Investment is currently a common thing among Indonesians. Among the many investment instruments, one alternative that is easy to purchase and manage is mutual funds. The products offered in mutual fund investments are also available in the Indonesian equity market, managed by a registered investment manager, and supervised by the Financial Services Authority (OJK). Mutual funds are investment instruments that collect funds from registered customers as financiers, which are then managed by investment managers to be allocated to stock/money/bond market products as an investment portfolio up for offer.1
In this article you will find two main points on mutual fund investment; (1) Why mutual fund investment can be an effective investment alternative, and (2) Finding the right mutual fund investment products to suit your needs.
Why Mutual Fund Investment Can Be An Effective Investment Alternative? As an investment instrument alternative, the following can make mutual fund investment to be considered an effective alternative.
Attractive yields.
The attractive yields come from a comparison between mutual fund investments and the allocation of certain level of funds on fixed deposits. As quoted from Bareksa2 —the five money market mutual fund products with the highest yields have the growth potential from 6.23% to 6.93% over the past year. While the yield offered by fixed deposit is in the form of interest that follows the bank's reference rate. For comparison, the last BI 7-day Repo Rate in 2020 on December 17 was 3.75%. When the fund placement in the same time period is compared, the potential return on mutual funds exceeds the yield on fixed deposits.
An effective investment alternative to manage funds within a certain period of time with high liquidity.
Mutual fund investments offer higher liquidity than fixed deposits2 because they can be withdrawn at any time by selling the unit at the prevailing price. The funds placed in these investments can be more easily disbursed without any fines/penalties, with the risk of capital loss if the mutual fund's performance is being corrected. Mutual funds can also be sold on the same day1 .
Finding the Right Mutual Fund Investment Products to Suit Your Needs Although mutual fund investments offer attractive yields with effective liquidity to clients as investors, it is also necessary to note the components of the mutual fund products, so you can make the right investment to suit your needs. The following are the main components of mutual fund products that you need to take note of.
Investment risk
Among the many investment risks, there are benchmarks that can be used as a reference for predicting the investment risk of a mutual fund product. The benchmark is a risk classification with a low-medium-high scale, and refers to the OJK letter as a standardized supervision towards mutual fund investment products.
In addition to the risk classification by OJK, the details of other general investment risks are as follows; liquidity risk, default, market, interest rate, regulatory changes, and so on.
Yield
In analyzing the yield of mutual fund products, the expected percentage depends on how well the investment manager manages the funds and the current market conditions. In general, each mutual fund investment performance projection refers to the current benchmark of deposit interest rate, which may change at any time. So, don't be surprised if the investment performance of certain mutual funds currently has a lower YTD (year-to-date) return than fixed deposits.
Currently the equity market performance and the economy in general are being affected by the ongoing pandemic. As of September 30, 2021 as reported by Bareksa for comparison of NAV3 returns; the money market mutual fund index was at 0.65%, the fixed income mutual fund index was at 1.58%, the new mixed mutual fund index was at 2.94%, and finally the stock mutual fund index was at the highest position with 4.72%.
Effective fund management by investment managers
Mutual fund products include fees for management and custodian banks up to a certain percentage of maximum. In general, this investment management fee is a fee charged from the daily net asset value or from the initial net asset value per year, which will be paid monthly and subject to VAT. Meanwhile, custodian bank fees are fees charged for handling investment transactions related to the mutual fund.
Usually these two costs are integrated into the offer price of the mutual fund4 , and varies between products. There are also mutual fund yields that are not subject to tax, unlike fixed deposit interest which is subject to a tax of 20%2 . The management fees and custodian bank fees can also be calculated into the final return from the amount of net asset value allocated in the mutual fund.
You can access the analysis of these components and more in the "Summary of Product Information" data provided by the investment manager. You can also access this document through DBS Treasures on the following page Prospectus & Fund Factsheet
Invest in Mutual Funds with DBS Treasures Discover the types of mutual funds offered by DBS Treasures before you invest in mutual funds.
Money Market Mutual Funds, the mutual fund investment portfolio is an investment for short-term asset instruments, less than one year, or instruments on the money market. It has high quality and short-term debt using assets that are easier to liquidate.
Fixed Income Mutual Funds, investment portfolios where most of the funds are invested in instruments that offer fixed income, such as securities and bonds.
Mixed Mutual Funds, investment portfolios of mutual funds in various instruments such as money market, bonds, and stocks.
Equity Mutual Funds, a mutual fund investment portfolio that has the largest percentage of funds allocated to shares of companies listed on the stock exchange.
Invest in mutual funds with DBS Treasures and gain the following benefits:
Reducing risk through diversification
Increased diversification reduces investment risk, in which funds are managed by implementing diversification of investment instrument ownership. In this case, the mutual fund divides the ownership of the investment instrument as a portfolio.
Investment management by professionals
Mutual fund investments are managed and supervised by professional Investment Managers. All investment options are managed by leading Investment Managers who are committed to optimize product performance.
Gain insights to guide you in investment
Your investment will be supported by a team of financial experts who are reliable and proactive in analysing and communicating the risk, performance and potential growth of the opportunities that have been personalized for you.
How to Invest in Mutual Funds with DBS Treasures Enjoy personalized mutual fund investments through DBS Treasures as a priority banking client. Minimum fund placement as priority banking client is IDR500,000,000. As a priority banking customer, you gain a wealth management strategy that is always analysed and communicated to you. Get the right wealth management from a trusted partner, so you can make timely investment decisions confidently.
