#CHSupportsLokal – How Social Media Can Benefit Small Businesses (SMEs) – Here Are 6 Ways
- By CompareHero.my
- December 21, 2020
Social media is an important aspect of digital marketing as it helps improve brand awareness for businesses. Read this article to find out how your small business can take advantage of social media.
Contents
With 3.96 billion people or more than half of the world now on social media, it’s fair to say that social media is a powerful and essential tool for both businesses and personal use.
Despite this, only about 70.5% of businesses in Malaysia use social media, either through WhatsApp, Facebook or Instagram to engage and interact with customers, according to a 2018 survey by SME Corp. Malaysia and Huawei Technologies. The survey focuses on small and mid-size enterprises (SMEs) in the manufacturing and service sectors across all regions in Malaysia.
Though social media utilisation for customer engagement is generally high in Malaysia, according to the same survey, it still hasn’t reached it’s full potential or even lags in certain states such as the northern region, where almost one-third of the total respondents say they have no plans on using social media at all.
On an individual scale, the average person spends almost two hours on social media every day. Why? Because social media is a great way for people to connect and engage with friends, family, and brands they love. Beyond serving as a tool of connection and embarrassing reminders (Facebook memories anyone?). Many people also rely on social media for news, family updates, and current events. More customers are joining social media networks to look for reviews and recommendations as well. In retrospect, that makes social media super powerful.
So it is concerning to know that many SMEs in Malaysia, who also make up the backbone of Malaysia’s economy or 98.5% of all business establishments in Malaysia in 2019, are not fully harnessing social media. By the way, SMEs also contributed RM521.7 billion of the nation’s gross domestic product (GDP) and provided 7.3 million jobs to 48.4% of Malaysia’s workforce.
It’s clear that our SMEs play a pivotal role in our economy, and their success equates to our success. In this article, we will take a look at how using social media can help SMEs scale digitally, leading to increased engagement, sales and productivity.
Coca-Cola has great brand recognition – a fair to say that many people can identify and associate the logo and classic red colour of the brand with their products.
1. Improves brand awareness and recognition
For a business to successfully dominate the market share for a specific product, they must first excel in selling it to the consumers. To achieve this, consumers need to have a level of familiarity and knowledge about the brand beforehand. There’s where brand recognition and awareness comes into play.
Brand awareness and recognition are so powerful that it could be the determining factor when someone decides to buy or (drop) a certain product. For those who are not quite sure what brand recognition entails, it means when consumers can identify the brand characteristics (e.g. logo and packaging) without any clue or info about the company’s name.
In a world that has extended beyond traditional advertising like out-of-home advertising and pamphlets, into the endless world of digitalisation, brands can now – more than ever – get airtime from consumers.
This is why it is pertinent that brands take advantage of digital tools to amplify their brands online as well. Social media is a great way to increase brand visibility and to ensure your content and business story reaches a wider audience.
Got a huge sale coming up? Many brands have chosen to do live streams of sales or giveaways as a way to engage and interact with their customers in real time.
2. Engage with customers
In today’s digital world, the job scope of a customer service specialist goes beyond making calls or sending emails to customers. Today, some also include reaching out to fans or customers via social media; others may have to monitor Facebook, Instagram and Twitter and reply to any comments, in what has been described as community management.
Although emails and phone numbers are great ways to connect with customers, social media allows a brand to communicate with their audience much faster and on a larger scale. The only challenge to community management is it is visible to the eyes of the public so every move or communication made by the brand will be under tight scrutiny.
For smaller businesses that may not have the scale or platform to engage with an audience, social media is a great way to interact with customers. Businesses get to speak to potential and established customers directly and establish a company voice and tone to the audience.
The best way to get to know your customers is by interacting with them. The more you communicate and engage with your customers, the higher chances you have of conversion – as well as retaining existing customers. But that’s not all, social media is also another way for your brand to engage with other clients, investors, and brands as well.
Though there isn’t a similar survey in Malaysia, a survey from Constant Contact, which got its findings from 2,000 SMEs showed that 60% of them said Twitter is an effective platform to connect with customers, and another 81% said they use social media to market their business.
Raya di mana-mana rasanya sama sahaja kalau sentiasa bersama keluarga. Selamat Hari Raya to all our Muslim friends!🔥 pic.twitter.com/NGsC2WUF89
— Nando’s Malaysia (@NandosMY) September 26, 2020
Take this example of the New Straits Times interacting with Nandos Malaysia.
Different platforms will cater to different audiences. For example, Twitter is a suitable platform for brands who want to engage with a younger audience that engages in quickfire tweets.
LinkedIn, on the other hand, is a suitable platform for brands that would like to share content for professionals and businesses.
3. Build brand loyalty and retention
It is not enough to just build brand awareness and recognition. To truly succeed as a business, companies must retain their customers.
More customers are open to trying new experiences and brands, but brand loyalty remains a pivotal key component of marketing in the 20th century.
Of course, we are not saying this is the defining factor – a survey by Nielsen revealed that just 9% of Malaysians consider themselves committed loyalists when it comes to their favourite brands. Meanwhile, a significant 44% are more into “newism” or trying new brands and products. The other 47% say they prefer to stick with brands they know, but are open to experimenting new products or services given the right factors.
Although brand loyalty may no longer be a given these days, in a world where consumers have endless options to choose and buy from, we can safely assume that at least 9% of customers in Malaysia are loyal to brands.
A good brand will build ambassadors, people who will help their business retain customers in the long term. Just a simple illustration of brand loyalty at play – would you rather choose a restaurant with a rude server or a place where the waiter was both warm and engaging? Brands that give their audience an unforgettable and memorable experience – something that can’t be found or replicated – anywhere else, will find customers coming back.
Any brand will tell you that brand loyalty is a key component of marketing, and thanks to the power of social media, companies have the scale and ability to interact directly with consumers, making it easier to achieve brand loyalty.
But we will be frank because anyone can get on social media, it has become an immensely competitive space as well.
