As of the investment instruments, mutual funds provide returns which varies depending on the risk profile and investment period. Apart from that, if you’re planning to invest in these funds, learning the benefits and risks would certainly be very helpful.
Benefits of Mutual Fund
An experienced Investment Manager (IM) will professionally oversee and manage your wealth every day. Therefore, you’re free from administrative work and market observation.
An IM can diversify its investment portfolio to minimize the risk that may arise from the pool of funds.
The purchase and redemption of participation units can be done anytime every business day and such redemption proceeds will go into the account of Participation Unit Holder within 7 business days.
You will be informed about the composition of the investment portfolio assets and instruments, risks, and costs. In addition to that, booking process performed by an independent party other than the IM, namely Custodian Bank, and subject to be overseen by Public Accountant registered with the OJK.
Investment Value Growth Potential
Given the pool of funds from many investors, Mutual Funds have the power to obtain a relatively low investment cost due to the size of fund managed, as well as access to investment instruments that may be difficult carried out by individuals.
This gives equal opportunity for all Participation Unit Holders to yield attractive investment returns according to the risk level.
Affordable & Not Subject to Tax
Initial fund in Mutual Funds set at a relatively small amount compared to investing directly in capital markets. Besides, any amount of the proceeds and profits is not taxable.
Risks of Mutual Funds
Risk of Reduced Value of Participation Units
The risks arise from the changing of market conditions (such as interest rates, inflation, etc.) and resulted in fluctuating prices/returns. Default on the part of the Issuer of Securities or the associated party of the Funds.
An event of force majeure experienced by the Issuer of Securities or the associated party of the Funds as regulated in rules and regulations of the capital market.
Risk of Changing Political and Economic Conditions
The business performance of the industry is influenced by economic conditions, regulatory environment, and business climate for the business sector. Changes in government regulations related to macroeconomics, business, and taxation can affect the economic conditions and industry performance, which subsequently affect the rate of return and investment returns obtained from the Funds.
In the event all or the majority of Participation Unit holders simultaneously redeem their mutual fund units to IM, the manager may be unable to meet their redemption obligations to pay out such redemption proceeds immediately.
In an event of force majeure, the Investment Manager may refuse the Participation Unit redemption in accordance with the provisions of the Collective Investment Contract and OJK regulations.
Exchange Rate Risk
The risk may arise from foreign currency exchange rate fluctuations against Rupiah.