Money Market Mutual Funds are highly in demand among investors because of their relatively reliable performance. This instrument allocates all investors' funds into the money market. The type of money market instruments include securities that mature in less than 1 year. In addition to the potentially high returns, investors are not charged for resale or purchase.
The type of investor that is suitable for investing in this Mutual Funds investment instrument is the conservative type. Why is that? Because this type of investor wants their investment to have a stable rate of return and tend to worry if the principal investment is reduced. The bottom line is that conservative investors expect safe investments.
Money Market Mutual Funds investment is a type of investment that has low risk and tends to be stable. However, you still need to know how it works, benefits, risks, and tips for investing in the money market through this Mutual Fund. Minimal risk does not mean no risk. So, you still need to pay attention to how it works and apply the advised tips so that the return on investment can match your investment goals.
How Do Money Market Mutual Funds Work?
Prior to knowing the risks and tips for investing in Money Market Mutual Funds, it's best to know how this investment instrument works in the first place. So how does it work?
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Investment Manager Collects Funds from Customers
The Money Market Mutual Funds investment process begins with the Investment Manager gathering funds or capital deposited by the Clients. Then these funds are invested in several Money Market instruments such as Bank Indonesia Certificates (SBI), Money Market Securities, Certificates of Deposits, and so on, which will provide returns as proof of the investment process.
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Investment Manager Manages Customer Funds
After the Investment Manager gathering funds from Clients, then the funds will be managed by creating an investment portfolio. This investment portfolio contains several money market instruments such as Bank Indonesia Certificates, bonds and other money market instruments that will mature in under 1 year. The Investment Manager will then process and invest the investment portfolio to make a profit.
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Reporting to Investors
In Mutual Funds investment, including Money Market Mutual Funds, the task of the Investment Manager is not only to gather and manage funds from investors, but also to provide reports to investors regarding the funds invested on a regular basis. The report include asset composition, product performance, as well as the securities portfolio.
As long as you invest in Mutual Funds, you don't have to worry about missing out on various information about these investments. Everything will be informed as you need to know everything clearly.
That is how Mutual Funds work in managing the invested funds. After reading the information thoroughly, you don't need to hesitate anymore to invest using Mutual Fund investment instruments.
Advantages of Choosing Money Market Mutual Fund Investment
You will gain various benefits by investing in Mutual Funds. Among the advantages are:
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Flexible Investment Capital
You can invest in Mutual Funds with flexible capital, especially Money Market Mutual Funds. So, no need to worry about adjusting it to your financial needs and aspirations.
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Guaranteed Security
As an officially registered investment, Mutual Funds are under the supervision of the Financial Services Authority and are regulated by the government. Therefore, no need to worry about the security issues when investing using this instrument.
As you invest, you certainly seek a safe and potentially profitable investment, right? If so, then Mutual Funds investment can be an option.
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Transparent Performance
Mutual Funds prioritise investment transparency in all aspects. Because it concerns the reputation of the investment instrument as well as for the convenience of investors to avoid unwanted risks.
All Mutual Funds including Money Market Mutual Funds are required to report to investors various kinds of available information that need to be shared, including how they perform. With such transparency, it makes it easier for investors to compare products with one another.
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Daily Liquidity
Interestingly, one of the advantages of Mutual Funds investment is the daily liquidity. This is because Mutual Fund investors can resell their assets with the net asset value on the same day.
This is a distinct advantage for investors in money market instruments, because it is easier to earn potential returns in a relatively fast time. Especially those who invest in Money Market Mutual Funds in the short term.
Money Market Mutual Fund Investment Risks
There are several risks that you may face when investing in Money Market Mutual Funds. Below is a full explanation of the risks:
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Interest Rate Risk Affecting Returns
The first risk that you may face is the risk of interest rate influence on the return value. The occurrence of return fluctuations in Mutual Fund instruments is caused by fluctuating interest rates.
There’s no possible way to accurately predict the changes in interest rates, so it can happen at any time. Therefore, the investors of this Mutual Fund instrument need to always know the latest information about economic conditions.
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Default Risk
The next possible risk when investing in Money Market Mutual Funds is the risk of default. This risk occurs because of payments failure during the redemption process.