4. Promote your products and services
In the past, businesses needed to pay for a slot in their local newspaper, yellow page or magazine. But thanks to social media, anyone can promote their products and services online for free! (we are not talking about paid digital advertising because that’s a whole different conversation).
This reason is why the promotion in social networks is a norm and necessity for any digital business.
A disclaimer though – making a sales pitch on social media could be equivalent to walking a tightrope. Customers may be turned off by messages that are too hard to sell – and if you are not careful your followers may unfollow or unfriend you faster than the snap of a finger.
The key here is to get your messaging right. Social postings that are honest, come from a good place, have sincere intentions may pick up wind, and go “viral,” a situation that could see an increase in sales. Wrong messages, however, do the exact opposite. Find the perfect balance.
A product video is an interactive way to help consumers better understand your product, and how to properly use or apply in their daily lives.
Some quick tips we found on how to sell your products or services online is to run a contest or campaign promotion, really connect with users on a deeper level, create more product videos or explainers that are helpful and useful for readers, create user-generated content, and know your target audience well for different platforms.
5. Higher traffic
If you work in the marketing industry, a common thing you’ll hear from any marketer, seasoned or beginners, is the need to bring in a lot of traffic to make your website work or for it to carry value.
With so many brands now going online, many realise the importance of securing the market share of the Internet or the “traffic.”
Increasing site traffic is an ongoing priority for e-commerce companies or digital companies as the Internet is the bread and butter of their businesses.
Though many local microenterprises leverage e-commerce platforms like Lazada and Shopee or even Instagram or Facebook shops to generate revenue, there is great value for brands to start and grow their websites as the primary source of revenue.
Brands who understand the value of SEO or search engine optimization will dedicate their marketing efforts to improve the site ranking of their pages because the higher the rank in Google, the more views and the higher the brand visibility and the more potential customers you have.
But does more traffic equal to more money? Because despite the high traffic and eyeballs, if no one clicks buy or add to cart, does it matter? The key is to understand how many visitors turn into clients or paying customers, aka the conversion rate.
But high traffic or being highly-ranked on Google would mean nothing if your business only has a 1% conversion rate. The conclusion here is that though traffic is important, it is equally crucial to convince people that your product or service is the best.
All in all, when your business shares your website or blog content on social media, you give them a reason to visit your website, which could help grow your website’s traffic.
6. Gather data from customer surveys to improve business
Everyone needs feedback to be able to improve. Social media is also a great way to learn more about your customers and their preferences to help improve your products and services.
Businesses or brands that want to increase their revenue and customer retention, can opt to conduct a survey to better understand their customer’s perception towards them.
Gone are the days where surveys need to be carried out manually – now with just a few clicks businesses can conduct quick surveys through social media – giving essential information and data that will reveal customer preferences and when analysed and used correctly, helps companies build better strategies to become more successful.
It’s important to remember that your current customers have the biggest potential to turn into buyers and they cost less than acquiring new ones according to fortunly.
Companies that invest more time and energy in customer feedback with the goal of improving their current customers’ experiences, will reap the benefits.
From our research, many surveys reveal that businesses realise and acknowledge the importance of social media for their business performance. According to a 2019 study by Buffer, 73% of marketers believe that their efforts through social media marketing have been “somewhat effective” or “very effective” for their business. In terms of the reach and impact of social media, the numbers show that 54% of social browsers use social media to research products, according to GlobalWebIndex.
However, though businesses may generally realise the importance of social media, many smaller and micro-enterprises in Malaysia still lag when it comes to social media marketing and management.
The power of social media cuts lines, borders and industries, it’s even affected global politics and the economy as well, so leveraging on it could be the best investment you will ever do for your business.
We hope you found this article insightful!
The pandemic has severely affected the livelihoods of many small-medium enterprises in the country. CompareHero.my understands and acknowledges these challenges, and through its #CHSupportsLokal series hopes to provide our local businesses with educational and informative content to help better run, manage and operate their businesses. Stay tuned for more content!
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Maybank Islamic Berhad Launches First-in-market Islamic Corporate Card With A Charity Element
- By CompareHero.my
- December 18, 2020
Maybank Group, through its Islamic banking arm, Maybank Islamic Berhad, today launched a new Islamic corporate card, the first in the market that channels a percentage of customer spending to charity.
The bank will contribute 0.1% of all customer spending on overseas merchants, such as eBay, Amazon and Apple, to selected charity bodies.
Based on Shariah principles, the Maybank Islamic Corporate Card also provides a digital Shariah-compliant payment platform to assist businesses in the management and planning of their operations.
Tapping into the rising trend of digital payments, the Maybank Islamic Corporate Card offers card members both rewards and convenience in a single package in the form cashback for retail and online purchases – 0.3% cashback for local spend and 0.7% cashback on overseas spend.
It is also the first Islamic corporate card in Malaysia offered in both Visa and Mastercard. Maybank Islamic expects to issue about 45,000 new Maybank Islamic Corporate Cards within the next five years.
“Embodying the Islamic finance values of equitability and social well-being, this new Maybank Islamic Corporate Card aims to meet the increasing demand by Shariah-compliant and halal conscious businesses,” said Dato’ Mohamed Rafique Merican, Chief Executive Officer of Maybank Islamic.
Related: How Much Do You Know About Islamic Finance?
“The current pandemic has made it more important than ever for banks to play a role in addressing the challenges within the communities they serve. Maybank Islamic is committed to providing Shariah-compliant financial solutions that meet the needs of our customers and create a positive impact on the community,” he said.
From left: Ng Kong Boon, Visa Country Manager for Malaysia; B. Ravintharan, Senior Executive Vice President & Head, Cards, Maybank; Datuk Hamirullah Boorhan, Head, Community Financial Services Malaysia, Maybank; Dato’ John Chong, Group Chief Executive Officer, Community Financial Services, Maybank; Dato’ Mohamed Rafique Merican, Chief Executive Officer, Maybank Islamic; Perry Ong, Country Manager for Malaysia and Brunei, Mastercard
“As the market leader in cards, we are constantly looking for new value-adding offerings for our customers. The new Maybank Islamic Corporate Card caters to an increasingly conscious corporate customer segment by providing an alternative which they feel is better suited to their beliefs and values,” said Datuk Hamirullah Boorhan, Head, Community Financial Services Malaysia of Maybank.
