10 Advantages of Mutual Fund Investment
5/28/2022
Mutual funds are one of the most popular investment products today. In the form of collective investment, mutual funds are indeed an option for storing liquid assets that are affordable for all people.
As an illustration, data from PT Kustodian Sentral Efek Indonesia or KSEI shows the growth in the number of mutual fund investors is the highest compared to others.
As of the end of July 2021, the number of mutual fund investors reached 5.16 million, up 62.68 percent compared to the position at the end of 2020. Meanwhile, stock market investors or C-Best reached 2.59 million, up 52.77 percent.
Meanwhile, investors in state securities (SBN) currently amount to 544,891, up 18.36 percent year to date (ytd). Overall, the number of capital market investors in Indonesia reached 5.82 million, an increase of 50.04 percent.
The dominance of these mutual fund investors shows how well known these investment products are. However, do you know what the advantages of mutual funds are compared to other investment products?
Before we go there, let's try to get acquainted with the notion of mutual funds. According to the Capital Market Law, mutual funds are a forum used to raise funds from the public (investors/investors) to be subsequently invested in a portfolio of securities or securities by investment managers.
Investment managers themselves are professionals who have received permission from the Financial Services Authority (OJK), which can take the form of individuals or institutions. In Indonesia, the investment manager is a limited liability company or PT.
Based on OJK data, currently there are 97 companies registered as investment managers (MI) in the country. MI names usually use the words 'Asset Management or Asset Management', 'Investment Management or Investment Management', 'Investama,' and 'Capital or Kapital.'
There's also a lot of MI. Really, how many mutual fund products are there in Indonesia today?
on't be surprised, according to the latest data from the OJK, the number of mutual fund products is 2,208. Wow, that's a lot, don't you have to worry about choosing it if you want to invest?
However, in this article we are not discussing how to choose mutual funds, we will discuss that in the next article.
Now, meanwhile, the total funds managed by MI through thousands of mutual funds reached IDR 549.90 trillion at the end of early August. All that money...
Apart from MI, in mutual funds there is also known as a mutual fund selling agent or APERD. Well, this is what we usually buy from APERD. However, you can also buy mutual funds directly from an investment manager.
Currently there are 71 APERD, up from the end of last year which was 61. Examples of this APERD are Bibit, Moduit, Tanamduit, Bareksa, Indo Premier Sekuritas (IPOT) and others. The majority of banks in Indonesia also have permits as APERD you know … especially in the wealth management division.
Mutual Fund Advantages
Now, let's talk about the advantages of investing in mutual funds. Maybe you already know some of it, but many are still curious.
You know, out of hundreds of millions of Indonesians, only about 5 million have mutual fund accounts.
1. Easy
How easy? Even though it looks complicated right? It's complicated because maybe you don't know or have never invested in mutual funds.
For those who have experienced mutual fund investing, of course it is very easy. This is because you don't need to understand very high financial knowledge to be able to invest in mutual funds.
Mutual funds basically leave funds to the investment manager, so that MI is the one who is concerned about how to allocate the funds according to what is stated in the prospectus.
What is a prospectus? The mutual fund prospectus is a complete explanation of the mutual fund products offered to the public. It includes investment strategies, on what securities customer funds will be rolled out, and much more. Therefore, you must read the prospectus before buying a mutual fund.
So, here, you buy mutual funds and simply monitor the movement of your investment returns via a gadget —of course, if you invest through APERD, which provides a platform with real . Usually, it is fintech that has advanced facilities.
Another convenience comes from the registration process and buying and selling ( subscription and redemption) of mutual funds. Everything can be fully online . In fact, for those of you who don't have an SID or single investor identification , or our identity as capital market investors.
Trust me, from the outside, the terms are a bit complicated. When you practice, everything feels easier.
One more thing that makes product selection easy. Namely, the availability of robots in a number of fintechs to match the investor's risk profile with the appropriate product.
What else is a robot? Don't worry, you are just an artificial intelligence machine that makes it easier for investors to choose mutual funds.
So, you will only be chosen by the appropriate product robot. Of course, you have to check which APERD in the application provides a robo advisor .
2. Transparent
Yup , mutual fund investment is one of the most transparent, especially in line with the development of information technology.
We can see the development of investment through platform , for those who use it like fintech. There are also banks that have platforms for mutual funds that can be monitored daily, such as BCA and OCBC NISP.
Mutual fund price information, which is commonly referred to as net asset value (NAV), updated every working day after the capital market closes. So, price changes are usually seen in the afternoon or evening, if there is no delay.
So, every day you can see changes in your mutual fund portfolio.
In addition, every month the investment manager also publishes the name of fund fact sheet which contains data on the latest developments in the mutual fund along with (usually) the 10 assets held by the mutual fund the most.
For example, if it's a stock or mixed mutual fund, there is data on what stocks are held the most. So you know, whether the mutual fund holds fried stocks, or blue chip .
