How I’m Earning Passive Income In Malaysia

When I first started working at my first full-time job almost 30 years ago, I already had retirement on my mind.

My mother had just retired from a 35 year-long career, and was about to transition from working for a salary to living on a monthly pension.

I was also fully aware that I, on the other hand, would not have a pension to live off of once I retired, since I didn’t work for the government.

So then what bubbled up was an endless series of questions that stayed at the back of my mind as I began my working life:

• How do people who don’t have a monthly pension survive after retiring?
• How much money will I need to (one day) stop working?
• How much money do I have to start saving so that I’ll have enough for retirement 35 years from now?
• How on earth am I going to set aside that much money with my measly (starting) salary?
• What is this thing called investing that I keep hearing about and how can it help me?

…and the list went on.

Having to find answers to these questions made me determined to learn all I could about budgeting, saving and investing.

What also became obvious to me was this: That I would have to create my own pension.

There was no financial independence, retire early movement back then, and at the ripe young age of 23, I knew that I had a long runway on my side, so I came up with my own plan: Just save and invest as much as humanly possible.

That’s when I bought my first stock.

Since then, I’ve grown that very first stock buy into an investment portfolio that helps pay for my monthly expenses.

Here’s what I’ve been investing in to generate that passive income:

Dividend Stocks

I stumbled upon dividend stock investing early on in my investing journey, and by accident.

At the time, I knew that investing in stocks was something that I had to do if I wanted to grow the money I’d already saved, so I went ahead and bought my first blue-chip stock.

Months later, I received a letter and cheque for RM200 in the mail from the company I’d recently invested in.

I’d just gotten my first taste of being paid a dividend — a payment from a company’s earnings to its shareholders — and a light bulb went off in my head.

I thought to myself: “What if I owned a bunch of stocks like this, and got paid dividends not just once or twice a year, but on most months of the year?”

And so that’s exactly what I started aiming for, and over 20 years of investing later, I’m reaping the rewards of walking the dividend stock investing path.

I’m not done yet though — I’m always learning and refining my investing strategy to make smarter decisions.

Real Estate Investment Trusts

As someone who’s averse not only to debt but the idea of dealing with tenants, buying an investment property was never on my radar.

But I still want to earn rental income.

Lucky for me, I found that I can have my cake and eat it too when I discovered real estate investment trusts (REITs) — companies that own and run income-producing commercial real estate.

And the great thing about these companies is that you can buy or sell their stock on Bursa Malaysia, just like you would for any other listed company.

REITs generally pay out at least 90% of their taxable income to their shareholders each quarter, making them a great addition to my income portfolio.

Amanah Saham Nasional Berhad Funds

I was lucky enough to acquire a decent number of fixed-priced Amanah Saham Malaysia units from ASNB over the years.

These funds are a pure income play for me (ASNB allows withdrawals of up to RM2,000 per month).

I went in knowing that my initial capital wouldn’t grow (unless I re-invest my annual dividends) since the unit prices stay fixed, so I basically treat these funds as high-interest savings accounts (their Amanah Saham Malaysia fund has returned an average dividend rate of 4.75% per year).

Unit Trust Funds

Unit trusts have a bad reputation, and for valid reasons.

Reason number one: Their fees.

You’ll likely have to pay a one-off sales charge of between 1.5% and 5%, plus annual management and trustee fees, and these will add up to eat into your returns.

These types of fees typically come with any kind of actively managed fund or portfolio (like one that’s managed for you by a financial advisor), and it all boils down to your personal preferences.

I tend to prefer lower-fee investment options like individual stocks and exchange-traded funds, but when it comes to certain asset classes like bonds, I prefer unit trust funds.

Unlike corporate bonds (where you lend money to one company in six-figure amounts), these are convenient to buy into (they’re available through banks, fund management companies and online investment platforms), are lower risk because they invest in a basket of bonds, and require much lower minimum investment amounts (typically RM100 or more).

Reason number two for the unfavourable reputation of unit trusts: Picking winning funds isn’t easy, and investing into the wrong ones can put you on a losing streak.

This is why I’ve chosen to invest primarily in bond funds, which are lower risk than equity funds, and have proven to be a consistent source of income for me on most months.

Cryptocurrency Staking

I started buying cryptocurrencies out of curiosity several years ago.

My crypto buys were largely ad hoc and depended on whether I had some spare cash lying around, but more recently, I’ve started dollar-cost averaging into it for no other reason than a fear of missing out.

I’m fully aware of how volatile and speculative crypto is, and if it takes off, I stand to benefit from the uphill ride.

If it tanks, it’ll pinch, but it won’t be a big enough amount to put a significant dent in my overall portfolio.

I’ve also started experimenting with staking, which has been earning me a small trickle of income each month.

So far, so good as far as the staking goes, and I’m considering upping my stakes (literally) as my crypto portfolio grows (which it isn’t as the moment, thanks to prices taking a dive).

Fixed Deposits

This is where I stash spare cash that I haven’t decided what to do with, or that I don’t want exposed to the ups and downs of the markets.

Although much less than the income from my other investments, they offer a stable, predictable cash flow within the period of their placement — typically one to twelve months at a rate of between 2.5-3.5%. annually.

Employees Provident Fund

Given that any cash that’s deposited into an Employees Provident Fund (EPF) account is supposed to be capital-guaranteed and income-generating (the good folks at EPF guarantee an annual dividend of at least 2.50%), these combined benefits make investing in the EPF a no-brainer.

With an average dividend payout rate of 5.88% over the last 10 years, I consider it to be one of the biggest profit-driving engines in my portfolio.

The only downside I see (as an investor who’s prioritising passive income generation to fund my life) is the accessibility of my funds, although the recently introduced Account 3 (Akaun Fleksibel) somewhat mitigates this drawback.

However, given that this is a retirement account and that I’m gunning for maximum compounded returns for my future self, withdrawing from my EPF funds is something I would never consider unless I had no other choice.

I’ll just have to make prudent investment choices with the rest of my portfolio, which I do have access to.

The Role Of Passive Income In My Life

I fell in love with the idea of building multiple streams of passive income early in my working life, and I’m glad I did.

Coincidentally, as this trickle of income grew into something more over the years, so did my weariness at work.

I was tired of having to deal with the daily traffic-clogged commute, toxic workplace politics, resulting chronic anxiety, and the sense that I was on a never-ending hamster wheel that I would never be able to jump off of if I didn’t have a backup plan.

So when I finally experienced a trickle of cash coming in from my investments, my hope grew.

This passive income growth reaffirmed my decision to go all in with investing.

Yes, it has meant making sacrifices in many areas of my life: Staying home while my friends went out, juggling an average of three jobs at any given time (leading to severe burn-out), putting off buying my own home, and sticking to a strict monthly budget so I could pump as much cash as I could into my investments.

But now, almost 30 years later, the passive income from my investments has grown considerably and is literally saving my sanity.

Having this income has meant:

• Being able to quit my full-time job to work on projects and schedules that work for me.
• Not having to worry about how I’m going to pay my bills if I decide to take time off from work to deal with life.
• Having the luxury of being fully present and generous with friends and family when I’m with them, instead of constantly distracted by work or cash constraints.

The income I’ve been earning may be passive, but it’s allowed me to step up and take a more active role in living a more authentic, meaningful and present life.

What about you? What have you been investing in to build your passive income?

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Photo by Austin Distel on Unsplash