“With this new addition, which complements our conventional commercial cards range, we now offer a holistic suite of cards for our corporate, as well as individual customers. Having Visa and Mastercard, two of the world’s biggest payment network providers as our partners, our customers can be assured that their card experience will be a smooth and safe one, locally or overseas.”
Ng Kong Boon, the Visa Country Manager for Malaysia also expressed delight at launching the first fully Shariah-compliant corporate card in Malaysia, emphasising the significant contributions of both large corporations and small and medium enterprises (SMEs) to the country’s growth.
“The corporate card business is an important segment for us, given that large corporations and Small and Medium Enterprises (SMEs) make up more than one-third of Malaysia’s Gross Domestic Product (GDP). By using business payment cards, corporations will be able to better manage their expenses,” he said.
Related: SME Landscape of Malaysia
On top of their collaboration with Maybank, Ng said Visa has also created a halal lifestyle eCommerce platform called “Myhalalstop.com,” in collaboration with their global network of halal and Muslim-friendly merchant partners. The platform allows cardholders to enjoy rewarding dining and shopping experiences when spending with their Visa cards.
Perry Ong, the Country Manager for Malaysia and Brunei, Mastercard echoed the same sentiment. “Mastercard is proud to partner with Maybank Islamic on this Islamic corporate card offering with a ‘charity-focused’ key feature. The card is a welcome addition for Malaysia as the economy strives to emerge from the pandemic and ready itself for a digital new normal,” he said.
“By leveraging Maybank Islamic’s strong customer base in Islamic financing and Mastercard’s payments technology, the new offering supports the rising demands of corporates and SMEs while ensuring payment transactions are easy, safe and secure. Most importantly, it allows businesses to expand their social responsibility by giving back to the community,” he said
However, Maybank Islamic is no stranger to embedding a charity element in its cards. Its consumer card, Maybank Islamic’s MasterCard Ikhwan Card-i, also has similar features. Under the card’s charity element, Maybank Islamic has allocated more than RM3 million in charity funds based on total customers’ transactions since the launch of the card in June 2014.
“This year, we continue to positively impact the community through our Maybank Islamic Mastercard Ikhwan, which disbursed more than RM750,000 to 19,150 beneficiaries who were impacted by the COVID-19 pandemic,” Mohamed Rafique said.
What is an Islamic credit card?
An Islamic credit card has similar functions to a conventional credit card, but with some slight differences in the offered features. Below is a comparison of the features between a conventional credit card and an Islamic credit card.
| Conventional Credit Card | Islamic Credit Card | |
| Interest | Yes | No |
| Compounding Factor | Yes | No, and total liability is known upfront |
| Early Repayment Rebate | No | Yes |
| Non-Permissible Transaction Filtering | No | Yes |
| Takaful Coverage | No, but conventional insurance is offered | Yes |
| Zakat Payment | No | Yes |
Related: How Islamic Credit Cards Work
Another Maybank corporate card that businesses get to opt for is the Maybank Visa Corporate Card, an ideal card for a company’s business travel, entertainment and business expenses. Among its key highlights include unlimited cash rebates 0.5% on a company’s retail transaction and complimentary personal travel accident insurance of up to RM700,000, among other things. Find out more here.
For more information on the Maybank Islamic Corporate Card, customers can visit the Maybank2u website or get in touch with their corporate account relationship manager.
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Ask The Expert: A Beginner’s Guide To Forex Trading – How Does Forex Trading Work in Malaysia?
- By CompareHero.my
- December 16, 2020
Forex, foreign exchange or FX trading is the conversion of one currency into another. If you’re interested in trading on the forex market, here’s a closer look at everything you need to know about forex, how it works, the methodology and its landscape in Malaysia.
Contents
- What is a forex marketplace and how does forex work?
- The history behind forex trading
- The forex trading methodology – what are the different ways to trade forex?
- What is the spot market, futures market and forwards market?
- Is forex trading legal in Malaysia?
- Should you give forex trading a try – what is the landscape in Malaysia?
- Step-by-step guide on how to trade forex and make your first trade
- Pros and cons of forex trading
- If you are interested, reach out to a forex trading expert for more insights
If you have ever walked past a money changer, you might have noticed different currencies peg against the Malaysian Ringgit in a big chart. Forex trading is the complex version of this scenario, used by traders to exchange currencies to earn a profit.
Forex trading is also relatively less popular among Malaysians than other mainstream asset classes like stocks, robo-advisors or unit trusts. We will be honest – forex trading may not be profitable for everyone if you don’t have the right skills or knowledge.
According to our research, it is a well-known figure that 80% to 90% of forex retail traders do not succeed in the forex world, most probably because forex is a high-risk investment. Because the market is based on competition and speculation, it is quite difficult, perhaps even impossible, for everybody to be profitable at the same time. From what we gathered, there are also apparently very few truly successful forex traders out there.
These are interesting findings given the fact that the foreign exchange market is the most actively traded market in the world, according to Nasdaq. More than RM20.2 trillion are traded on average every day, exceeding the global equities trading volumes by 25 times. This high liquidity makes it easy to buy and sell currencies.
To help us get a better sense of the forex world, CompareHero.my spoke to Jin Dao Tai, the managing partner of ForexBriefcase, a premier multi-account manager headquartered in Singapore. Jin is also an entrepreneur, award-winning forex coach and trainer, an international speaker and a multi-million dollar trader.
What is a forex marketplace and how does forex work?
Forex is derived from the words of foreign currency and exchange. Forex exchange market, also known as FX, is a global marketplace for exchanging one national currency for another to gain a profit; it is usually exchanged as pairs.
