Is a 12% Annual Return Considered Low?
•By Maher Alias
Artikel ini juga tersedia dalam Bahasa Melayu
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The following is part of a report published by the Securities Commission Malaysia: National Strategy for Financial Literacy 2019-2023.
The report found that Malaysians consider an annual return of 12.4% to be low.
Meanwhile, an annual return of 42.9% is considered a high return.
According to the report, investors were found to have unrealistic expectations regarding annual returns from investments in capital market products.
Similarly, the awareness about the amount of losses investors are willing to bear indicates a lack of understanding regarding the level of investment risk in the capital market.
There are several investment instruments that investors favour with the aim of growing their money.
Examples include stocks, unit trusts, gold, property, and ASB.
For investors who prefer low-risk investments, they typically choose instruments such as ASB, AHB, and Tabung Haji.
On average, the returns from these instruments are estimated at 5% to 6% per year.
After investing in low-risk options, investors then expand their portfolio by investing in property stocks, unit trusts, and gold.
Investors are allowed to increase their risk exposure according to their willingness to bear that risk, starting from low-risk to high-risk investments.
Indeed, these instruments can deliver returns of up to 100% or even 200%.
In the stock market, a 100% gain for a particular counter typically takes at least 5 years.
However, it depends on the performance of the company.
If the company performs well, its stock price will also rise.
A company''s share price can also surge if there is positive news about the company.
The question is, how often can investors enjoy such opportunities?
In investing, we are taught to maximise profits while minimising losses.
It is better to have low but consistent and continuous returns than high returns that carry high risk.
One wrong move, and you could face never-ending losses.
This is because stock market profits are categorised as passive income — supplementary income that supports your primary source of earnings.
Investors also need to manage their emotions wisely to keep their investment objectives on the right track.
This is because the long-term objectives of an investment differ from short-term ones.
So, do not let emotions influence your decisions.
In the stock market, it is not impossible to achieve high returns, but maintaining such consistency is extremely challenging.
Let us talk about realistic profits.
A daily profit of 1-3% is realistic to discuss compared to a 30% daily gain.
Moreover, this is especially true when the stock market is in a bearish phase.
It is therefore not surprising that many people fall victim to get-rich-quick schemes because they want high returns.
According to statistics, 17 million victims of investment syndicates have been reported with estimated losses of RM4.9 billion.
In fact, get-rich-quick schemes have undergone a digital transformation and even mimic stock trading systems.
These digital get-rich-quick schemes can now cross borders, built on the success of replicating the Bursa Malaysia platform.
What is even more disheartening is that the targets of these scams are often the elderly.
This is because this group is easily deceived as they lack knowledge about get-rich-quick scams and often use capital withdrawn from their EPF savings.
Remember, it is impossible to achieve high returns in a short period with minimal capital.
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A realistic annual return from stock investments in Malaysia ranges from 5% to 12%, depending on the instrument and risk level. Low-risk instruments like ASB and Tabung Haji typically yield 5-6% annually, while higher-risk investments such as individual stocks may deliver higher returns but with greater volatility.
According to the Securities Commission Malaysia, many Malaysians consider a 12.4% annual return as low and expect returns of 42.9% or higher. This unrealistic expectation stems from a lack of financial literacy and understanding of capital market risks, which makes them vulnerable to get-rich-quick schemes.
Investors should be wary of any investment promising exceptionally high returns in a short period with minimal capital. Always verify investments through the Securities Commission Malaysia, avoid unregulated platforms, and remember that consistent moderate returns are far more sustainable than chasing unrealistic gains.