting. You only can appoint your broker as your proxy to vote in the meeting. However, the brokerage fee charged for Nominee CDS is cheaper. If you wish to do daily trading, Nominee CDS probably is the best choice for you.
# Collateralised Account
Some brokers offer this type of account. Normal trading account is cash upfront account, which you need to bank in or transfer money into your trading account first. Your trading limit is limited to your account balance. If you have a collateralised account, you can acquire shares more than your trading limit. Normal rate is twice or thrice of your trading limit.
# Buy Shares
After opening your account finally can start trading in the stock market. You can contact your broker to transact or you can do it online by yourself. Brokerage fee for broker to transact is higher than online transaction.
In Bursa Malaysia, shares counted in Lot. 1 Lot size is 100 shares. For example, Company A share price is RM 2.05, then 1 Lot of share will cost RM 205.00.
# Transaction Fee
When you transact any shares including buy or shares, you must pay the transaction fee. This transaction fee includes Brokerage Fee, Stamp Duty and Clearing Fee. Brokerage fee charged by every broker is vary, basically phone transaction charged around 0.6% or minimum RM40, online transaction charged around 0.42% or minimum RM12. Clearing Fee charged 0.03% of share price while Stamp Duty charged RM1 for every RM1,000 (maximum charge RM200).
For example, Company A share price is RM2.00, you are purchasing RM2,000.00. Let's say the brokerage fee is 0.42%, your total transaction fee will be RM12.60. Brokerage fee RM12 (RM2,000 x 0.42%) + Stamp Duty RM 2 + Clearing Fee RM0.60 (RM2,000 x 0.03%)
# Trading Platform
There are about 17 trading platforms for Bursa Malaysia, every platform charged brokerage fee differently. All banks offer both Direct CDS and Nominee CDS. For Rakuten Trade, it only offer Nominee CDS.
Rate and Charges by Trading Platform
Invest in stock market without any knowledge has no difference as gambling. Before you start trading, make sure you know the background and risks. Fellow, trade wisely and surely you can become the next Warren Buffet!
*** Photos credit to the owner ***