In a world where international trade is necessary to develop and survive, currencies are considered a standard in international business and are exchanged in order to conduct foreign trade and business. In other words, forex is the practice of trading currency for profit.
Some real examples of currency exchange (but not forex) are, for example, if you travel to the United Kingdom, you wouldn’t be able to buy goods or services in the Malaysian Ringgit (MYR) because it is not the locally accepted currency, and you will, instead, need to use the British Pound.
The same method applies to e-commerce transactions as well. If you buy a set of makeup from South Korea, you will need to buy it through the locally accepted currency which is the South Korea won.
However, forex trading is also a popular form of investing for private citizens, or also called retail traders.
“Retail traders, companies, banks and institutions interact in a market – very similar to the stock market. But instead of buying a slice of a company, you exchange currencies across different countries,” Jin Dao told CompareHero.my.
“As traders, what we do is we take advantage of the small price movements to make a profit out of that difference in movements over a long period of time or a short period of time. For example, that fluctuation between the Malaysian Ringgit and the Singapore Dollar – it changes every day, so instead of just changing it to buy goods and items, we change it over and over again to try to make a profit out of it,” he said.
A unique fact about forex is that there is no central marketplace for foreign exchange. Because it is decentralised, it instead, trades electronically over-the-counter (OTC), meaning all transactions are conducted via computer networks between traders around the world, rather than on one centralised exchange.
The market is also a global one – it starts at 6.a.m Sydney time and ends on Friday at 5 p.m New York time, which means it is open to traders 24 hours a day, five and a half days a week.
Currencies are traded worldwide in the major financial centres of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney, across almost every time zone.
Forex trading has been around for some time, however the modern version has been in existent for the past 10 years or so.
The history behind forex trading
According to Investopedia, forex, in the most basic form of converting one currency to another for financial advantage, has been around since nations began minting currencies. This is a stark contrast to the modern forex markets which are a modern invention.
“Forex has been around for a long time since companies started trading and countries started exchanging currencies with each other to manage their hedge funds and reserves,” Jin said.
“But it started becoming more mainstream towards retail traders, or most of us, in the last ten years – when it became available for retail traders just by having computers and the internet rather than going through banks,” he added. “It started for a lot of people as a form of gambling or speculative asset. But now thanks to more analysis and proper strategies and risk management, we have seen people make a lot of good returns from the market.”
The forex trading methodology – what are the different ways to trade forex?
As a trader, you will buy currency at the current market price, and at the same time, sell another at a target price in the future.
A trader will always buy and sell at the same time, which is why currencies are always quoted in pairs. The profit or loss obtained is the difference between the two prices because, as we know it, currency prices are frequently changing.
There are several different ways to invest or speculate in currencies. From what we found, the most popular ways to invest in currencies are retail forex, spot FX, currency futures, currency options, currency exchange-traded funds (or ETFs), forex CFDs, and forex spread betting.
What is the spot market, futures market and forwards market?
In today’s market, Jin said, are there are three ways that institutions, corporations and individuals trade forex: the spot market, the forwards market, and the futures market.
Jin said the spot market has always been the largest in forex trading because it is the so-called “real asset” that the forwards and futures markets are based on.
Jin said different people will approach different markets for different purposes. “Traders such as ourselves, will be trading the spot market – which means we will be selling and buying based on current prices,” he said. “It is very straightforward, you turn on any trading platform, and you look at the current price – and that is the price you are going to be buying or selling at.”
“But for the forwards and futures markets, you are pricing the currency three months or four months, even one year ahead. So it’s a form of hedge or pre-planning purchase,” he said. “It is quite complex to price a currency over an extended period especially with so many things that could affect the market.”
Is forex trading legal in Malaysia?
The short answer is yes. In 2012, Bank Negara Malaysia stated that forex trading or the buying and selling of foreign currency in Malaysia is allowed only through licensed commercial banks, Islamic banks, investment banks, and international Islamic banks, according to Forex Malaysia. However, the platforms or brokers you use must comply with these rules.
1. The Exchange Control Act Of 1953
This Act imposes general restrictions on foreign exchange dealings by residents and non-residents. However, there are no restrictions for non-residents to invest in Malaysia to purchase ringgit assets, such as land property and securities. On top of that, there is also no restriction for non-residents to transfer foreign currency, all profits, returns and divestment proceeds from their investments in Malaysia, abroad.
2. The Securities Commission Act Of 1993
This Act gives powers to the Securities Commission Malaysia, to license and regulate businesses dealing in securities.
3. The Money Changing Act Of 1998
This Act provides the licensing and regulation of money-changing business. For example, under this act, a person licensed under the Exchange Control Act 1953 is permitted to trade (buy and sell) foreign currency that is licensed under the Money-Changing Act 1998.
Should you give forex trading a try – what is the landscape in Malaysia?
From his experience of approaching many retail investors in Malaysia, Jin said he had seen a growing interest among traders towards forex. “We have seen more people getting involved and realising they need to get involved in the market – not just in forex but across the board in investing or trading because having just one piece of income, especially in today’s economy is insufficient,” he said.
“If anything – this pandemic has taught us that you need another source of income in life: either by trading, starting a business or by building on another skill, we all need that extra source. We have seen a significant increase in people trying to find out more about FX, trying to learn how to do it and also trying to get started whether it is trading or investing.”
When it comes to forex, the more attractive it is to do business with a particular country – because of the tax benefits and booming industries etc. – the higher the value of that country’s currency (exchange rate).
If Malaysia’s palm oil is in high demand, thus more people would want to buy Malaysian Ringgit to purchase that oil, and Malaysian Ringgit will subsequently rise.
“With forex, you are buying into the performance of a country. If a country is doing well, we see the value of that currency increase, or if the country is performing badly, because of the pandemic for example, then the currency will drop,” Jin said. “It is similar to gold in a way – the price of a currency depends on how that country performs.”
