28 Nov 2022 | Edukatips

Investing in Asset Classes, What and How?

Investment asset classes (Investment asset classes: cash and cash equivalents, fixed income, stocks, safe haven)

In investment, many terms are used extensively, including asset classes. Does it sound familiar to you?

Some may think that asset classes have the same meanings as investment diversification. However, asset classes are a grouping of investment instruments that share certain characteristics, such as the risk level and the regulations to which the products are bound.

So, what are the groups? Here are the details!

Asset classes to Invest

This article will at least outline at least three asset classes to invest in.

1. Cash and cash equivalents

When compared to other investment instruments, cash and cash equivalents (assets other than cash such as deposits and money market funds), can be interpreted as the most liquid asset class. It means that funds or capital deposited in the form of investment can be accessed or used easily.

This investment is also known as a short-term investment with a maturity date of less than or equal to 1 year. Furthermore, the risks from the cash and cash equivalent asset classes are relatively lower compared to other asset classes. Return or profit from this instrument tends to be stable, which is usually provided in the form of regular interest payments (for deposits) as well as its unit price increase in Money Market Funds.

2. Fixed Income

Types of instruments in the fixed-income or securities asset classes that offer a fixed income, including bonds or Sukuk with a maturity of one year or more. The instrument of this asset class is considered ideal for individuals who wish to avoid high risk, but wish to gain higher returns from cash and cash equivalent instruments. Investing in this instrument can be allocated for medium-term investment needs with an estimated investment period of around 1 to 3 years.

3. Equity

You must be familiar with this term. Shares are units of equity ownership of a person or party (business entity) in a company or limited liability company. With this ownership, investors have the right to claim company assets, including dividends or profit sharing as well as capital gains or the difference between the purchase price and selling price.

Compared to the previous asset classes, stock investment instruments have the highest risk. The reason is, in an unpredictable situation, investors must be prepared for the three worst possibilities.

  • Risk of losing the opportunity to earn dividends.
  • Risk of capital loss (when the selling price of the shares is lower than the buying price).
  • Risk of liquidity (investors are the last priority in dividing the company’s remaining assets after all liabilities are paid off when the court declares the company bankrupt). There are times when the company has no assets left, leaving the investors to lose all the capital they have invested.

The three asset classes mentioned above (Cash, Fixed Income, and Equity) are available for ownership as a form of diversified portfolio whose amount can be adjusted according to the investor’s risk profile and investment objectives.

Responding to investors’ needs for the three asset classes above, BCA provides a variety of Mutual Fund products, both in the cash asset class through Money Market Funds, fixed income asset class through Fixed-Income Funds, and Equity Funds. A mutual fund is an investment product that is managed professionally and transparently by an Investment Manager and can be started with relatively small funds compared to investing directly in the Capital Market.

In addition to Mutual Funds, BCA also offers Government Securities (SBN), which are included in the fixed-income asset classes, both conventional and sharia SBN, whose interest and principal payments are guaranteed by the Republic of Indonesia. In addition, this investment product comes with various benefits such as potential capital gains, free coupons/reward transfer fees at BCA, and the ease of making ORI SR FR as loan collateral.  

Interesting isn’t it? It’s even more interesting because there are various promos to obtain for transactions at BCA!

For investors who are interested in updated market conditions and recommendations for the best asset class to invest, you can watch the Wealth Inspiration Webinar BCA House View, aired monthly that can be accessed through the Youtube Solusi BCA – Playlist Investasi & Proteksi

Let’s manage and monitor investment activities and a variety of attractive investment instruments through the Welma feature on myBCA.

For further information, please contact Halo BCA at 1500 888 ext. 4 for investment services.