financialtreat – will explain about information on How to Invest in Index Mutual Funds to Be Precise which you will get in the following article. let’s look at this article carefully!
One type of mutual fund that is marketed to investors is index mutual funds. Index mutual funds are mutual funds that imitate the portfolio of their underlying indices, both stock indices and bond indices. If you want to invest there we will give a review of How to Invest in Index Mutual Funds along with an explanation.
But before we discussed How to Invest in Index Mutual Funds, you must get to know about what index mutual funds are. Index mutual funds are investment instruments made by Warren Buffet, one of the richest people in the world.
Objectives of Index Mutual Fund Investment
The purpose of Index Mutual Funds is to imitate the movements of the benchmark index. So the more similar it is to the underlying index, the better the mutual fund will be.
For example, there are stock index mutual funds that refer to the LQ45 index, then the content of the mutual fund portfolio is the same as the stocks in LQ45. Meanwhile, the LQ45 index is a stock index that contains the most frequently traded (liquid) stocks and has a strong financial performance (fundamentals).
Especially for stock index mutual fund investments, as with stock investments or stock mutual funds, there is a risk of rapid market movements. This means that stock index mutual funds can go up or down in the short term.
Then, how to achieve optimal benefits while facing this condition calmly? Well, if you intend, here are a number of tips for investing in stock index mutual funds that can be considered to do:
Tips for Investing in Index Mutual Funds
1. Adjust the Risk Profile
As an investor, a risk profile is something that must be known before investing. The reason is that this risk profile will determine us in choosing a suitable investment product, based on the expected level of return (profit) with how much risk level we can afford to bear.
In the principle of investment, the level of risk that we dare to take will be directly proportional to the potential return expected. If we want to get high profit potential, we must be brave to face high risks.
For stock index mutual funds, we must be ready to profit and also ready to lose. The risk profile of investors who match stock index mutual funds is an aggressive type that is ready to accept risk (risk taker). People with an aggressive risk profile are ready to lose most or even all of their investment funds for the sake of large returns.
Therefore, prepare your guts before buying stock index mutual funds, even though the portfolio of stock index mutual funds is selected selected stocks. Don’t forget to also research the contents of the portfolio of these mutual funds to convince our investment decisions.
2. Long-term
Because stock index mutual funds are volatile in nature, we can get optimal results when investing for the long term. The long-term measure is over five years, so we have to adjust our financial goals as well. Long-term financial goals are also often large in value. For example, for the education of the child or preparing for retirement.
3. Routine
Once we have determined our financial goals, we can plan the amount of money we invest. If our capital is very small, we must be disciplined to invest regularly so that the results can be maximized.
This routine habit is also often referred to as the dollar cost averaging strategy, which is to invest with the same value periodically. For example, we invest IDR 100,000 regularly every month within five years.
With this strategy, we don’t have to think about what the current state of the stock market is, the important thing is that we always invest with the same value. As a result, we can get the average price of our investment and the risk can be lower because purchases are made periodically.
4. Don’t Look At Portfolios Often
Already know that the stock investments on which index mutual funds are based fluctuate greatly in the short term, so why are we still curious to open our portfolio every day. If we have determined for long-term goals, there is no need to monitor the portfolio too often because it makes us more nervous or tempted to disburse before our plan is achieved.
Indeed, it is okay to look at and reconsider the portfolio within a certain time, for example once a year. So if in a year it is not in line with our expectations, we can take the next step, whether to add or transfer to another product.
Or, when the stock market is falling like it is today, we can use this as a momentum to buy at a low price. It’s like there is a discount in the store, we certainly want to buy in more quantities because when the price increases we can to multiply.
5. Harvest in Time
Investing is like planting a tree. When the tree is fruitful, we can enjoy the results without having to cut down the staple.
Additional Information: How do I buy index mutual funds? Here’s the Explanation!
Luckily we live in the digital age. Anything is so easy to do. Shopping just click the application on the smartphone, the order will arrive at the front door. Then, if you want to go around, just use the online transportation application to the intended place. Actually, just like other mutual funds, you can buy index mutual funds from the following various ways.
· Bank
The Bank is an official institution that has long been one of the mutual fund selling agents (APERD). At the bank you can buy various mutual fund products according to your investment goals including index mutual funds.
Securities Company
It is no secret that large banks usually have subsidiaries in the form of securities banks that sell stocks and bonds. Over time, now securities companies also generally provide mutual fund products, including index mutual funds.
· Fintech
This is what makes buying index mutual funds easier, namely the emergence of mobile application-based financial technology companies. Regarding its relevance to mutual fund investment, these companies can be considered as APERD Online which allows you to invest anytime, anywhere by utilizing devices and internet access.
One example, the Bibit application, which also sells index mutual funds (offers about 6 index mutual funds) What is the point of buying index mutual funds if we don’t know the advantages. Reporting from blog.bibit.id, there are at least two advantages of index mutual funds:
· Cheaper management fees
The composition of stocks in an index does not change much over time, in contrast to conventional mutual funds where the Investment Manager (MI) more often changes the composition of stocks in the portfolio according to the management strategy.
There is not much change in the composition of stocks, so the cost of managing index mutual funds is usually cheaper than conventional mutual funds. So, the profit obtaine by investors is maximize.
· Avoid bad conventional mutual funds
When choosing an index mutual fund, your investment performance has followed the market. Unlike conventional mutual funds, their performance is influence by the management strategy of investment managers. When MI doesn’t manage well, it can get a bad return.
However, in index mutual funds, the entire market is determine. When the market is good, mutual fund returns are also good, and vice versa.
Read more financial independence:
Examples of Index Mutual Funds
After knowing the explanation of index mutual funds, you may want to know an example in Indonesia. As a reference, products with good performance are those that have a small difference between the yield and the index. The following is an example of an index mutual fund in Indonesia.
· Premier IDX30
The first is the IDX30 premiere. The investment manager is PT Indo Premier Investment Management. This index mutual fund was launche on November 1, 2016.
· Panin IDX30
The mutual fund was release on December 28, 2017. The investment manager is PT Panin Asset Management. The minimum initial investment of this index mutual fund is IDR 100,000.
· Syailendra IDX30 Index
The investment manager of this investment product is PT Syailendra Capital. The pt was establishe in 2006. PT Syailendra Capital focuses on managing conventional mutual funds, RDPT, and discretionary funds.
· Simas IDX30
The investment manager in this investment product is PT Sinarmas Asset Management. This pt was establishe on April 9, 2012. PT Sinarmas Asset Management serves professional and prudent management.
· Avrist LQ45 Index
The investment manager in this investment product is PT Avrist Asset Management or called Avram. The company was founde in 2011 and was license on June 18, 2012. Avram is a subsidiary of PT Avrist Assurance.
That’s a review of How to Invest in Index Mutual Funds. This information is important for you to know so that you can understand which stocks can go up and down in the short term. Therefore you can benefit from the shares.