Unlike the stock market, big news or large market movements, as opposed to small nitty-gritty things, affect the market, Jin said. “FX is easier than the stock market; for the latter, you need to analyse the stock and the company compared to the FX market,” he said.
“Big news, such as the pandemic has affected the markets quite significantly. The U.S. election is another example – that has affected the price of the U.S. dollar,” Jin said. “If we go back even further to the global financial crisis 2008 – that is one of the biggest news that has affected markets across the board and affected currencies.”
Just like stock trading, there are steps to forex trading.
Step-by-step guide on how to trade forex and make your first trade
Now that you have some understanding of forex, let’s take a closer look at how you can make your first trade. Follow these steps:
1. Choose a currency pair
In forex, you are always exchanging or trading the value of one currency for another. What that means is you buy one currency while selling another at the same time. That means you will trade in pairs e.g. RM/USD.
Typically, new traders begin by trading the most commonly offered pairs of major currencies – but there are no restrictions to this.
2. Analyse the market
Quite similar to stock trading, you will need to research and do a thorough analysis of the market – two tactics that make up the foundation of trading. Remember, that operating on emotion will never end well.
To avoid feeling overwhelmed by all the different currencies – because there’s a lot, narrow your research on a particular currency pair, and gather valuable resources for the two. Regularly look at current and historical charts, and monitor the news for economic announcements, as well as perform other technical and fundamental analysis.
3. Understand the quote
Since you will trade a pair of currencies, you will notice two prices for each currency. The difference between the first and the second rate is called the spread. That difference is the amount that a dealer charges for making the trade. However, spreads vary according to dealers.
4. Choose your position – buy or sell?
A buy position means you believe that the value of the base currency will rise compared to the quote currency. If you’re buying MYR/USD, you predict the price of the Ringgit will strengthen against the dollar. (The Ringgit is bullish and a bearish dollar)
A sell position means you believe that the value of the base currency will fall compared to the quote currency. If you’re selling MYR/USD, you predict the price of the Ringgit will weaken against the dollar. (The Ringgit is bearish and the US dollar is bullish).
Here’s an example:
A buying position
The current price for MYR/USD is 1.3555/560. You believe that the Ringgit is bullish, so you enter a buy position for one lot or one unit of the MYR/USD. Your trade is priced at 1.3555.
Later in the day, the MYR/USD is now at 1.3888/180. Your trade has gained 333 pips, and you opt to close your position at the current sell price of 1.3888 and make a profit.
A selling position
Let’s say the Ringgit is bearish, and you decide to enter a sell position for one lot or one unit of MYR/USD. Because you are selling, your trade is at priced at 1.3555/560.
Later in the day, the EUR/USD is now at 1.3888/180. Your trade has lost 333 pips. You close your position at the current buy price of 1.3555 and accept your losses.
Pros and cons of forex trading
For some, forex trading is a form of side income to help bolster their overall income.
Pros
1. Extra source of income
In these difficult and challenging times, having the ability to procure extra side income may go a long way for many of us. “Forex is something you can do on your own, manage on your own, at your own time, whether you are at home or anywhere else in the world,” he said.
2. Low barrier of entry and transactional costs
Unlike trading stocks or investing in unit trusts, forex trading does not require a large investment to get your feet off the ground. “You can start small and scale, it is not something that requires like US$10,000 or US$1 million. You can get in with a couple of hundred dollars or a couple of thousand dollars,” Jin said. There are options to open a mini or micro forex account with as little as $5. Similar to robo-advisors, forex trading also has a low transactional cost for the brokerage and commissions charges.
3. Accessibility
The forex market is open 24 hours a day, five days per week, meaning it could fit easily into your schedules compared to other tradings. Opening a forex account is quite easy for individual traders; you can set it up within one to three days. Most brokerages can be done online and traders have access to real-time market pricing, price charts, tools and more through online trading platforms.
4. Liquidity
As we have said before, the forex market is the largest market globally by volume. This means there is high liquidity, especially in major currencies.
5. No central exchange
Because companies need to report dividends and huge profits or losses as stipulated by law, their performance could drastically affect the stock prices on the exchanges. But forex trading operates differently and has no such central entity and no regulators.
This decentralised and deregulated feature of the forex market also eliminates any possibility of insider trading as market movements depend solely on global factors and developments.
Cons
1. Decentralised and deregulated
Similar to Bitcoin or cryptocurrencies, the world of forex trading is dominated by brokers and not by market regulators. Without proper regulation, there is not enough incentive or push for brokers to be fully transparent with traders. This could lead to lack of transparency on matters such as quotes, prices, or orders.
2. Volatility
No asset class is completely sheltered from volatility and the forex market is no different and maybe riskier. Getting exposed to unexpected and extreme volatility at times can affect a trader’s trading strategies.
3. Small retail traders may be at a disadvantage
From the more than RM20.2 trillion traded daily on the global forex market, the bulk is transacted by big players such as banks, hedge funds and other large financial institutions. So smaller retail players may be at a disadvantage compared to these players who have greater access to information and technology, giving them the upper hand at influencing price movements in the market.
If you are interested, reach out to a forex trading expert for more insights
Our article is pretty much the tip of the iceberg on what the forex trading industry looks like – there’s so much more about the market and industry to be digested before one goes straight into it.
On top of that, being decentralised makes it a double-edged sword because the lack of regulation could leave smaller players more vulnerable to scammers and dishonest people who just want to dupe and take advantage of curious investors.
If you are still curious about forex trading, stay tuned as we dissect the best forex brokers in Malaysia in our next forex-related article.
Disclaimer: Neither CompareHero.my nor the content on it is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. The content on CompareHero.my is for general information purposes only and is not intended to be personalised investment advice or a solicitation for the purchase or sale of securities.
Compargo Malaysia Sdn. Bhd. and/or its affiliates cannot and do not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. CompareHero.my may receive compensation from the brands or services mentioned on this website.
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#BreakingItDown – What Is The Best Way To Pay For A Car? Car Loan vs Cash
- By CompareHero.my
- December 15, 2020
Contents
- Buying a car with cash versus taking a loan – which is better?
