Revealing the Mystery of Mutual Funds


Many of us have heard of Mutual Funds or have even been encouraged to invest in it, but still have made no effort to take out some of money from our savings account to invest it in this “basket”.

Data showed that Indonesia’s mutual funds industry remains small compared to the banking industry. The Jakarta Globe reported last month that total assets under the nation’s    119 commercial banks stood at Rp 4,000 trillion as of September, according to data from the central bank.

Meanwhile, funds managed by fund managers in the country totaled
Rp 172.2 trillion as of October, which was up 9 percent on a year earlier, but still relatively small.

Keeping our hard earned money in the bank is good, but it won’t build our personal wealth because the saving interests can’t keep up with the inflation. That’s why people invest on stocks, properties, bonds and other instruments.

Mutual Fund is simply a pool of money deposited by individual investors, insurance companies and other financial institutions. This pool of money is managed by an Investment Manager -- an individual or institution that has the expertise in choosing potential assets -- that will give maximum return to all members of the Mutual Fund.

How to Start?

Since Mutual Fund generally provides higher return than time deposits, it can be a simple way of building up wealth over a long term. Here are two important tips before deciding to invest:

1. Know your capacity and goal. As a beginner investor, put the spare money you have after paying expenditures and securing an emergency fund. This is the money that you can grow, but also you can afford to lose.   

2. Make yourself informed. There are plenty guides on Mutual Fund provided by the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK), asset management firms like Danareksa, Manulife Asset Management, banks and others. The last thing you want is to invest on something you don’t understand or you’re not familiar with.

Where Will My Money Be Invested?

There is a wide variety of mutual funds offered in Indonesia ranging from money market fund, balanced fund, equity fund and more. Each of the funds has different risk features because of the type of assets they invest in –shares, government bonds, short-term securities and others. By knowing where your money will be invested in, you can choose the one you’re familiar with. For example, if you think investing in shares is risky, you should choose a less risky fund.

Tip: The golden rule of investing in mutual fund is to spread your investment over 2 or 3 funds rather than put all your money in one fund.This way you minimize the risk and maximize your returns

What Are the Benefits?

1. Your money is managed by a full time professional funds manager who monitors the market closely. If you not satisfied with the performance of the fund, you can always take your money out and put it in a better performing fund

2. In Indonesia, you don’t have to pay tax for the capital gain earned from Mutual Fund

3. Access to your money.  With all types of mutual funds available, you can withdraw (redeem) you money at any time. Some funds charge a fee for cashing in your money. As with any investment with a financial institution, it is very important to check the fees and charges applicable before you invest

Are There Risks in Investing in Mutual Fund?

Unlike traditional time deposits where the interest rate is fixed upfront, the returns on mutual funds move up or down depending on the type of assets the money is invested in. With that said, investing in Mutual Funds is more of a long term investment and is a good way to build a healthy “nest egg” for the future –buying a retirement house in Bali, a fishing boat,....you name it! 

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