Nowadays investing is something that everyone needs to do, and public awareness of the importance of investing is growing. Fixed income mutual funds are among of the most promising investment products in the current situation. In general, Mutual Fund products have a low level of risk, so they are widely favoured by investors.
Many investors who have experience in mutual funds recommend investing in fixed income-based mutual funds. This is because the potential yields are quite high when compared to the other investment instruments, which are currently in a fluctuating state. For those of you who want to invest in the medium term, fixed income-based mutual funds can be put into consideration because they can still provide attractive returns.
What is Mutual Fund?
Before discussing fixed income mutual funds further, you should know the general definition of mutual funds. Mutual Fund is an investment product or system that collects investor funds. The funds will be managed by a business entity called an investment manager who is responsible to allocate the funds into several investment instruments.
The legal form of a Mutual Fund product is a company or KIK (Collective Investment Contract) which is categorized into two, namely closed mutual funds and open mutual funds. In Indonesia, the most widely circulated Mutual Fund products are Mutual Funds in the form of an open Collective Investment Contract.
Open mutual funds are a type of investment product that you can buy or sell at any time, and as you know most mutual funds in Indonesia use this system. So what are the advantages of Mutual Funds compared to other types of investment products? Here are some of the advantages that you need to know:
Managed by Investment Manager
The first advantage of Mutual Funds is that you don’t have to think about the investment strategy in depth. All funds collected from investors will be managed and optimised by investment managers with experience in the capital market world.Fundamentally, investment managers can maximise the investment returns. Through in-depth analysis by considering the current economic and market conditions, planning investment strategies, and selecting the right assets.
Relatively Low Investment Risk
The funds collected from investors are quite large, making it possible to diversify investments freely. With investment diversification, the risks faced by investors can be made lower.
A Transparent System
In general, all Mutual Fund products always have a transparent system, making it easier for investors to know where their funds are invested. Investment managers are obliged to provide information regarding the risks and costs charged to their investors.
Maintained Liquidity
Another advantage of mutual funds is the easy process of investment fund withdrawal by selling the product. Investors can apply for the withdrawal process on every exchange day, namely on the working day that has been determined according to the calendar of the Indonesia Stock Exchange. This convenience allows more flexibility for investors in managing their investments.
Understanding Fixed Income Mutual Funds Fixed income-based mutual funds are a type of mutual fund product that many investors favour. That’s because the growth and yields are relatively more stable with potentially promising profits. A fixed income mutual fund is a type of mutual fund where most of the investment funds are allocated to debt securities that have the potential to provide stable returns.
Examples of debt securities in question are debt securities or bonds that matures in more than one year. The term ‘fixed income’ does not mean that you will get a fixed return. Instead, most of the investment funds collected are allocated to investment instruments that routinely provide predetermined returns.
Some people experienced in mutual fund investment say that this type of mutual fund product is quite promising compared to other mutual fund products. Although just like other investment products, it does not guarantee profit. But at least this Mutual Fund product is relatively stable.
Fixed Income Mutual Fund Mechanism The workings of this Mutual Fund product are quite simple and easy to learn even for people who are not familiar with Mutual Funds. Approximately 80 percent of the funds raised will be allocated by the investment manager into debt securities or bonds. Meanwhile, 20 percent of the investment funds will be allocated to money market instruments.
For example, let’s say that you invest IDR 1 million in a mutual fund with the NAV (Net Asset Value) of IDR 1,040 per unit. From this example, you have 961.54 units which will then be invested by the investment manager into Retail Sukuk within a period of 3 years.
Then the investment manager will also roll back the yield or capital gain from the difference between the selling and buying prices if the Retail Sukuk are sold. This is done by investment managers to get maximum investment returns or profits.
The Potential of Fixed Income Mutual Funds That Makes It Worth Choosing According to data from PT Invofesta Utama, throughout the year until August 27, 2021, the performance of fixed income-based mutual funds had promising returns. Although the performance of money market mutual funds was superior in the first semester, in the highest position at 2.31 percent, which was then followed by fixed income-based mutual funds with 1.51 percent in August 2021.
