Investing in Mutual Fund

Why is it important to invest? That’s the most common question people ask about investing, but first of all, it is important to know the definition of investment.

Investment is a sacrifice that is being done for now with the expectation to get better result in the future. And why bother to invest? The answer is simply because everybody wants to get rich and there are 2 ways of getting rich. First, is by getting more income through working, second is by letting your asset doing all the work for you.

Let’s say you have IDR 10 million in your saving account. The average interest rate of saving account is 1%-3,5% per annum and the inflation rate in Indonesia is about 3,2%. Meaning that, if you get 3,5% interest rate from your saving account, your net income is only 0,3%. Imagine if you only get 1% of interest rate from your saving account, instead of getting more income you will experience loss due to inflation.

That’s why it is important for us to invest in investment instrument which will yield more than the inflation rate. One of the investment instruments that you can rely on is mutual fund. So, what is mutual fund?

According to Capital Market Act no 9 year 1995 chapter 1 article 27, Mutual fund is an instrument used of collecting funds from investors to be invested again in securities portfolio by Investment Manager.

In a simple way, mutual fund is form of investment that let people to gather their fund to be managed by professionals. Those funds will be invested again in equity, bonds, money markets, and other securities, which is combined to form a mutual fund product. If we use an analogy mutual fund is like a basket contained of many investment products. That’s why if investors buy a mutual fund product, they will buy a basket contained of many investment products.

The benefits of investing in mutual fund is:

  1. Easy to access
    Nowadays, it is very easy to buy mutual fund products. Anyone can open an account in a company that sells mutual fund products which already have the license to sell mutual funds known as Selling Agent and start investing. You can start investing mutual funds through Moduit, it is reliable because Moduit is already authorized by the Financial Service Authority as an agent to sell mutual fund products.
  2. Diversification
    Since mutual fund product can invest in many types of investment instrument, it is possible for
    you to do diversification by investing in one product of mutual fund.
  3. Variances of product
    When your asset is growing along with your financial journey, of course you want to start investing in other type of investment product. Mutual fund products have many variance and category which can fulfill your needs.
  4. Affordable
    Investing in mutual funds products don’t need a big amount of money. You can afford some of mutual fund products only with IDR 10.000. Also, there is no transaction fee to purchase mutual fund products.
  5. Managed by professional
    The biggest benefit to invest in mutual fund is, you don’t need to spend a lot of time to do research and in-depth analysis regarding products in your investment portfolio, because all of those efforts are already being done by the investment manager that issued the mutual fund products.
  6. Flexible
    Mutual fund is not binding, so you can sell your product anytime you want without any consequences.

In conclusion, mutual fund is suitable for those who are inexperience in investing. But you also need to take into account that it is not necessarily suitable for each individual and investors should be careful to choose what kind of product which is suitable for their financial goal and risk profile.