Mutual funds are an investment product that can be used in wealth management, especially for wealth accumulation. The following is an explanation of mutual fund investing strategies.

What Are Mutual Funds?

Mutual funds are investment products managed by investment management companies. Investment managers will invest in products such as short-term debt (money market), long-term debt (fixed-income), or stocks.

The following is an example of an equity fund product available on the Moduit App*:

*) Disclaimer: mentioning examples of mutual fund products are intended for educational purposes, not investment advice. Please ensure you get investment advice from a trusted financial advisor.

The mutual fund's name (see letter A) is Panin Dana Teladan. The type of fund is an equity fund (see letter B). An investment manager manages mutual funds, which PT Panin Asset Management manages (see letter C).

The investment guidelines (see letter D) are at least 80% in stocks or equity securities. The remainder is invested in the money market or cash equivalents. Currently, the investment position is (see letter E) 81.98% in stocks and the remaining 18.02% in money market and cash.

The ten highest weighted investments are sorted alphabetically and include (see letter F): Panin bank deposits, Raya Indonesia bank deposits, BCA shares, and so on.

You can also see the mutual fund's performance (see letter G).

• YTD (year-to-date) mutual fund performance measures performance from the beginning of the year until the fund fact sheet was created, which is 29.21%.
• Compared to last year's prices, the 1-year performance of the mutual fund has experienced an increase of 30.73%.

Apart from Panin Dana Teladan, the Moduit app has other mutual funds from various investment managers.

Benefits of Investing in Mutual Funds

The advantages of investing in mutual funds are:

1. Mutual funds provide benefits in capital gains suitable for wealth accumulation.
2. It can be purchased affordably with some mutual funds' minimum purchase starting at IDR 100 thousand.
3. It can be adapted to different investment objectives (e.g., time horizon, profit target, maximum risk, and so on).
4. Mutual funds also have no risk of loss because the custodian bank will guarantee the safety of mutual fund assets, such as interest and dividends.
5. The investment is very flexible and liquid. The maximum time for funds to be received is T+7 working days.
6. Mutual fund profits are net of taxes because mutual funds are not taxable. Investors only need to report it on their tax returns.

The risks of investing in mutual funds are:

1. Risk of capital loss due to a decrease in the value of mutual funds. This risk can be mitigated by periodically reviewing mutual fund performance with a wealth advisor.
2. Risk of mismanagement (default) by the investment manager. Moduit risk mitigation employs the PRIME framework and due diligence with investment manager partners.
3. Risk of misinformation when buying mutual funds. For example, being promised a certain return. MODUIT as a registered investment advisor applies a precautionary function to mitigate the risk and never promises an inevitable return.

Types of Mutual Funds

In general, mutual funds are divided into four categories, which are:

Money Market Funds

Money market funds are mutual funds in which 100% of the funds under management are placed in short-term debt securities with tenors of < 1 year (money market) or cash equivalents.

Money market funds are suitable for short-term needs (< 1 year) and maintain liquidity. The average return for money market funds is 3% - 5% per year.

Fixed-Income Funds

Fixed-income funds are mutual funds where at least 80% of the managed funds are placed in long-term debt securities with tenors of > 1 year (bonds or fixed-income).

Fixed-income funds are suitable for medium-term needs (1 – 3 years). The average return for fixed-income funds is 5% - 8% per year.

Balanced Funds

Balanced funds are mutual funds where a maximum of 79% of the managed funds are in long-term debt securities with tenors of > 1 year (bonds or fixed income) or stocks.

Balanced funds are suitable for medium to long-term needs (1 – 5 years). The average return for balanced funds fixed income mutual funds is 8% - 12% per year.

Equity Funds

Equity funds are mutual funds where at least 80% of the managed fund is in stocks.

Equity funds are suitable for long-term needs of around five years. The average return for equity funds is 10% - 15% per year.

Active Investing vs. Passive Investing Mutual Funds

Investment managers actively manage some mutual funds, and some are managed passively.

• Active management means the investment manager actively buys and sells shares during a specific period. Usually, the performance of actively managed mutual funds is highly dependent on the investment manager's skill.
• Passive management means that investment managers only follow certain indexes, for example, the IDX30 index. Usually, the performance of passively managed mutual funds (e.g., index funds) will follow the index's performance.

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

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