The stock market is hugely popular, not only in Malaysia but the entire world. During the Movement Control Order (MCO) back in 2020, retail investors made a huge splash in Bursa Malaysia, and most investors made quite a handsome profit.
Let’s look at the two ways which you can earn in Malaysia share investment.
1. Capital Gain
Capital gain is the increase in a capital asset’s value and is realized when the asset is sold. It is the profit that you get when the selling price of the stock exceeds its purchase price. It is the difference between the selling price (higher) and purchase price (lower) of the stock.
Stock ABC price = RM1 per unit
Buy 10 lot (100 unit) = RM1 x 100 units
Purchase price = RM1,000
One month later
Stock ABC price = RM1.10 per unit
Selling price = RM1,100
Profit/Capital gain = RM100 or 10%
The above shows an example of how a capital gain of 10% is being made. ABC price went up by RM0.10, and was then sold at RM1.10.
*Note, the profit does not take into consideration costs such as brokerage charges, stamp duty and clearing fees. The net profit should be less after deducting these fees
The second way to earn in Malaysia share investment is through dividend. A dividend is the distribution of a company’s earnings to its shareholders and is determined by the company’s board of directors.
When a company generates a profit and accumulates retained earnings, those earnings can be either reinvested in the business or paid out to shareholders as a dividend. Dividends are often distributed quarterly and may be paid out as cash or in the form of reinvestment in additional stock.
If the company is not making good profit, or even making a loss, then we shouldn’t expect any dividends from the company. In fact, we don’t invest in these companies that do not have good fundamentals.
Malaysia Share Investment: Capital Gain VS Dividend?
The stock market is suitable for all kinds of investors. There are those who are in for the short term, perhaps capital gain is more suitable. But do keep in mind that if a stock price can go up so fast, it can go down even faster.
Whereas dividend stocks are more suitable for those who are in it for the long term. By investing in good and strong fundamental companies, you should be able to get a steady stream of dividends.
But that shouldn’t stop you from looking for stocks that can give you both capital gain and dividend right?
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