Investment is one way to grow wealth and/or increase income. The following is a discussion of various investment products in Indonesia.

What Is Investment?

The definition of investment according to some experts:

Bodie, Kane, Marcus (2013)

Investasi adalah komitmen uang atau sumber daya lainnya saat ini dengan harapan menuai keuntungan di masa depan.

Adam Hayes (2022)

Investasi adalah kegiatan mendapatkan asset yang menghasilkan kenaikan harga atau mendatangkan pemasukan.

Financial Services Authority

Investment is a placement of capital, usually long term, for the procurement of complete assets or the purchase of shares and other securities to gain profit.

How Investment Works

Investment works by way of compound interest. An example of IDR 1 million earning a profit of 10% per year in the next 5 years would be:

Year 0: IDR 1 million
Year 1: IDR 1 million x (100% + 10%) = IDR 1.10 million
Year 2: IDR 1.10 million x (100% + 10%) = IDR 1.21 million
Year 3: IDR 1.21 million x (100% + 10%) = IDR 1.33 million
Year 4: IDR 1.33 million x (100% + 10%) = IDR 1.46 million
Year 5: IDR 1.46 million x (100% + 10%) = IDR 1.61 million

In financial management, this is known as the time value of money formula.

Formula used:

Notes: FV: future value or investment return PV: present value or current investment capital PMT: routine payment or investment (invest every month) r: return or profit on investment n: investment period

This means

• The greater the current investment capital (PV), the greater the potential profit (and risk) that can be obtained.
• The greater the regular investment capital (PMT), the greater the potential profit (and risk) that can be obtained.
• The longer the investment period (n), the greater the potential profit that can be obtained.
• The greater the investment return (r), the greater the potential profit and risk that can be obtained.

Why Invest?

There are two types of investment benefits, wealth accumulation or capital gain, and generating income.

Disclaimer: Mention of securities (eg mutual funds, stocks, bonds) is intended for educational purposes, not investment advice. Please contact your investment advisor or wealth advisor for investment advice.

Investment to Increase Wealth (Capital Gain)

For example, Mr. Andre invests in buying Bank BRI shares at a price of IDR 4,250 per share. Currently the share price of Bank BRI has become Rp 4,880. Then Mr. Andre's advantages are:

= (Rp 4.880 – Rp 4.250) / Rp 4.250 = 14,8%

If Pak Andre's total investment was Rp. 1 billion, then Mr. Andre's wealth would increase by 14.8% x Rp. 1 billion = Rp. 148 million.

The function of increasing wealth in wealth management is a function of wealth accumulation and can also be used to beat Indonesia's inflation (10 year average = 4.02% per year).

Source: Website Resmi Bank Indonesia

Notes: ** Based on PMK No. 124/PMK.010/2017 18 September 2017

Investment to Generate Income

For example, Pak Andre invests Rp. 1 billion in Bank BRI shares. Bank BRI shares provide a dividend of 3.57% (blue arrow) in 2022.

Then the income derived from the dividend of Bank BRI is = 3.57% x IDR 1 billion = IDR 35.7 million

Examples of Investment Products

In general, investment is divided into three types, namely investment in real assets, paper assets and digital assets.

Investing in Real Assets

According to Investopedia, Real assets are tangible investments that have intrinsic value because of their substance and physical properties.

Examples:

• Invest in boarding houses (rented houses), which benefit from monthly rental income, rising land prices and depreciating house prices.
• Invest in a wallet bird house
• Invest in precious metals, such as gold and silver.
• Investment in land for plantations or agricultural.
• Investment in land for mining purposes

Investing in Paper Assets

According to Investopedia, paper assets (also known as financial assets) are liquid assets that derive their value from contractual rights or claims of ownership.

Examples:

• Invest in stocks
• Invest in bonds
• Invest in mutual fund
• Time deposits (money market products)

Investing in Digital Assets

According to Investopedia, digital assets are anything that is created, stored, identifiable, & discoverable digitally, and has value.

Examples:

• Non-fungible tokens (NFT)
• Cryptocurrency
• Tokens
• Crypto Assets
• Tokenized Assets
• Security Tokens
• Central Bank Digital Currencies

The difference between Investment, Trading and Speculation

Investment activities, trading, and speculation look similar but have many differences. Here is a table of differences:

According to Melvin Mumpuni CFP®, one of the reasons for failure in investing is due to, “Most people claim to INVEST, but the strategy used is SPECULATION or LUCK.”

How to Invest to Get Optimal Results

Some of the investment strategies that have been submitted by the world's top investors:

#1 Focus on Risk Management

“The essence of investment management is the management of risks, not the management of returns.” Benjamin Graham

When making investment decisions, apply risk management. Perform maximum loss calculations and strategies to reduce the risk of loss.

#2 Learn BEFORE Investing

“Invest in what you know.” Warren Buffett

If you don't have much experience with something, then you can learn or ask the experts. In terms of investment, you can consult a wealth advisor.

#3 Diversify the Right Way

"Wide diversification is only required when investors do not understand what they are doing." Warren Buffett

Diversification or asset allocation aims to reduce investment risk. As with eggs, don't keep all your eggs in one basket. If the basket falls, then all the eggs will break.

However, if spread out too broadly, the results will not be maximized. Investment will generate optimal profit, if it is more concentrated (Concentrated Investing).

Want to Start Investing?

You can become a Moduit Beyond client by contacting us on this form or contacting a Moduit Beyond wealth advisor.

PT Moduit Digital Indonesia is an investment advisory company under OJK (Decree: KEP-30/D.04/2019).

Moduit Beyond is a Wealth Management service handled by experienced wealth advisors.

You can start becoming a Moduit Beyond client by filling out a form and investing a minimum placement of IDR 1 billion. As a Moduit Beyond client, you will receive many benefits such as:

• Personal advisor
• Curated financial products
• Priority access for newly launched products & services
• Daily reports on the market
• Priority call center
• Exclusive lounge access
• Year-end gifts