Definition, types, riks and advantages of mutual fund investment
Friday 8 April 2022Talking about mutual funds, of course, we also talk about investment, besides that mutual funds are also in great demand by novice investors or for people who want to invest with small capital.
The definition of mutual funds is one of the investment alternatives for the investor community, especially for small investors and investors who do not have much time and expertise to calculate the risk for their investment, so in general, mutual funds have a small investment risk, therefore they are suitable for investors. people who want to invest.
This mutual fund is designed as a means to raise funds from people who have capital, have the desire to invest. In addition, mutual funds are also expected to increase the role of local investors to invest. In general, mutual funds are also defined as a forum used to collect funds from the investor community, which will then be invested in the form of a securities portfolio by the investment manager.
Three things related to the definition
The existence of funds from the investor community.
The funds will be invested in the form of a portfolio of securities
The funds are managed by the investment manager
Thus, the funds in the mutual fund are the funds of the investors, while the investment manager is the party who is trusted to manage the funds.
In general, mutual funds are divided into four of them:
1. Money market funds
Money market mutual fund is a type of mutual fund that invests in money market investment instruments with a maturity period. Several forms of investment can be in the form of time deposits, certificates of deposit, bank certificates, and various other types of money market instruments, and the risk is relatively low compared to other types of mutual funds.
2. Mixed mutual funds
This mixed mutual fund is a type of mutual fund that allocates a mixture of mutual funds to allocate their investment funds in the form of a varied portfolio. Investment instruments can be in the form of stocks and in combination with bonds.
3. Fixed income mutual funds
This mutual fund is a type of mutual fund that invests at least 80% of its activities in the form of debt securities or bonds. The goal is to generate stable returns and these carry a higher risk than money market mutual funds.
4. Stock mutual funds
Equity mutual funds are types of mutual funds that invest at least 80% of their active shares in equity securities. The goal is for stock price growth in the long term, and this type of mutual fund has the highest risk.
Those are some types of mutual funds that you can choose from when you start investing.
Advantages of investing in mutual funds.
Every investment brings various profit opportunities. Mutual fund investors can diversify their investments without having to have a large capital and without special skills in calculating the risk.
Through mutual funds, large amounts of funds will be collected so that investment managers can diversify their investment products in the capital market.
That way, investing in mutual funds doesn't need to be bothering to monitor investment performance, because this has been handled by the investment manager, who is certainly experienced in fund management.
Risks of investing in mutual funds.
In every investment, there must be risk, for example the risk of mutual fund investment is the decrease in the value of the participation unit, the decrease in the price of stock securities, bonds and others.
There is also liquidity risk, namely the risk that involves the difficulties faced by the investment manager if most of the mutual fund investors sell their units back.
That's the understanding, types, risks and benefits of investing in mutual funds. In essence, every investment brings benefits and risks, for that we must be more careful before we enter the world of investment.
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