3. Affordable Initial Investment Value
This seems to be the most influential, right? Mutual fund investment can be started from funds that are small enough for the pockets of the majority of people. Some have a minimum purchase of Rp. 5,000, many have a minimum of only Rp. 10,000, some have a minimum of Rp. 100,000.
However, there is also a minimum investment requirement of IDR 10 million, but it seems rare. Well, for global mutual funds, the minimum requirement is usually pretty good, for example US$1,000.
Of course, you can adjust to the state of your pocket for mutual fund investments. It is relatively affordable compared to, for example, investing in retail deposits or government securities (SBN) which are at least Rp. 1 million.
Tips for you, set aside regularly even though the value is small. For example, every day you set aside IDR 5,000 or IDR 10,000 from your e-wallet . Or, it could be monthly, for example IDR 300,000 per month, it will definitely feel light but the impact will be felt really later.
Instead of buying a coffee latte , it's better to set it aside for mutual funds.
4. Diversification
Diversification, or separating funds into assets with different levels of risk, is one of the keys to investing. The adage most often echoed about diversification is:
Well, if you invest in mutual funds, your funds will automatically be diversified because investment managers will buy different assets. For example, for shares, MI can hold a maximum of one share less than 10 percent of the total managed fund.
That way, if one stock falls, other stocks can be safe and can reduce overall risk.
5. Liquidity
Liquidity is the ability to meet short-term obligations. For example, if you need funds and have to withdraw mutual funds, then the investment manager must immediately withdraw it.
Therefore, in mutual funds you can withdraw your investment at any time. Only, it takes time to thaw. For money market mutual funds, it is usually the fastest, 2 days can be liquidated.
In general, the maximum liquid funds that enter your account is 7 working days from the sale/ redeem . It's different if you invest in a deposit, where you can only withdraw it after maturity.
6. Relatively Higher Yield
This is an important attraction for those who invest. Of course you expect the funds to grow. In mutual funds, your money can grow according to the character of the mutual fund you hold.
For money market mutual funds, for example, they can be compared to time deposits. If state-owned bank deposits currently provide interest below 3 percent per year, then money market mutual funds can provide higher yields, 5 or 6 percent.
The potential for greater returns is in stock mutual funds, which on average can provide returns up to a dozen percent. In fact, there are stock mutual funds with hundreds of percent returns, because the stock price increase can be very significant.
However, of course the risk is also higher for the same mutual fund. Therefore, you should carefully choose mutual funds according to the risk tolerance you can bear.
7. Different Types of Mutual Funds
There are at least four types of mutual funds that we commonly encounter, namely money market mutual funds, fixed income mutual funds, mixed mutual funds, and equity funds.
There are also protected funds that tend to be similar to fixed income funds, but have a maturity period. As a result, it cannot be withdrawn at any time.
On the other hand, there are also index mutual funds and ETFs which are developments of stock mutual funds.
Well, the types of mutual funds also determine the character of each. The difference in mutual funds certainly makes it easier for you to choose a product that fits your risk profile.
What is a risk profile? The risk profile is our tolerance level for the risk of asset impairment. There are at least three main types of risk profiles, namely the conservative type, the aggressive type and the moderate type.
Conservative types are those who tend to dislike high risk. For the aggressive type, as the name suggests, the opposite of the conservative type, which is bold with investment risks. Aggressive types dare to take risks because they also hope to get a higher return.
The moderate type is the one whose level of courage is higher than the conservative type but not as high as the aggressive type.
Now, if you already know your risk profile, you can choose the right mutual fund. If you are not too brave with the decrease in investment value, you can choose money market mutual funds and or fixed income mutual funds.
If you are aggressive, equity funds are for you. For those who are moderate, can choose a mix and a fixed income.
Of course, you don't have to, yes, you can combine them too. It is usually recommended to divide the funds into 3 different mutual funds. Well, the proportions are different.
8. No Risk of Losing
What do you mean, huh? Imagine if your house caught fire—God forbid, don't let it happen—then your banknotes at home could be sold out. The gold in your drawer can also be lost. Or, property scorched.
Unlike mutual funds. Because the funds are kept by the custodian bank, not the investment manager, yes, it is safe from the risk of theft or fire.
smartphone is lost, you can still secure your mutual funds. Of course, while maintaining the confidentiality of the account and password .
9. Tax Free Profits
Really? Yes, it is true. Mutual fund profits are already tax-free, will not be deducted again. This is because the assets managed by MI have been taxed. So what you receive is clean.
It's different if you buy deposits or buy Retail Bonds. The deposit interest tax is 20 percent, while the SBN yield tax is 15 percent.
10. Supervised by the government
Mutual funds are regulated by the government. Mutual fund investment activities are closely monitored by OJK.
Indeed, there are several cases of mutual funds that violate the law, but in this case the regulator can act immediately.
After all, our funds are not actually held by the investment manager, but in the custodian bank. MI only acts as a party that regulates asset allocation, does not hold funds directly.
Well, between MI and the custodian bank are usually not affiliated, thus reducing the risk of collusion.
