Mutual Fund Investment: Understanding, How it Works, and Tips for Beginners

2022 has entered the fourth month, how are your savings so far? If you are still having trouble saving, it looks like you can try investing with mutual funds. Profit from investation Mutual funds can be your motivation to be diligent in saving.

Moreover, with mutual funds, you can get a better profit than placing a deposit in the bank. Want to know how it works? Read on for the following information.

Understanding Mutual Funds

According to the Capital Market Law of 1995 Article 1 Paragraph 27, mutual funds are a forum to raise funds for the investor community to be invested in securities portfolios by investment managers.

Simply put, mutual funds are crowdfunding of the public to buy a portfolio of securities which tend to be expensive. Mutual funds are indeed an alternative for people who want to invest but still have limited capital and knowledge.

Examples of securities in mutual funds are deposits, bonds, stocks, to a mixture of several securities. Mutual funds are an investment instrument that is suitable for beginners because of the minimal risk and guarantee return tend to be stable.

How Mutual Funds Work

In general, the workflow of mutual funds is very simple, namely as follows.

1. Investors buy a mutual fund unit (UP).
2. The investment manager invests a pool of funds that have been purchased by investors into the type of mutual fund that has been selected.
3. The investment manager monitors the market as well as makes regular reports in Fund Fact Sheets (FFS).
4. Investors can withdraw funds as they wish for a maximum of 7 trading days.

Transaction Security

You don't have to worry about mutual fund schemes where a third party has to manage your funds. This is because mutual funds are indeed an official investment product that is supervised by the Health Services Authority (OJK).

Starting from the rules of mutual fund products themselves to those who manage investment funds such as investment managers and custodian banks. Well, before providing services, these parties must first have official permission from the OJK.

Therefore, to ensure the credibility of third parties, make sure the investment manager you will choose is registered with the OJK so that you avoid being scammed.

Mutual Fund Benefits

1. Affordable cost. You can start investing in mutual funds starting from IDR 10.000 to IDR 100.000.
2. Investment diversification. There are many types of mutual funds, you can choose them according to your goals and risk profile. Given the affordable cost, you can allocate your investment to various types of mutual funds.
3. Managed by professionals. You don't have to worry if you can't monitor the market potential because that is the job of the investment manager. In addition, the investment manager is also tasked with reporting portfolio performance periodically in the FFS.
4. The existence of periodic reports on portfolio performance indicates a transparent mutual fund model. Mutual fund performance is also regularly informed in the media every day.
5. Easy registration and search process. You just need to prepare your KTP or NPWP to register and start investing. In addition, the process of disbursing funds is also very easy. Just contact the investment manager then wait for your money in the account.

Investment Tips for Beginners

After knowing the benefits of mutual funds, make sure you learn the right way of investing. In addition, before starting to invest, make sure you also do thorough research to choose the best mutual fund product.

There are mutual funds from various banks such as Bank Mandiri, Bank BCA, Bank BSI, and the like for investors who have a conservative profile. On the other hand, if you want to be more independent in determining your product and risk profile, you can use marketplace mutual funds such as Bibit, Bareksa, Tanamduit, and Magic.

Well, we have tips for beginners to start investing with mutual funds.

1. Set goals. It can be short term or long term. You can state your investment objectives by entering the elements “what is the amount”, “how long”, and “for what”.
2. Define a risk profile. In general, there are three types of investor risk profiles, namely conservative, moderate, and aggressive. Conservatives don't like big risks so they are willing to accept return small but still stable and minimal risk. Moderates are willing to endure short-term fluctuations and want a hefty profit. Aggressive is one who dares to take high risks but also wants return commensurate.
3. Choose the type of mutual fund that suits your goals and risk profile. The right type of mutual fund will help you achieve your goals according to your plan.
4. Research the best mutual fund products by looking at the prospectus. Always read the prospectus to see how a mutual fund is performing. Also analyze FFS mutual funds to see their track record in the past.
5. Choose an investment manager. Most importantly, make sure the investment manager is registered with the OJK. Then make sure how it has performed in the past while managing investment funds.
6. Investment routine. You don't need a lot, as long as you invest regularly because "a little bit, over time it becomes a hill".

Thus today's brief discussion about mutual fund investment. Before starting to invest, make sure you have equipped yourself with basic information about mutual funds, for example about types. Hope it is useful!

Image source headers: Freepik

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