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Guide to Choose a Mutual Fund

09/03/2015

Mutual fund is one of popular ways in investing which are widely done by beginner investors. It is because mutual fund does not require technical skills and a lot of time to be compared to other investment options such as common stocks or forex. Besides, investors also do not have to spend a lot of money in investing on mutual fund. Even though there are many benefits we can get from investing on mutual fund, there are still a lot of important questions pop up on beginner investor’s mind. One of those questions is how to determine the suitable mutual fund for you when the investor starts investing for the first time. Before answering that question, firstly first, you actually should have a deep understanding about your purpose of investing on mutual fund, the time periods you planned in investing, as well as the risks you may face in investing on mutual fund. 

Determining Your Purpose of Investing on Mutual Fund

Determining your purpose of investing on mutual fund must become the first step you have to take before deciding to choose the suitable mutual fund for you to invest. There are eventually various purposes which can trigger people to do investment. Each investor has different purposes from others. There is probably one that considers investment as a tool to prepare children’s college tuition fee. Others may use investment to make up a purse for retirement fund. Whatever the purpose you have, all of them are closely related to the time periods of your mutual fund investment. 

Adjusting the Investment Period

The second step you have to pay attention before committing to mutual fund investment is deciding the right time periods of investing. In general, there are four options of time periods that could be chosen by beginner investors. They are less than 1 year, 1 to 3 years, 3 to 5 years, and more than 5 years. Those time periods will bring great effect to determine the types of mutual fund investments you can choose. If you take the time periods which is less than 1 year, you can start your investment on money market funds. The other option you can take is fixed-income funds. It is suitable for those who want to invest for 1 to 3 years. Nevertheless, if you want to take 3 to 5 years period of investing, then you should choose multi asset fund. In addition, equity fund is the most suitable option for more than 5 years period of investment. 

Recognizing the Risks of Mutual Fund Investment

No matter what types of mutual fund investment you choose, there might be risks you have to face and it will probably make you lose some of your money. There are some common risks which often occur to mutual fund investment, such as market risk which can happen because of the declining of investment value, liquidity risk which can happen if all investors redeem in the same period of time whereas liquidity is limited, thus can create delay in payment, and regulatory and economy political risk which occur when there is changes in the regulation and political unsteadiness in the country concerned. 

By understanding those points above, you inevitably can determine the suitable mutual fund for you to invest. It is the one which can meet your requirements of time periods and type of investment you choose. It also has to be able to minimize the risk you may face later. We highly recommend beginner investors to invest with the help of asset management Indonesia companies with many experiences and good tracks in order to acquire a proper guidance in optimizing return and minimizing the risks. 

Sources:

Accessed on 14 August 2014. 

Disclaimer:

INVESTMENT IN MUTUAL FUND CONTAINS RISKS. PRIOR TO INVESTING IN MUTUAL FUND, INVESTOR MUST READ AND UNDERSTAND THE FUND PROSPECTUS. PAST PERFORMANCE DOES NOT INDICATE FUTURE PERFORMANCE.

This report has been prepared by PT Schroder Investment Management Indonesia for information purpose only. It should not be considered as an offer to sell, or a solicitation of an offer to buy. All reasonable care has been taken to ensure that the information contained herein is not untrue or misleading, but no representation is made as to its accuracy or completeness, no reliance should be placed on it and no liability is accepted for any loss arising from reliance on it. From time to time, PT Schroder Investment Management Indonesia, its affiliated companies and any of its or their officers may have an interest in any transaction, securities or commodities referred to in this report. Also PT Schroder Investment Management Indonesia or its affiliated companies may perform services, for, or solicit business from, any company referred to in this report.

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