Diversify with Fixed Income Mutual Funds: Get to Know Its 8 Characteristics
Key Features of Fixed Income Mutual Funds
- Longer Tenor
- High Liquidity
- Investment Allocation
- Risk Profile
- Tax Obligations
- Portfolio Diversification Goals
- Managed by Reputable Investment Managers
- Diversified Holdings
Invest in Mutual Funds with DBS Treasures Priority Banking
Diversifying your investments is essential to minimize risks while maximizing returns. One way to do this is by allocating your funds across various instruments—such as Fixed Income Mutual Funds.
However, before choosing this type of fund, it’s important to understand its key characteristics. This gives you a clearer picture of how your money will be managed within the instrument. Let’s take a look at the defining features below.
Key Features of Fixed Income Mutual Funds
Each investment instrument has its own unique characteristics that distinguish it from others. These features also guide how the fund is managed in order to generate optimal returns.
Fixed Income Mutual Funds have specific traits worth considering before including them in your portfolio as part of your diversification strategy. Here are some of the main features:
- Longer Tenor
Many investment instruments have tenors of less than one year. These are often chosen by investors seeking quicker returns. But if you're looking for a longer investment period, Fixed Income Mutual Funds may be a suitable choice.
Generally, these funds offer a medium-term tenor ranging from one to three years, making them ideal for investors with that investment horizon.
This tenor is typically aligned with a moderate risk profile, where investors are willing to accept short-term market fluctuations for more stable long-term results. You can assess your own risk profile to determine if this suits you.
- High Liquidity
One appealing feature of Fixed Income Mutual Funds is their high liquidity. Despite having a specific tenor, you can redeem your investment at any time.
The redemption process is relatively quick—usually between two to seven business days after the request is submitted. For more details, you can consult your investment partner.
This liquidity is useful if you need quick access to funds, such as for a home renovation or unexpected expenses. It also offers flexibility if your plans change along the way.
- Investment Allocation
By regulation, at least 80% of a Fixed Income Mutual Fund’s portfolio must be invested in debt securities that provide regular income—such as Government Bonds.
These instruments generate periodic coupon payments, allowing you to receive a steady return even before the bond matures. They also offer more stable cash flow within the portfolio.
The remaining 20% is typically invested in money market instruments or cash equivalents. This helps maintain flexibility in fund management and supports the fund’s overall liquidity.
- Risk Profile
Every investment instrument carries its own level of risk, which influences the potential returns and losses you may face.
The higher the risk, the greater the potential for both gain and loss. Conversely, lower-risk instruments usually offer more modest returns with less volatility.
As mentioned earlier, Fixed Income Mutual Funds generally have a moderate risk profile. This is because their risk level is higher than money market funds, but still lower than stocks.
That said, they offer a lower default risk compared to equities—meaning there’s a smaller chance of non-payment. At the same time, these funds tend to provide stable annual returns.
This makes them a compelling choice for investors seeking steady gains with relatively low volatility.
- Tax Obligations
As you may already know, Indonesian citizens are required to pay taxes under certain conditions—and this applies when investing in this type of Mutual Fund as well.
Technically, Mutual Funds are not considered taxable objects. However, they still need to be reported in your annual tax return (SPT) so that they can be calculated by the tax authorities. Why is that?
Because Mutual Funds are categorized as investments, and investments fall under the broader category of assets. Just like other assets, Mutual Fund holdings must be reported in your annual tax return.
- Portfolio Diversification Goals
As mentioned earlier, Fixed Income Mutual Funds typically have a medium-term tenor of one to three years. This makes them suitable for portfolio diversification with medium-term financial goals.
An example would be saving for your child’s education. If your child is now in kindergarten and you want to start preparing for their primary school tuition, this Mutual Fund could help you meet that goal.
Another example is planning for an overseas holiday. If you’re aiming to travel in two or three years, this fund could serve as a diversification tool that provides steady returns in the meantime.
- Managed by Reputable Investment Managers
There are currently many types of instruments that can be selected as assets within Fixed Income Mutual Funds. Each has its own characteristics that need to be understood before making a choice.
However, not everyone has the time to analyze each option—especially those with busy schedules. If you’re one of them, there’s no need to worry, as the fund will be managed for you.
These funds are handled by reputable, credible, and professional Investment Managers. They will select and manage your investments based on carefully conducted research and strategic planning.
- Diversified Holdings
This instrument also allows you to diversify your investments more easily, as the fund allocates capital across multiple instruments.
This level of diversification helps you maximize potential returns while also minimizing risk more effectively—making it easier to achieve your financial goals.
Invest in Mutual Funds with DBS Treasures Priority Banking
The discussion above can serve as valuable insight before you choose Fixed Income Mutual Funds as part of your portfolio diversification. If you’re ready to take the next step, DBS Treasures priority banking is a trusted partner you can rely on.
With DBS Treasures priority banking, investment risks can be minimized through well-planned diversification strategies. You’ll also gain insights into the latest market trends and opportunities, while your funds are professionally managed by reputable Investment Managers.
You’ll be supported by curated market analysis from our team of financial experts, communicated directly and tailored to your risk profile and portfolio needs—powered by Artificial Intelligence and Machine Learning (AI-ML). These insights are paired with personalized solutions in both investment (Grow) and insurance (Protect), giving you the confidence to invest quickly and efficiently through your preferred channel.
Even better, the digibank by DBS Application is available to support all your investment activities—from buying, selling, and switching Mutual Funds to registering your SID (Single Investor Identification)—all in one place.
Interested in investing in Fixed Income Mutual Funds with DBS Treasures priority banking as your trusted partner? Click here to learn more and get started.
