Types, Advantages and Disadvantages Investing in Mutual Funds


Types, Advantages Mutual funds are a place used by the public to invest in various financial market instruments. The legal basis for mutual funds is Capital Market Law No. 8 of 1995.

Types Advantages and Disadvantages Investing in Mutual Funds
Types, Advantages and Disadvantages Investing in Mutual Funds

For those of you who want to understand more about mutual funds, here’s a full explanation below. Listen carefully, okay?

What is a mutual fund?

Mutual funds are an investment that is very easy for people to apply because they don’t need to spend a lot of capital. Mutual funds are a collection of funds managed for the purpose of purchasing investments, for example buying bonds, stocks and other financial instruments.

Types Advantages Mutual funds must be implemented based on a Collective Investment Contract between the Investment Manager and the Custodian Bank. Investment Manager is a party that manages and monitors the securities portfolio invested by mutual funds.

Meanwhile, the Custodian Bank is a party whose role is to administer and store mutual fund assets and issue transaction confirmation letters and monthly reports for mutual fund investors.

Types of mutual funds

Know the Types, Advantages and Disadvantages of Investing in Mutual Funds
Illustration of monitoring stock movements. Mutual funds have several types, including the following:

Fixed income mutual funds

Fixed income mutual funds are mutual funds that allocate funds or money invested at least 80 percent in bonds. Nearly 10 percent per year return on fixed income mutual funds is higher than money market mutual funds.

Money market mutual funds

Money market mutual funds are all funds invested in a deposit, bonds and Bank Indonesia Certificates. In terms of security, money market mutual funds are relatively safer than other mutual funds, but the return is much lower. The investment period for money market mutual funds is usually less than one year.

Protected mutual funds

Protected mutual funds are mutual funds that are similar in placement to fixed income mutual funds. At the maturity of the fund, which is instrumented in bonds, it will provide protection for the investment value.

Mutual fund protection is protected by 100 percent of the investment value if the investor withdraws the money at the maturity date agreed in the agreement.

Stock mutual funds

Equity mutual funds are mutual funds that place investment funds in shares by 80 percent. Equity mutual funds are mutual funds with greater profit potential than other types of mutual funds.

Mixed funds

Mixed mutual funds are mutual funds invested in mixed instruments such as deposits, bonds and stocks.

Index mutual funds

Index mutual funds are mutual funds that are similar to stock mutual funds, because these investment instruments can be traded on exchanges called Exchange Trade Funds or ITFs and fluctuating prices are similar to stocks.

Buying and selling index mutual funds on the exchange does not always exist because it is managed passively. This type of mutual fund is traded when someone new subscribes or makes a redemption.

Profits from investing in mutual funds

Investing in mutual funds has several advantages, including:

  • Investors who do not need to spend large amounts of capital to diversify their
  • investment in securities stocks, which makes the risk of loss smaller
  • Investments are made in many Types Advantages of investment instruments such as bonds, stocks and deposits
  • Make it easier for investors to invest in the capital market
  • The existence of a professional investment manager so that it becomes more efficient which makes investors not have to bother to monitor their shares.

Investment losses in Types Advantages mutual funds

Like investing in anything else, investing in mutual funds also has some downsides. Are as follows:

  • The value of the investment unit is at risk of decreasing, this value is affected by fluctuations in the price of securities in the form of stocks, bonds and securities that are already listed in the mutual fund portfolio
  • Liquidity on stock prices, this risk will be faced by investment managers when many investors sell their shares back. So at that time there will be liquidity which makes it difficult for investment managers to provide cash on demand for the sale of these shares
  • There is a default, this can happen when the insurance company does not pay compensation or it is lower than the amount of liability as desired
  • Default can be committed by related parties such as payment agents, natural disasters, so that it can cause a decrease in the value of net assets in mutual funds.

Terms on Types Advantages mutual funds

If you want to invest in mutual funds, you must first understand some of the terms as follows:

  • NAV is a fund managed in a mutual fund, which is commonly referred to as asset under management. Within the NAV are usually deposits, stocks, bonds, and cash.
  • UP is NAV which is broken down into several parts into investment instruments and managed by mutual funds or a unit of measurement to show the amount owned by investors.
  • NAV/UP is the value of assets per unit of participation. The value of a mutual fund is the basis of the price and transactions made.
  • Subscriptions are funds for purchasing mutual funds. The size of the subscription is between 0-5 percent.
  • Redemption is a fund issued to sell mutual funds with an amount between 0-5 percent.
  • Disbursement transaction is a search for a part of the unit owned by the investor. The investment manager is responsible for paying for the disbursement of these funds, whose job is to get it directly from the Custodian Bank, the funds must be immediately given to investors.
  • Switching transactions are transfers of certain mutual funds to several other types of mutual funds by investors
  • Collective Investment Contract is a mutual fund contract between investment manager and Custodian Bank.
  • Thus the discussion about mutual funds. Mutual funds themselves are an investment alternative that is very easy to transact and generate high profits.