How To Do Mutual Fund Investment
Mutual Funds are a form of collective investment (collectively), and these investments are managed by an investment management company. Investment management company is a company whose work is managing the investment of its customers.
For example, there are investors A, B, C, D, and E each having different money and decide to invest together. Here, they can combine all the money they have to hand over their investment management to an investment management company.
Later, if the investment is profitable, say 15% in a year, then each of these investors will get a profit that amounts in proportion to the amount that they invest. But if the investment is a loss, of course, each of them will also lose in accordance with the proportion of the amount that they invested earlier.
Well, the form of collective investment (collective) where the management of its investments submitted to an investment management company is called by the name of investment Mutual Fund. Investment Management Company (hereinafter called Investment Manager) is what will then invest into various investment products such as stocks, deposits, debt securities, and so forth. Mutual Funds are actually a good way to invest because your investments are managed by an investment management team that is proficient and (usually) experienced.
How does Mutual Fund work?
How its work? Okay, first of all, the investment manager (who issued the Mutual Fund) will invite a number of parties to become a sponsor/promoter (funder). From this sponsorship will be obtained large enough funds, which will be allocated to a number of investment products.
For example, let's say that the total funding from sponsors is $ 1,000,000. Funds of that size, by the Mutual Fund Company (through its investment management team), will be purchased a number of investments, such as the purchase of deposits in various banks, with a period of one month.
After that, the Mutual Fund Company will divide the investment into small pieces, called Unit Units (UP), where each UP will be worth $ 1. So from the total investment of Rp 1 trillion as exemplified above will be obtained UP as much as $ 1,000,000: $ 1 = $ 1,000,000 UP.
Well, UP is what will be published and sold to the public. Thus, investments made by investors is by buying the UP. To uniform, the UP Mutual Fund initially always sold at a price of $ 1. In this case, the price or value of the UP is also called Net Asset Value (NAV).
The number of UPs purchased by investors varies, some only buy 100 UPs, but others buy 1,000, 5,000, or even 10,000 UP. All that depends on each investor's funds. In addition, investors also have to pay a commission for the Mutual Fund Company, which is usually a maximum of about 0.75% to 3% of your total investment. For example, if you buy 1,000 UP for a total price of $ 1000 then you must add about $ 7.5 to $ 30 for the investment manager commission.
In the world of mutual funds, the commission for investment managers is often referred to as the "cost of sales". This is because the commission you must pay when you buy the UP is sold.
Furthermore, since the above mutual funds are allocated into Time Deposit 1 month, then of course after 1 month, there will be interest on deposits obtained, so consequently, the NAB of your UP will rise. In the example above, we assume that each deposit will give the same interest (although the reality will vary)
According to the example, the value of UP that was purchased for $ 1, after one month has risen to $ 1.01. This means, within 1 month, the owner of the UP (investor) has received a NAB increase of 1% per month.
In reality, the change in the NAV of a mutual fund depends heavily on the investment instrument selected by the investment management team. If they choose deposit instruments as their investment product, their mutual fund NAV will continue to rise and may not decrease. This is because of the nature of the deposits that would provide benefits in the form of interest so it will continue to add a value of mutual fund assets.
But there are also mutual funds that specifically invest in stocks. Stocks, unlike deposits, have the possibility of uncertain profits. Can rise, can also go down. Therefore, the value of the UP in the equity fund is likely to rise and also to fall. The UP you originally bought for $ 1, for example, could have been $ 0.9 in a month later because the shares selected by the investment manager dropped in value. On the other hand, when the value of the stock rises, the magnitude of the increase can be greater than the deposit. That is why this type of mutual fund is called by the name of the growing income mutual fund.
Other mutual funds are investing in bonds, and some are investing in a combination of two or more investment instruments, such as stocks and bonds, or bonds and deposits.
So, before buying a mutual fund, ask the mutual fund seller or read the prospectus first (explanation) so you know what type of mutual fund you will buy. Whether it's a mutual fund that invests in stocks, bonds, deposits, or a combination of two or three investment instruments.
Resell the Mutual Funds You Have Been Having
After some time, you can resell the UP you have to your mutual fund company. The type of mutual fund in which you can resell your UP to the issuing company is called the Open-End Mutual Fund. Opponents of Open-end Mutual Funds are closed-end mutual funds. Closed Mutual Fund is a type of mutual fund where you can not sell the UP you have to the publisher, but you can only sell it to other investors, and the sale must be done through the exchange.
For Open-end Mutual Funds, if at any time you want to sell your UP, then you can resell it to your mutual fund issuer, and mutual fund companies are prohibited from refusing to resale UP from their customers. This will certainly benefit you.
Conversely, in closed-end Mutual Funds, the resale process often faces an obstacle because there are not always investors who want to buy your UP Mutual Fund. So in other words, the UP of the Open Fund is more liquid than the Mutual Fund.
Read:
Mutual Fund: Definition And Type
6 Easy Way To Save Money
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