Key Points:
- Investing is one of the main ways to help you grow your money beyond just savings.
- Know your investment capital, financial goals, risk tolerance, and the types of investment products available before you start investing.
- You can fund your investments with a lump-sum contribution or smaller regular contributions.
- Common investment products include stocks, mutual funds, bonds, and gold.
Want to start investing with more confidence?
Whether you're just starting your career, an experienced professional, a parent with school-going children, or preparing to retire after a long career, investing is an effective way to make your savings work for you and preserve or grow your wealth.
One of the main benefits of investing is that, over time, it can help combat the effects of inflation. By investing wisely, your savings can outpace inflation or at least minimize its impact. In September 2022, Indonesia's Consumer Price Index (CPI) and core inflation rate reached the highest level since the Covid-19 pandemic.
That’s why there are times when it’s crucial to find ways to beat inflation before it erodes the value of your hard-earned money. With a long-term investment plan, you can not only cope with inflationary pressures but also harness the power of compounding.
While investing has many benefits, people often feel hesitant to start. This is understandable, given the vast array of investment options in the market. As a new investor, you might feel overwhelmed by the information available.
Here’s a simple introduction to some common investment products and funding options to help you get started and make the right decisions!
Ways to Invest:
Depending on your financial goals and situation, you can choose to fund your investments through a lump-sum contribution, regular smaller contributions, or a combination of both.
Lump-Sum Contribution:
If you’ve been saving for a while and have a sizable amount of funds, you can consider making a one-time purchase in a selection of bonds or mutual funds. Lump-sum investing can also be done with extra funds (e.g., when you receive a bonus).
Regular Savings Plan:
One of the investment instruments in the digibank app, Regular Savings Plan (RSP), allows you to invest a fixed amount of money regularly over a period.
Additionally, regular savings can utilize the dollar-cost averaging (DCA) strategy, where your money buys more units when prices are low and fewer when prices are high, reducing the impact of stock market volatility. The RSP feature in the digibank app allows you to invest regularly in exchange-traded funds or mutual funds, starting with as little as IDR 100,000 per month.
Types of Investments:
- Mutual Funds:
Mutual funds are pooled investment instruments that offer diversification by holding a basket of stocks rather than individual stocks. Mutual funds are actively managed by professional fund managers who conduct thorough research before allocating funds to specific investments according to their investment mandate. Mutual funds are considered diversified investment products, meaning you invest in a pool of securities often from various business sectors. This makes them a good option, especially if you don’t have time to closely monitor market fluctuations. Read more: A Beginner’s Guide to Mutual Funds.
- Bonds:
Bonds are debt instruments. When you invest in bonds, you are essentially lending money to the entity (e.g., a company or government) that issued the bond for a set number of years.
In return, you will receive regular interest (coupon) payments until the bond's maturity date, when the principal amount will be returned to you. The coupon amount and payment frequency are usually fixed, providing a level of predictability of income streams for the investor.
If you were to lend money to someone, there is always a chance that the borrower might not be able to repay you. Similarly, different bonds carry different levels of risk, depending on the credit quality of the issuer. For example, bonds issued by the Indonesian government (e.g., FR and INDON/INDOIS) are considered safer options than corporate bonds as they are backed by the government. Whether you are investing in government or corporate bonds, it is prudent to do your due diligence on the entity's credit rating before making a decision.
Read more: 8 Things to Know Before Buying Bonds
- Time Deposits:
If you're looking for a safe instrument to grow your savings, deposits definitely come to mind. One option is time deposits. Until your investment matures, you will receive your initial principal amount in full (except in the worst-case scenario where the bank becomes insolvent) along with the base interest return.
By broadening your exposure to other investment instruments, you can potentially improve your overall portfolio returns without taking on excessive risk.
Ready to start investing?
After reading this article, knowing your financial goals and risk profile, and doing your research, it's time to take the first step and be more confident in your investment journey. With digibank by DBS, you can access macroeconomic forecasts and investment recommendations from our experts, choosing from over 150 curated products, ranging from mutual funds to bonds, to navigate your future, enabling strategic and seamless investments even amidst fluctuating interest rates. Contact us now.
