In addition to increasing sources of income, investment is one of the ways you can maintain or even enhance the value of your assets. Investment has become increasingly popular among Indonesian people thanks to the easier flow of information accessible to the public. This has led to improved financial literacy levels. According to data from the Indonesia Stock Exchange (IDX) at the end of 2022, the total number of investors in Indonesia's capital market reached 10.3 million investors. This figure increased by 37.5 percent from the previous 7.48 million investors at the end of 2021.
There are quite a number of investment instrument options available to you, ranging from gold investment, bond investment, stock investment, to mutual fund investment which is known to have relatively low investment risk. Among the previous investment options, mutual fund investment products are the only investment instrument that is highly suitable for beginner investors. This is because mutual fund investments will be managed directly by an investment manager from a particular asset management company. On this occasion, we will discuss further about what mutual funds are, particularly fixed income mutual funds.
Key Takeaways:
- Fixed income mutual funds are a type of mutual fund that allocates collected funds into instruments that can generate fixed income.
- Fixed income mutual funds will be managed by an investment manager from an asset management company.
- The investment manager managing fixed income mutual funds will place 80% of the funds into debt securities (bonds) with a maturity of less than one year.
Definition of Mutual Funds
According to the Financial Services Authority (OJK), mutual funds are a vehicle for collecting funds from the public that are managed by a legal entity, in this case called an investment manager, to then be invested in securities such as stocks, bonds, and money market instruments.
Mutual funds themselves are actually divided into two types, namely closed-end mutual funds and open-end mutual funds, however in practice open-end mutual funds are more commonly used by the public. Open-end mutual funds are types of mutual funds that can be bought and sold every day during exchange hours.
What Are Fixed Income Mutual Funds
Fixed income mutual funds are a type of mutual fund that allocates collected funds into instruments that can generate fixed income. Usually, the investment manager managing fixed income mutual funds will place 80% of the funds into debt securities (bonds) with a maturity of less than one year.
There is one strong reason why fixed income mutual funds have become a favored investment product choice for many investors. This is inseparable from the potential return or yield generated which is relatively higher than keeping it in a bank savings account or even a time deposit. However, the level of return from fixed income mutual fund investments will greatly depend on Bank Indonesia's interest rate and currency exchange rates. Bond interest rates will rise when Bank Indonesia's benchmark interest rate decreases, which will increase public interest in borrowing money from banks, rather than saving it.
Benefits of Fixed Income Mutual Fund Investment
The purpose of someone investing is none other than to maintain their owned assets and also to grow their assets, rather than just keeping it as regular bank savings. Fixed income mutual funds are suitable for investors with conservative profiles because the majority of funds are placed in bonds or debt securities that are relatively safe. This instrument offers low potential for default as well as more stable returns for the medium term.
The following are several benefits of fixed income mutual fund investment:
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Classified as a Relatively Safe Investment Instrument
Fixed income mutual fund investment products are investment instruments that are relatively safe, this is because the funds collected in fixed income mutual funds are mostly placed in bonds or debt securities so the risk of default will be smaller.
Fixed income mutual funds are usually suitable for investors who have conservative to moderate risk profiles and are suitable as your investment portfolio.
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Provides Potential for Double Returns
Fixed income mutual funds also have the potential to provide you with higher returns, this can be realized when the mutual fund's performance is good so that the price value per unit of the mutual fund you own will grow.
In addition, some types of fixed income mutual funds also provide dividends to their investors.
Disadvantages of Fixed Income Mutual Fund Investment
Although investing in fixed income mutual funds has the potential to provide you with relatively stable movements, it should be remembered that fixed income mutual funds are an investment instrument that of course has risks for every purchase.
Therefore, before you decide to invest in fixed income mutual funds, consider the following disadvantages:
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Potential for Investment Manager Default
As we know together, the mechanism of mutual funds is entrusting funds to be managed for investment by an investment manager. It should be remembered that an investment manager also has the potential to fail in managing these funds so that investors have the potential to lose their funds when investing in fixed income mutual funds.
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No Government Guarantee
On this second point, you should pay higher attention because investing in fixed income mutual funds is not guaranteed by the government like State Debt Securities investment which is 100% guaranteed by Law. This is because fixed income mutual funds do not use banking instruments in managing their funds.
Of course, this automatically means that mutual funds are not banking products that are directly protected by the Deposit Insurance Corporation (LPS). This makes every fixed income mutual fund investor fully responsible for the risks that might occur to their investment portfolio.
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Investment Fund Liquidation Risk
In the investment world, anything can happen including actions where investors rush to withdraw their funds from the chosen asset management company. When this happens, the investment manager will certainly have difficulty preparing funds, so there is potential for delays in payment of funds to investors.
Getting to Know Several Asset Management Companies
As in the previous discussion, mutual fund investments will be managed directly by someone called an investment manager and are under an asset management company. The following are several asset management companies that are trusted to manage mutual funds.
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Syailendra Fixed Income Fund
Syailendra fixed income fund is a mutual fund product from Syailendra Capital asset management. Syailendra fixed income fund itself has an investment portfolio composition of minimum 80% and maximum 100% in debt equity securities, including State Debt Securities, SUKUK, and other securities such as corporate bonds and other debt securities with a rating or class A from securities rating agencies.
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Eastspring IDR Fixed Income Fund Class A
Similar to Syailendra fixed income fund, Eastspring Investments also has a mutual fund investment product called Eastspring IDR fixed income fund Class A, the majority of which will be allocated to Republic of Indonesia State Debt Securities or Corporate Debt Securities in Indonesia.
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