- Things to consider when weighing in the pros and cons of buying a car with cash versus a car loan
- Other ways to pay for a car besides by cash or an auto loan
- Verdict: Buying a car is expensive, so navigate carefully, especially because its value will depreciate fast
If you are in the privileged position of having enough upfront cash to pay for a car, does it mean that paying for a car via cash, as opposed to financing, is automatically the best way to go?
After all, car loans are notorious for having the reputation of being the single monthly commitment that hinders one from building and growing their wealth.
This perception is not completely far-fetched and has its merits – most car loans are so-called upside-down loans, meaning the amount you owe for your car is more than its market value. This happens because the value of cars depreciates especially with a seven to nine-year loan tenure.
Related: #BreakingItDown – 8 Things That Affect Your Car’s Resale Value
Though it is common for car buyers to rely on financing to purchase a car, do not assume you have to as well— there are plenty of other ways to pay for a car that doesn’t include taking up a loan.
Here is a breakdown of some of the common car payment options to consider, and analysis on which is better: paying via cash versus the loan.
Buying a car with cash versus taking a loan – which is better?
Most people think that buying a car with cash is better than financing because you get to avoid paying interest every month. After all, with cash, you only pay the sticker price, and there are no additional charges as you go through the years.
That is true. However, if the interest rates you earn on your savings or investments is higher than the after-tax cost of borrowing, then you may lose out on growing your wealth if you decide to pay the car in cash.
Tip: Get a loan when interest rates are favourable.
Understandably, some people may want to avoid loans at all costs to avoid having debt hanging over their head.
List down the pros and cons of buying a car with cash versus a loan for more clarity.
Things to consider when weighing in the pros and cons of buying a car with cash versus a car loan
1. The opportunity cost of cash
It’s important to establish that, in addition to the sticker price of a car, the actual overall cost of a car includes the interest you’ll pay on your loan over time.
So if your main focus in life is to remain debt-free, then paying via cash wouldn’t be such a bad idea — if you can afford it.
But, if you pay in cash, there will be an opportunity cost in the future, aka the interest or investment returns via savings or stocks that you could have earned from keeping that cash. In other words, you lose out on capital that could have been used to grow your wealth.
Let us say you have RM20,000 and you want to buy a car costing RM20,000. You can pay via cash, and that means no loan is needed. You also get to protect your budget from a minimum interest rate of 4% to 5% per year.
Alternatively, you could pay your car via a 10% down payment and a 90% nine or seven-year car loan. If you do, that leaves you with RM18,000 cash in hand and a typical RM1000 monthly instalment.
Which is more worth it?
It depends on how you plan to utilise the RM18,000.
You could, for example, earn RM 19,764 or so if you put it into a savings account that comes with a return or Annual Percentage Yield (APY) of 3% monthly, and if you deposit a minimum of RM100 monthly. Check out this calculator we found online to help calculate your APY.
Note: Actual returns on savings and investments are usually higher than 3% but it is hard to predict and is never guaranteed. For instance, you could earn up to 5% in returns on the cash by investing it elsewhere via stocks or ETFs.
However, if you spend that RM20,000 to buy a car, you will automatically forgo those earnings. By the way, if you need a list of dummy-proof ways to invest your money, we recommend you check this article we wrote about investing.
We read that a 7% APY from your savings is a good indicator that you should keep the money and opt for a car loan instead. The return could maybe go up even more significantly when the value compounds over time.
2. Any interest rates below 2% are worth financing
Compare best interest rates from lenders online. Sometimes interest rates are subsidised by auto manufacturers to help sell off cars.
A car loan that comes with an interest rate below 2% is worth it because this figure is typically lesser than investment or savings returns – though there may not be many if any, car loans at that rate.
For example:
The goal is to earn and not lose. Let’s say you invest in stock and earn long-term returns equivalent to 8% in annual return and you pay 2% in car loan interest, you are getting 6% on your money, before inflation. That’s not bad at all.
3. Debt service ratio
If you have ever applied for a car, home, or personal loan, you will have heard the phrase ‘Debt Service Ratio’ from the bank’s loan officers when they explain how a loan works.
In short, Debt Service Ratio, or DSR, is a calculation used by banks to check whether you are capable of repaying a loan. Your DSR is usually compared against the bank’s maximum allowable DSR limit. If your DSR is within the limit, you stand a higher chance to receive the loan. However, a DSR limit varies according to individuals and their respective levels of net income.
Related: How do I calculate my Debt Service Ratio?
Calculating your DSR is another way to help you figure out if paying by cash is better than via a car loan, and vice versa.
For example, let’s say you have a housing loan of RM1,000 and a car loan of RM1,000 your total commitment would add up to RM2,000 and you will have a DSR of 40%. As a benchmark, if your DSR rises above 40%, you may want to reconsider buying a car at all, to avoid overspending beyond your means and end up in financial distress.
4. Any plans to take up other commitments?
In the same vein as the previous point, assess whether you plan to sign up for other loans or commitments like buying a property or continuing your education, among other factors because this could affect your overall bottom line.
It’s also important to realise that the value of a car depreciates over time, so really assess whether you have the finances to commit to that monthly instalment. We recommend those looking to buy a property to not carry a car loan at the same time – if possible.
Other ways to pay for a car besides by cash or an auto loan
1. Use your savings
To be honest, it is unrealistic for a person to save enough cash to buy a brand-new car outright. The whole concept of car loans was created to help us buy new cars. Instead, it is a much wiser strategy to pay with cash if you are buying a used car. The added plus of paying with cash is skipping the interest.
The next question after that is to figure out how long you will need to build up the money to buy a car with cash. Start saving from young and set aside at least RM20 every day. In a year, you could save up to RM7,300 and in five years, that will grow to RM36,500. And thanks to the power of compounding interest, over time, you will be able to grow that money even more.
