Mutual funds are investment instruments that are easy to
understand, making them suitable for attracting novice investors who want to
know more about mutual funds. If you have limited time to oversee investments,
mutual funds are the right choice because they are also managed by experienced
professionals and are known as investment managers (MI).
Mutual Funds are investment instruments that collect funds
from the public to be placed in the Securities Portfolio by the Investment
Manager. Furthermore, this fund will be managed by the Investment Manager to be
invested in stocks, bonds, and the money market.
Before deciding to invest in mutual funds, let's look at the
advantages and risks of mutual funds. So that in practice later, you can be
wiser in making decisions related to financial planning in the future.
Mutual Fund Benefits
There are four types of mutual funds, namely money market
mutual funds, fixed income mutual funds (the majority are in bonds), equity
mutual funds, and mixed mutual funds. In general, the advantages of mutual
funds are as follows.
1. Affordable Capital
One of the advantages of investing in mutual funds is that
the capital is affordable. You don't need to collect money up to a fantastic
nominal to start investing in mutual funds. Even with affordable capital, the
benefits of investing in mutual funds are also fairly competitive with other
investment instruments.
2. Managed by Professionals
As previously explained, mutual fund investments are managed
by investment managers who are professional and experienced in their fields.
This makes the investment safe and has the opportunity to get good profits. The
investment manager will only manage funds in the best place so that the results
are maximized. If you are a novice investor, another advantage is having the
opportunity to learn and dig up information from Investment Managers as a
provision of knowledge in reading the market.
3. High Liquidity
Another advantage of mutual funds is their high liquidity,
meaning that investments can be liquidated/sold at any time using the Net Asset
Value (NAV) price that was in effect at the time of sale. With its
easy-to-disburse nature, when you have an urgent need, you can immediately
withdraw mutual funds and their benefits.
4. Can Diversify Easily
Mutual funds are referred to as safe and profitable
investment instruments because the funds can be placed in various financial
sectors. Several sectors to choose from, such as deposits, bonds, and stocks.
If the worst condition is that one sector goes bankrupt or loses, you are still
safe because there are other profitable sectors, losses can be prevented.
5. Easy Process
In addition to affordable investment capital, mutual funds
can also be processed easily. Currently, there are many online platforms to
help access mutual fund investments. Mutual fund buying and selling
transactions can be done anytime and anywhere online.
Disadvantages of Mutual Funds
In making an investment, using any instrument there are
definitely risks that must be faced. It is important for potential investors,
especially for beginners, not only to focus on the advantages or convenience of
an investment instrument, but also to pay attention to the disadvantages or
risks involved in investing. By understanding both of them, you will get
additional information that is wise in making decisions in your financial
planning. Here are some of the disadvantages of mutual funds that you need to
know about.
1. Default
The first risk that might occur is the risk of default from
the Investment Manager. This condition makes investment managers unable to
fulfill their obligations to investors, namely returning funds and profits or
also known as default. This was due to the inappropriate selection and
management of securities. Investment Manager business partners such as
custodian banks, brokers, or mutual fund securities agents.
2. Economic and Political Problems
The existence of economic and political problems in a
country can also cause unstable investment in mutual funds. An example is a new
policy regarding investment rules in a country.
3. Value Dropped
Another risk that may occur is a decrease in the value of
net assets per investment unit. Usually, this risk is quite high for stock
mutual funds. For money market mutual funds, the risk of decline in value is
quite small because the instruments are usually deposits and bonds. Therefore,
the profits from mutual funds are also uncertain, there can be a lot of them,
they can also suddenly decrease and even make you lose.
4. Mutual Fund Ownership Fee
There is a cost in the ownership of mutual funds or called
the expense ratio. Expense ratio is an indicator of the cost of managing mutual
funds by investment managers. This fee is charged to mutual fund investors.
5. Liquidity Risk
Even though mutual funds are easy to liquidate, under some
conditions the investment manager is late in preparing funds for investors.
This can happen if there are many investors who withdraw large amounts of funds
simultaneously.
However, this risk may be small because mutual funds are now
regulated in law and the maximum disbursement is 7 working days. So, investment
managers can prepare funds first before starting to give them to investors.
6. Losses are borne by investors
If the place where you invest in mutual funds goes bankrupt,
the losses will be borne by yourself. The government does not guarantee mutual
fund losses. In contrast to deposit products that have been guaranteed by LPS.
It is also possible for mutual fund dissolution to occur as a result of
violations based on OJK observations that eventually failed to pay investors.
Above is some information relating to the advantages and
disadvantages of mutual funds as a form of existing investment instruments. The
more information you know, the more comfortable you will be in investing.
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