This happens when then Investment Manager fail to return the funds invested by investors due to certain conditions, for example, due to the company which issued the money market instruments such as bonds suddenly going bankrupt. Investors who are interested to invest in Money Market Mutual Fund investment instruments need to be aware of this risk.
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Liquidity Risk
In Money Market Mutual Funds investment instrument, you may face liquidity risk. The meaning of liquidity itself means the ability to redeem assets into cash.
Money market investments are known as instruments that have high liquidity and are reliable. However, there is a risk of low liquidity in which assets are difficult to convert into cash.
This risk, of course, does not happen without a reason. It may happen when many Mutual Funds unit holders want to sell back their assets. If it occurs at the same time or period, it may pose a challenge for the Investment Manager to prepare the funds. This condition makes it difficult for investors or asset holders to also redeem their funds from this money market instrument.
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Economic and Political Risk
There are also economic and political risks in Money Market Mutual Funds investments. The solution is that investors need to always be updated on information on economic and political developments, both locally and globally. The goal is to easily predict the development of assets that have been invested in Mutual Funds.
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External Factor Risks
In addition to the internal risks mentioned in the previous points, there are also external risks, which are likely to be faced by investors in Money Market Mutual Funds instruments.
One of the factors is changes related to Mutual Funds investment regulations. This risk is also difficult to predict, so it requires investors’ vigilance in continuously seeking updated information on things that may interfere with the investment performance.
Tips for Investing in Money Market Mutual Funds
Efforts to reduce the risks mentioned above can be done by implementing a wealth of investment tips. Below we have provided tips on investing in Mutual Fund money market instruments:
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Choose long term investments. The longer the investment period, the more likely you will get the opportunity to earn profits.
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Apply Dollar Cost Averaging Strategy. In this strategy you buy assets regardless of NAV (Net Asset Value). This strategy prioritizes consistency and reduces the impact of fluctuations on the overall value of your investment.
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Take advantage of investment platforms. If you use an application or platform to invest, then take advantage of the features and advantages it contains. For example, you can find performance analysis and make online transactions so that you are more flexible in seizing opportunities.
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Avoid being tempted by investment trends. Investors should avoid the influence of trends among the society. Because the risk is quite high if the trend does not last long. Therefore, avoid taking investment decisions just to follow trends that have not been proven to be resilience.
Easy Money Market Mutual Fund Investment with DBS Treasures
If you want to choose an investment partner, it is highly advised to choose DBS Treasures priority banking. Because there are various investment conveniences that you can gain. Among its advantages are the following:
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Professionally Managed Investment
Investing with DBS Treasures saves you from having to worry about managing your funds. Because DBS Treasures partners with professional Investment Managers who will manage all investment options for optimal product performance.
Optimal product performance means optimal potential profit or yield that you can gain from investing in Mutual Funds. This is the reason why you need to invest in Money Market Mutual Funds through DBS Treasures.
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Gain Sharp Insights and Convenient Investing
You will gain the convenience of investing in Mutual Funds with DBS Treasures. Because various investment insights and guidelines can be accessed easily and will be communicated directly to you.
The team in charge are financial experts who are professional and proactive in analysing the market and the latest opportunities, all have been tailored to your preferences and needs, before delivered in a way that’s easy to understand.
You will gain the convenience of buying, selling, registering Single Investor Identification (SID) and switching Mutual Funds through one application, namely the digibank by DBS Application. The ease of using this application is certainly very important for investors to consider.
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Minimizing Risk
The Mutual Funds investment strategy at DBS Treasures is very helpful in reducing risk, because there is a diversified distribution of funds or allocations to various types of investment assets. These efforts aim to reduce the risks that may occur.
That’s the whole explanation of how Mutual Funds work, advantages, risks, as well as tips for investing in Money Market Mutual Funds. Before you choose this type of Mutual Funds investment instrument, it is important for you to first identify what type of investor you are. Whether you are suitable for money market investment instruments or not. This also contributes to minimize the risks you may face later.
Speaking of risks, it can also be minimized by investing in Money Market Mutual Funds through DBS Treasures. The various advantages and conveniences of investing through DBS Treasures have been elaborated in full above, so you can confidently optimise your investment in Mutual Funds.
