Types of Mutual Funds and Their Advantages and Disadvantages. Which One is selected?
"In this article, we will discuss the types of Mutual Funds and their conditions. Why do we need to know these types so you can choose the type."
In this article, we will discuss the types of Mutual Funds and their conditions. Why do we need to know these types so you can choose the type of mutual fund that suits your investment objectives and risk profile?
If so, what are the types of Mutual Funds?
Fundamentally, Mutual Funds are divided into four types, namely Money Market Mutual Funds, Bonds or Fixed Income Mutual Funds, Stock Mutual Funds and Mixed Mutual Funds.
Each of these types of Mutual
Funds has provisions for asset placement that have been regulated in the POJK
or Financial Services Authority regulations.
Money Market Mutual Funds
Have provisions for placing
100% of assets in money market instruments such as deposits and debt securities
or bonds with maturities of under 1 year.
If you look at the graphs of
money market mutual funds, their price movements tend to be stable and up. This
is because the feeling that money market funds contain deposits or bonds with
maturities of less than 1 year.
When we buy a deposit, the
percentage of profit or interest is determined from the start, for example, you
buy a deposit of 10,000,000 for 1 year with an interest of 3% per year. The
value of your deposit will not decrease because the deposit cannot be traded
and can only be disbursed when it is due
So this money market Mutual
Fund is suitable for those of you who are beginners or have a conservative risk
profile or don't like the decline in the portfolio
In addition, this Mutual Fund
is suitable for those of you who want liquidity, for example to save some of
your emergency funds, because the disbursement process is faster than other
types of Mutual Funds. This mutual fund can also be used for short-term
financial purposes of less than 1 year.
Bond mutual funds
Furthermore, there are bond
mutual funds or fixed income mutual funds. As the name implies, this Mutual
Fund is required to place at least 80% of its assets in debt securities or
In bond mutual funds, price
movements have started to fluctuate, because bonds can be traded.
t is this demand and supply
that makes bond prices fluctuate, but the fluctuations in bond Mutual Fund unit
prices are still more stable than stock Mutual Funds.
Because when we buy bonds, it
means we lend money to the party that issued the bonds, in return we will be
given returns in the form of coupons every certain period, for example per
month or per 6 months.
This coupon will provide
consistent profits to bond mutual funds, so even though the price fluctuates,
coupons can still help
So this bond Mutual Fund is
suitable for those of you who have a conservative to moderate risk profile,
namely investors who can accept ups and downs in investment values but within
In terms of investment
timeframe, bond mutual funds are usually used to optimize investment returns in
the medium term, around 1 to 5 years
Stock Mutual Funds
whereas in mutual funds, a
minimum of 80% of its assets must be placed in equity securities in the form of
shares of public companies or public companies, both domestic and foreign.
If we look at the stock Mutual
Funds chart, the ups and downs are very significant, because basically they are
resistant to fish every exchange day where continuous demand and supply makes
the price fluctuate very much, so for those of you who have an aggressive risk
profile or are ready to face ups and downs in investment value Stock mutual
funds can be an option
In addition, stock mutual funds
are usually more suitable for long-term investments, for example more than 5
Mixed Mutual Funds
Apart from the three types of
mutual funds, there are also mixed mutual funds that have their own uniqueness
This mutual fund has a maximum
asset placement requirement of 79% for each type of asset, namely money market
bonds and stocks
This gives flexibility for
investment managers to determine the best amount of asset allocation in one
mutual fund product. So, the point is flexible mixed mutual funds, for example
the investment manager projects that the prospects for the stock market are not
good, so the investment manager can allocate more funds to aspects of the money
market and bonds.
Mixed funds also go up and down
because they are a mixture of the bond and stock money markets
In terms of risk profile, mixed
mutual funds are suitable for investors with a moderate level of risk tolerance
These mutual funds are also
usually used for medium to long term investment purposes
So, each type of Mutual Fund
has a different level of potential profit and level of risk
Money market mutual funds are
the lowest risk type of mutual funds while stock mutual funds are the highest
risk type of mutual funds compared to other types of mutual funds.
In addition to the examples of
the types of mutual funds that have been mentioned earlier, maybe you have also
heard that there is such a thing as an index mutual fund.
What type of Mutual Fund is this Index Mutual Fund?
Index mutual funds are mutual
funds that are designed to mimic the position and performance of a particular
index. What is usually used is an index on bond and stock assets where there is
a collection of bonds or stocks that have been selected according to the
criteria for the index made
Therefore, we can conclude that
index mutual funds are part of bond mutual funds and stock mutual funds
An example is the ABF Indonesia
Bond index fund mutual fund product which is a bond index mutual fund and the
BNI-AM IDX30 index mutual fund product which is a stock index mutual fund
containing 30 stocks included in the IDX30 index.
of the various types of Mutual
Funds, all of them also have sharia versions, for example Islamic money market
mutual funds or Islamic stock mutual funds whose placement and management of
investment funds are in accordance with sharia principles in the capital market
So, this mutual fund has a
policy to invest in sharia instruments such as sharia deposits, sharia bonds or
sharia bonds and shares.
So, from the explanation above,
it can be concluded that there are 4 types of mutual funds, namely money market
mutual funds, bond mutual funds, stock mutual funds and mixed mutual funds.
Each of these types has different characteristics, so choose a mutual fund that
suits your needs and risk profile.