What is mutual fund and its advantages?

What is mutual fund

This article will discuss matters related to the meaning of mutual funds and their types and advantages. ‘Disclaimer: This article only provides information relating to mutual fund. This paper also does not represent a guarantee for the performance of an effect. Every investment has a risk, every investor must choose and pay attention to all the possibilities that will occur.

What is Mutual Fund?

Mutual fund is an investment alternative for investors who have small capital and who do not have much time and expertise. Mutual funds are an alternative for investors who do not have the expertise to calculate risk on investment


What is the Purpose of Mutual Funds?

In general, mutual funds can be interpreted as a container used to raise funds from the investor community. Then the fund will be invested in securities portfolios by investment managers. Mutual funds are designed to raise funds from people who have capital, but do not have sufficient time to manage investments and have relatively limited capabilities in the world of investment.


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What are the types of mutual funds

The following will be explored four types of mutual funds which include Money Market Mutual Funds, Fixed Income Mutual Funds, Mixed Mutual Funds and Equity Mutual Funds.

1. Money Market Funds

Money market mutual funds are types of mutual funds that invest in a type of money market investment instrument with a maturity of less than one year. The forms of investment instruments can be in the form of time deposits (time deposits), certificates of deposit (certificates of deposit), Bank Indonesia Certificates (SBI), Money Market Securities (SBPU) and various other types of money market investment instruments. The goal is to maintain liquidity and maintain capital. The risk is relatively low compared to other types of mutual funds.

2. Fixed Income Funds

Fixed income mutual funds are types of mutual funds that invest at least 80 percent of their assets in debt securities or bonds. The goal is to produce a stable rate of return. The risk is relatively greater than money market mutual funds.

3. Mixed mutual Fund

Mixed mutual funds are a type of mutual fund that allocates investment funds in various portfolios. The investment instrument can be in the form of stocks and combined with bonds. The aim is for price and income growth. The risk of mixed mutual funds is moderate with potential returns that are relatively higher than fixed income mutual funds.

4. Equity Mutual Fund

Equity mutual funds are types of mutual funds that invest at least 80 percent of their assets in the form of equity securities. The goal is to grow the share or unit price in the long run. The risk is relatively higher than money market mutual funds and fixed income mutual funds, but has the potential for the highest rate of return.

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What are the risks of investing in mutual funds?

Like other investment platforms, in addition to providing various profit opportunities, mutual funds also contain various risk opportunities. For example, the risk of reducing the value of the unit. The risk that is affected by the decline in the price of stock, bond, or other securities included in the mutual fund portfolio can be minimized by the investment manager (as the manager) with the diversification principle applied.

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