Eventually, you will have a significant sum of money to cover the total cost of a vehicle if not reduce the amount you will need to finance.
2. Try out other borrowing methods like credit cards and personal loans
Paying a car with a credit card may sound like an absurd idea but hear us out. Though we do expect dealerships to have limits on how much they can pay via a credit card, you may try using it to pay your down payment. If it’s possible – as it depends on dealership policies and your credit limit – you could maybe even fund the entire purchase amount with a card. But make sure you contact your card issuer and bank for further clarification first because it requires such a large transaction.
Disclaimer: We are not saying this is the best way or the go-to way – credit card interest rates are typically higher than auto loans. On top of that, carrying a large balance can hurt your credit because you will use up a large portion of your credit utilisation ratio.
Personal loans are similar to auto loans, in that both require a monthly instalment that will come with interest. The big difference, however, is that personal loans are unsecured loans, so what that means is though your asset will not be repossessed if you don’t pay on time, your credit will be severely affected. Besides that, personal loans have typically higher interest rates compared to auto loans.
Borrow from family and friends. This may be the least favourable method because you will need to ask around – but it doesn’t hurt to ask friends or family if they are willing to give you an interest-free loan. This could also be an option if you are short of a couple of thousands. However, we don’t recommend you count on this solution because it can be hard to convince someone to lend you money and we can’t guarantee that all families and friends are willing to provide such support to you either.
Buying a car can be a complicated and tedious process, but it doesn’t have to be a miserable one. So take comfort in knowing that many people have gone through it before you.
If you do end up deciding to get a car loan, search and compare online to get the best interest rates. We wish you good luck!
Whether you are a first-time or seasoned buyer, the process of buying a car can be complicated if you don’t know the industry that well. The #BreakingItDown series is all about addressing this problem. Stay tuned for more content.
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#PropertyHacks: Buying Your First Home In Malaysia – The Pre-purchase Stage (Part 1)
- By CompareHero.my
- December 14, 2020
Purchasing your first house can be exciting, but there are many things to be considered before starting your home-buying process. Before you begin your house hunting journey, read this article to get a checklist that every first-time home buyer should know.
Edited and updated by Anis Shakirah binti Mohd Muslimin
This article was first published in August 2019 and has been updated for freshness, accuracy and comprehensiveness.
Out of all the big-ticket purchases you will make in life, buying your first home may be the most daunting of them all. Anyone who has been through it will tell you that it is a process that requires substantial financial commitment, and one wrong move could be damaging.
Whether you are looking to ditch the landlord for a mortgage, buying for the sake of investment or dream of living independently, here are the six things you need to know before buying your first property.
P. S.: We will focus on other factors in part 2 and 3.
Contents
- 1. Figure out why you want to buy a house – what’s your purpose?
- 2. Figure out if you have the money to buy a house
- 3. What type of house suits your needs best?
- 4. What features do you want your ideal home to have?
- 5. Compare the interest rates from different lenders
- 6. Who will help guide you through the purchase?
- Five incentives for first-time home buyers in Malaysia
1. Figure out why you want to buy a house – what’s your purpose?
There are so many different questions you will have to ask yourself before deciding to buy a house.
Are you buying for your stay or as an investment?
How many people will be staying in it?
How far will you need to travel for your daily commute?
What kind of neighbourhood would you prefer: somewhere chilled and laid back or one that is more vibrant with a bustling vibe?
Once you have determined what sort of home suits your purpose, you will be more focused on where to look and more importantly, what to avoid – the process of buying a property starts even before you decide to buy the property.
Don’t make the mistake of buying without a goal. Determine what your long-term goals are and how homeownership fits into this goal. Perhaps you are tired of the rent payments, and prefer to transform them into mortgage payments? Or maybe you enjoy the idea of owning a home and want to be your own landlord? Maybe you see buying a home as good investment? Figure out what your homeownership goals are to get a better sense of what direction you’d like to take in your homeownership journey.
You could do additional research on the housing market in Malaysia by reading up online, talking to property agents, real estate investors, other homebuyers, your family and friends. The external opinion is helpful because they can give you a neutral perspective on the topic.
No pressure: If you are not financially capable of purchasing a home right now – you can always consider delaying your plans for a few months.
2. Figure out if you have the money to buy a house
Assess your financial health. Before going into the actual planning, do a serious audit of your financial health. Just like other big purchases in life – the price of a property is more than the sticker price. You’ll need to consider both the purchase and ongoing expenses of a home. Make an honest assessment of your finances to see whether you are ready to take this big step, or if you need more time to build up your wealth first.
Generally, you will need enough savings to buy a home because you need money for emergency savings and down payment. Buying a house shouldn’t be up for consideration – yet – if you don’t have enough money for your down payment and at least three to six months of living expenses for your emergency savings.
Will you have enough to spend after deducting your mortgage? Factor in other costs such as food, utilities, car loan and maintenance, entertainment, regular savings, retirement savings, and other miscellaneous items. On top of your 10% down payment, a mortgage payment typically costs a minimum of RM1,000.
Finally, check your credit score, because your credit score is what stands between you and the bank’s decision to approve that loan that you just applied for. If you need a quick refresher, a credit score is a sort of financial report card, and it contains financial information such as outstanding credit, loans, credit card and loan application history, payment history etc. In short, that piece of report carries a summary of all your financial activities throughout your life. Not having a good credit score is bad news for you because that means you either: don’t get your loan approved or your loan interest is sky-high – either way is unfavourable.
When planning the overall cost of your new home, don’t just factor in how big a loan to take and don’t limit it to your monthly payment, because the total cost includes the interest you’ll pay over time. Other considerations include homeowner insurance, maintenance cost, and quit rent.
In Malaysia, quit-rent, or land tax is imposed on occupants of freehold or leased land in place of services to a higher landowning authority, which is usually the government. Your quit rent rate will depend on the type of property. Finally, before you can decide on a budget, you’ll need to find out what the average house prices are in where you plan to live.
