Many beginner investors are interested in mutual funds because they’re convenient and can be started with a relatively small amount of money. However, many still ask, “How do mutual funds actually work?” The good news is that the concept is not as complicated as it may seem. In fact, mutual funds were created to make investing easier and more accessible, especially for beginners.
Before learning how mutual funds work, it’s important to first understand what they are. A mutual fund is an investment vehicle that pools funds from multiple investors and invests them in various financial instruments through an Investment Manager. Mutual funds are designed to help investors grow their funds, particularly those with limited capital or investment knowledge. To learn more about mutual funds and their characteristics, read this article.
Mutual funds involve several parties, each of which plays a different role:
- Investment Manager
- Custodian Bank
- Mutual Fund Distribution
- Financial Services Authority (OJK)
Investment Managers are responsible for managing investors’ funds and determining investment strategies based on market conditions. These funds are pooled and then invested in various instruments, such as Time Deposits, Bonds, and Stocks, to help maximize potential returns while minimizing investment risks. With the help of Investment Managers, investing becomes easier and more convenient, as investors only need to monitor market conditions periodically, for example, every three or six months.
Meanwhile, the Custodian Bank is responsible for holding funds and investment instruments, recording all transactions, and handling administrative tasks such as receiving interest and dividend payments. The Custodian Bank is selected by the Investment Manager and may be any bank in Indonesia, not limited to Bank BCA.
So, what is BCA’s role? BCA acts as a mutual fund distributor that collaborates with Investment Managers to market mutual fund products to customers. These products are marketed through the myBCA app, Customer Service, and certified Relationship Managers at BCA branch offices.
To better understand the relationship between the Investment Manager, the Custodian Bank, and the Mutual Fund Distributor, consider the following illustration:
Image description (Mutual Fund Investment Process):
- Investors invest their funds through a Mutual Fund Distributor
- Funds from multiple investors are pooled into a mutual fund
- The Investment Manager invests those funds in various investment instruments
The Custodian Bank holds the assets and handles administration. Another key player in the mutual fund sector is the OJK, the regulator responsible for establishing regulations and overseeing activities in the financial services sector, which, in the case of mutual fund products, includes investment managers, custodian banks, and mutual fund distributors. The OJK’s role is to ensure that all activities in the financial services sector are conducted in an orderly, fair, transparent, and accountable manner, enabling sustainable and stable growth while protecting the interests of investors and the public.
So, now you understand how Mutual Funds at BCA work, right? Let’s start investing with BCA and take the first step toward achieving your financial goals!
With the Investment feature on myBCA, you can start investing in Mutual Funds from just IDR10,000. Find out how here. Don’t have myBCA yet? Download the app today!