Meanwhile, other products, namely Balanced Mutual Funds and Equity Mutual Funds, performed less. Both recorded negative returns, in which balanced mutual funds were minus 0.68 percent and equity mutual funds were minus 5.34 percent. Equity mutual funds are still experiencing a decline in performance, impacted by the economic downturn due to the Covid-19 pandemic.
However, in the third quarter of 2021, the equity and balanced mutual fund indexes have experienced an increase in performance. Equity mutual funds have received positive returns of 0.52 percent, while balanced mutual funds are 0.79 percent. It might not be the optimum growth, but it shows a good potential in the future.
However, for now, the right choice of mutual fund products is fixed income-based mutual funds because they tend to score positive performances this year. Especially if you aim to invest funds in the long term, fixed income-based mutual funds can be the suitable choice for you.
Fixed Income Mutual Fund Investment Tips The workings of fixed-income-based mutual funds are easy to understand, so you don’t have to worry about investing in fixed-income-based mutual funds. As discussed above, most of your investment funds will be invested in bond products that have stable yields.
However, there are some things that you need to pay attention to before investing your funds in fixed income-based mutual funds. You need to know that the returns you will get are not completely fixed. This Mutual Fund product also has the potential to fluctuate, although not as drastically as when you invest in equities. But you still need to be careful because in investing profit and loss cannot be separated.
For those of you who want investment products for the long term and have good performance potential, fixed income mutual funds can be the solution. Before you decide to invest in fixed income mutual funds, you should know the following tips to optimise your investment.
Choose the Right Product
Fixed income mutual funds do have good performance potential. But you still can’t do it haphazardly. You need to be smart in choosing the right mutual fund product by looking at the potential performance of the product.
Choose a product that has a high chance of providing benefits in the long term, therefore you should choose a product that is in the top 5 position. Although the rating of a product is not a guarantee, at least a positive performance portfolio can provide the desired profit potential.
Choose Your Investment Manager Wisely
The next tip is that you should not just randomly choose an investment manager, make sure you have done in-depth research on the investment manager. When choosing an investment manager, you must pay attention to 3 things, namely the amount of investment funds they manage, the composition of the instruments used, and investment trends in the next 3 to 5 years.
Recognize the Main Purpose of Investing Goals become a strong foundation in doing everything, including investing. In order to get optimum investment returns, you must first identify the main goal of your investment. Knowing your main goal can determine the type of investment product, time period, to the right amount of funds. If someone makes an investment without a specific goal, of course, the investment will not last long because there is no solid foundation the basis.
Advantages of Fixed Income Mutual Fund Investment in DBS Treasures From the discussion above, are you interested in investing in fixed income mutual funds? If so, investing in Mutual Funds with DBS Treasures priority banking can be the right choice for you. For those of you who are interested in investing in Mutual Funds with DBS Treasures, the minimum deposit that must be deposited is IDR 500 million as an initial requirement for opening an account. Following are the advantages of investing in Mutual Funds with DBS Treasures:
Supported by a Team of Financial Experts
You will be supported by a team of financial experts who will personalise and communicate your wealth management strategy, while providing information on the latest market analysis and opportunities tailored to your risk profile.
Low Risk with Diversification
Mutual Fund products in DBS Treasures have relatively lower risk due to diversification. By distributing funds to various types of investment instruments. So you can worry less on the investment risks.
Ease of Investing
With DBS Treasures, you can easily invest in mutual funds through digibank by DBS Application. All mutual fund investment processes can be done through the digibank by DBS Application. Starting from Single Investor ID registration, you only need to go through the digibank by DBS Application and there is no need to switch to another application platform. Before the transaction, you can also analyse its performance which is supported by Infovesta data in the digibank by DBS Application. You can buy, sell, and switch easily, safely and anytime 24/7.
Investing in fixed income mutual funds with DBS Treasures is the right choice in the currently recovering economic conditions. With the advantages offered, you can confidently invest with DBS Treasures.
Reference: https://sikapiuangmu.ojk.go.id/