Related: Is Your Credit Score Good Enough To Get You A Mortgage? Here’s Why It Matters
3. What type of house suits your needs best?
In Malaysia, there are several residential property types to choose from, with the common ones being apartments, condominiums, bungalows, semi-Ds and terraces. Newer types of properties in the housing market include Loft, SoHo, SoVo, among others. Bottom line: there’s a lot of kinds of houses to consider.
But which do you know works best for you? Each type has its pros and cons, so it depends on your goals and budget.
For some families, having a slightly spacious kitchen is a requirement for them.
4. What features do you want your ideal home to have?
Though you should retain some flexibility and adhere to a fixed budget when choosing your ideal features, it’s fair to want to have your purchase fit both your needs and wants.
Work out a checklist that includes specific items like size of property and neighbourhood, desires and must-haves, and smaller needs like bedroom colour wall, kitchen top, and bathroom layout, for example.
It’s also during this process that you realise that cheap items don’t always equate to good value, and that financing, aka the process of securing a loan, can be a tedious and tiring process.
With that said, some people realise that they might need to compromise on their wants versus needs after getting priced out of the homes or features that they had initially envisioned. It’s best to find a middle-ground.
5. Compare the interest rates from different lenders
In Malaysia, this step typically comes after you have viewed and accepted a house offer. However, it doesn’t hurt to do your own preliminary research or ask around for the typical interest rates of different lenders.
Some banks offer great incentive programmes to aid potential Malaysian homeowners. For example, Maybank’s HouzKEY, from what we found, may offer up 2.3% interest rates for selected houses. We recently wrote about the Rent-To-Own Scheme in Malaysia, a programme that gives buyers the option to buy the house they are renting.
Lenders will typically assess your loan eligibility by looking at your total debt, your monthly income, and how long you’ve been at your current job.
6. Who will help guide you through the purchase?
A competent real estate agent could be the determining factor when closing a deal – at least that’s what we found out from the folks we talked to.
A good real estate agent will make sure the process is as smooth as possible for you and will help you locate homes that are within your needs and price range; they will also meet with you to view those homes.
These professionals will also help you negotiate the best price, make an offer, get a loan, and complete the paperwork.
To avoid any potential pitfalls make sure you work with a good real estate agent with a credible background.
Five incentives for first-time home buyers in Malaysia
Bonus: Aside from the conventional home loans, we listed down various government initiatives to help first-time home buyers turn the dream of owning their own home into a reality.
1. Projek Perumahan 1Malaysia (PR1MA)
This initiative is open to Malaysian citizens, at least 21 years of age (at time of application) who are either individuals or have a family (husband and wife) with a combined household monthly income of RM2,500 to RM15,000. You also need to register for an account with PR1MA on their website and then cast your ballot. A balloting process will be conducted and if you’re successful you can then select your preferred financing option.
Following the increase of income eligibility, the moratorium period where buyers of PR1MA homes are not allowed to sell their units within a given time have been reduced from 10 years to five years..
This initiative plans to provide affordable housing with a starting price of RM198,000, however, home units located within Klang Valley will start at RM255,000.
In terms of financing, there’s the PR1MA HOPE Home Assistance Programme, which offers financial solutions either through the end financing, Rent-To-Own scheme or The Care by PR1MA scheme.
Check out the full deets here.
2. MYHOME scheme
This scheme provides a subsidy of RM30,000 for first-time homeowners to buy a low or medium cost property. To be eligible you need to be a Malaysian citizen, 18-years-old or above, a first-time homebuyer with a salary between RM3,000 to RM6,000. The table below illustrates how the subsidisation works as well as the property price range that is allowed for properties in Kuala Lumpur.
You can apply for the scheme online through the MyHome scheme website or you can also get the form at the Kementerian Perumahan dan Kerajaan Tempatan (KPKT) office in Putrajaya.
3. My First Home Scheme
This scheme assists young adults with a gross income not exceeding RM5,000 a month or RM10,000 a month for joint applicants. Applicants also need to be 40 years old or below and a 10-year moratorium would also apply, so buyers are not allowed to re-sell or transfer ownership of the property except to immediate family members.
Additionally, the property value you’re planning to purchase needs to be between RM100,000 – RM500,000. The scheme allows young adults to get up to 100% financing which means they won’t have to come up with the 10% down payment.
The scheme is for those working in the private sector and applications can be done at any branch of participating banks. For a list of participating banks, check here.
4. Youth Housing Scheme
This partnership between BSN and the government is a special scheme for married youths aged between 25 to 40 years old with a household income not exceeding RM10,000 per month.
BSN bank will provide loans of up to RM500,000 with financing tenure up to 35 years for married youths who are first-time homebuyers. Applicants must be a BSN GIRO or GIROI account holder.
Additionally, the government will also give 50% of stamp duty exemption for the loan agreement. Successful applicants will be eligible for 100% loan amount of the purchase price with an additional 5% of the purchase price to finance for insurance (MRTA). The government will also provide RM200 monthly aid for the first 2 years to ease the financial burden of buyers.
However the scheme is only on a ‘first come first served’ basis as it is limited to 20,000 buyers or for two years, whichever comes first. To apply for the scheme download the application form here then submit it to any BSN bank branches.
5. Rumah Selangorku
These are for the folks who are looking to buy a home within the vicinity of Selangor. The Rumah Selangorku scheme is an effort from the Lembaga Perumahan dan Hartanah Selangor to help Malaysian aged 18 years old or above earning between RM3,000 to RM10,000 to own their first home.
Properties available range from low cost to medium cost not exceeding RM250,000, making it ideal for entry-level homeowners as well as young working adults who are looking to own a house in Selangor. Applications can be made online at their website.
For more tips on how to buy your first home in Malaysia, check out this handy CompareHero.my guide before you embark on purchasing your first home. Happy house hunting!
Buying a property is a major financial investment. This article is the first chapter of a special three-part mini-series within #PropertyHacks. Follow these tips and tricks to make the most out of your investment. Stay tuned for more content!
