13 Jun 2025 | Edukatips

Understanding Mutual Funds #3: Features of Equity Mutual Funds

Previous articles have discussed in greater detail about Money Market Mutual Funds (RDPU) and Fixed Income Mutual Funds (RDPT), which are intended for gaining liquidity and income. If you would like to learn more about investment objectives, please click the button below!

Investment Goal

This article will discuss in more detail about Equity Mutual Funds that can be used to achieve capital growth (growth) in the long term. Here’s the explanation.

Definition of Equity Mutual Funds (RDS)
Equity Mutual Funds (RDS) are Mutual Funds that consist of at least 80% equity instruments (stocks), with the remainder invested in Money Market Instruments or Bonds. Therefore, RDS is suitable for investors with low liquidity needs, aggressive risk profiles, and investment objectives focused on achieving long-term growth.

Although Equity Mutual Funds have the potential to generate higher returns than Money Market Instruments and Bonds, they also come with higher potential risks. This is because the Investment Manager (IM) allocates investment funds into various types of stocks, following the most optimal strategy in line with the investment policy and current market developments.

When first investing in an Equity Mutual Funds, investors may consider a gradual accumulation strategy to reduce the impact of significant portfolio volatility.

Types of Equity Mutual Funds

RDS can be grouped into the following categories:

1. Management Method:

Active: Mutual funds that are actively managed by selecting stocks with the goal of outperforming a benchmark index (e.g., JCI or LQ45 index)
Passive: Mutual funds whose performance tracks a predetermined benchmark index, commonly known as index Mutual Funds. This means the IM only aims to match the performance of the benchmark and does not invest in stocks outside the index universe, even if those stocks are considered to have strong upside potential.

2. Market Capitalization:

This is an indicator used to determine a company’s value, calculated by multiplying the number of outstanding shares by the share price. A company's market capitalization is typically categorized into two types: large-cap stocks (big cap) and small- to mid-cap stocks (small-mid cap). The following are the characteristics of each.

	*Big Cap*	*Small-Mid Cap*
Market Capitalization	Large (> IDR 100 trillion )	Small to Medium (≤ IDR 100 trillion )
Volatility*	Price volatility tends to be higher due to high trading volume by a group of investors.	Price volatility is sometimes lower due to generally lower trading activity. These stocks are often traded by a smaller number of investors.
Valuation	Tends to be higher	Tends to be lower
Liquidity	More liquid	Less liquid
Growth Potential	Stock prices tend to be high, so the potential for further price appreciation is more limited	Stock prices tend to be lower, so the potential for price appreciation is greater

*Volatility is measured based on the standard deviation of benchmark index movements during the 2021–2024 period.

In Indonesia, investors can monitor big cap stock movements through the LQ45 Index and small- to mid-cap stock movements through the IDX SMC Composite Index.

3. Geographic Allocation:

Domestic: Mutual Funds that invest in companies located in the Mutual Fund’s home country.
Developed market: Mutual Funds that invest in companies located in developed countries, such as the US, Europe, Japan, and other advanced economies.
Emerging market: Mutual Funds that invest in companies located in developing countries (emerging markets), such as India, Indonesia, China, and others.

4. Sectoral Allocation:

Mutual funds that invest in specific industries or sectors, such as technology, finance, property, energy, and others. When investors purchase sector-specific Mutual Funds RDS, the IM will allocate the investor’s funds only to sectors that are considered to have strong upside potential. It is important to note that sector-specific Mutual Funds carry higher risk because they focus solely on specific sectors.

Advantages and Risks of Investing in RDS

After exploring RDS, here are the advantages and risks to consider before deciding to invest in Equity Mutual Funds.

Advantages of Equity Mutual Funds

Mutual Funds are not subject to tax
Funds are managed by professional Investment Managers licensed by the Financial Services Authority (OJK)
Portfolios are diversified across various types of stocks, which have lower risk compared to investing in a single stock. For example, if an investor holds only one stock and it underperforms, they may experience greater losses than if they had invested in a Mutual Fund that spreads investments across multiple stocks.
Access to a wider range of markets and sectors, including both offshore (foreign) and onshore (domestic) stocks across various regions and industries.
Lower capital requirement compared to buying individual stocks directly.
Invest in a variety of stocks with an affordable minimum purchase, starting from IDR 10,000 or USD 10,000. In contrast, buying individual stocks directly often requires a higher and varying minimum investment.

Risk of Equity Mutual Funds

Higher volatility compared to RDPU and RDPT. Stocks are assets that generally offer higher returns than Money Market Instruments and Bonds, but they also carry a greater risks
Market risk. Economic conditions, geopolitical events, investor sentiment, and other factors related to investment instruments can affect stock price movements and should be considered when investing in stocks.
Equity Mutual Funds are not banking products and are therefore not guaranteed by Deposit Insurance Agency (LPS)

In addition to the advantages and risks mentioned above, there are other factors to consider when investing in Mutual Funds. You can explore them further by clicking here.

So, what are you waiting for? Start investing in Stock Mutual Funds (RDS) today through the Investment feature on myBCA!

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