Mutual Funds are a very popular type of investment, especially in Indonesia. However, this type of investment is still divided into several types. Such as Equity Mutual Funds and Fixed Income Mutual Funds.
Both clearly have differences that you should know. Especially if you are still confused about where to invest. Check out the differences in the following article.
Here’s the difference between Equity Mutual Funds and Fixed Income Mutual Funds
To be clearer in understanding the differences in these types of investments, you should understand the meaning. Starting from Equity Mutual Funds, then continued with Fixed Income Mutual Funds.
- Equity Mutual Fund
Equity Mutual Funds are a type of investment that collects funds from many investors and invests these funds in stocks in the capital market. Every investor who invests in an Equity Mutual Fund will have an investment unit, the value of which depends on the Mutual Fund's net asset value.
You can gain profits when there is an increase in the difference between the purchase and sale of Equity Mutual Funds. You can make a profit if the sales are higher than purchases.
In Equity Mutual Funds, the shares are specifically for companies that have legal entities and listed on the Indonesia Stock Exchange (IDX).
Some of the benefits that you can gain when investing in this type include:
- Portfolio Diversification
Equity Mutual Fund Investment can help investors to diversify their portfolios easily and effectively. In Equity Mutual Funds, investors' funds are invested in stocks from various sectors and companies. So that the investment risk can be minimized.
- High Yield Potential
Investment in Equity Mutual Funds has the potential for high returns compared to investments in other financial instruments. In the long run, the value of shares in the stock market tends to rise and provide greater returns for investors.
However, the resulting risk is also high. For that, you have to be careful in the transaction process.
- Liquidity
Equity Mutual Funds have high liquidity, because their participation units can be redeemed at any time in accordance with the Mutual Fund's net asset value. Investors can sell their investment units when the Mutual Fund's net asset price rises to make a profit.
- Fixed Income Mutual Fund
Next is the Fixed Income Mutual Fund which is no less popular than the Equity Mutual Fund. This Mutual Fund is a type of investment that collects funds from many investors and invests these funds in fixed income securities. Such as Bonds, Sukuk, and Deposits.
Every investor who invests in this type will have an investment unit. For the value, it depends on the Mutual Fund's net asset value. Mutual Fund net asset value is obtained from the total investment value in fixed income securities minus operational costs.
There are several benefits of Fixed Income Mutual Funds. Among others:
- Investment Security
Investment in Fixed Income Mutual Funds is considered safer than investing in the stock market. This is because investor funds are invested in fixed income securities which tend to be stable and have a lower level of risk.
This type of investment is suitable for those of you who have a low and medium risk profile. Because you don't need to worry too much about the level of risk.
- Stable Potential Returns
Even though the potential returns on Fixed Income Mutual Fund investments tend to be lower than investments in the stock market, the returns tend to be stable and guaranteed.
This is because the interest rates or coupons for Bonds and sukuk are usually set at the time of purchase. So that investors can estimate the potential profits to be obtained.
If you choose this investment, then you can make projections about the potential return. However, avoid expecting too much potential profit.
- Investment Diversification
Investment in Mutual Funds can assist investors in diversifying their investment portfolios. By buying their participation units, investors will have ownership in several types of fixed income securities at once. This can help investors reduce the risk of loss because the investment portfolio becomes more diversified.
- Investment with Affordable Capital
Investments in this type can be made with affordable capital. Investors can buy Fixed Income Mutual Fund participation units with smaller capital compared to buying Bonds and sukuk directly. This can help investors who have limited capital to invest in the capital market.
- Low Operational Costs
This Mutual Fund has lower operational costs compared to Equity Mutual Funds. This is because Investment Managers do not need to carry out share buying and selling transactions which require a higher fee. This lowers operational cost can increase the potential profit obtained by investors.
Overall, this type of Mutual Fund is an attractive investment choice for investors who want stable returns with controlled risk. However, before deciding to invest in this type, investors should understand the risks and potential benefits.
You can take note of the risk profile including the investment objectives that suit your aspirations. Only then can you choose which type of investment is right for you.
Choose the Right Mutual Fund at DBS Treasures
It is important that you choose the right partner to manage your investment. DBS Treasures priority banking can be the answer if you are going to invest in Mutual Funds.
This is because there are several advantages if you choose to become a DBS Treasures Client. Some of the things you can gain include:
- Investment Management by Professionals
All investment options are managed by leading Investment Managers to optimize product performance.
- Gain Insights to Guide You Investing
Supported by a team of financial experts who will deliver market analysis and the latest opportunities.
- Reduce Risk Through Diversification
Diversify your spread of funds across different types of investment assets to reduce risk.
- Convenient Transactions
You will enjoy easy transactions using the digibank by DBS Application. You can make purchases, sales, switching and even the SID (Single Investor Identification) registration process through the application.
Gain curated market analysis support communicated by a team of financial experts. With the latest opportunities that have been adjusted to your risk profile and portfolio needs, driven by Artificial Intelligence/Machine Learning (AI-ML). This insight is equipped with curated solutions related to investment (Grow) and insurance (Protect), so you can quickly and confidently invest through your preferred media.
Make sure you have prepared a special fund to invest. Then if you are a new investor, first make an investor identity through the digibank by DBS Application.
Start by discussing the risk profile and strategy with the DBS Treasures Relationship Manager. Only then can you start making investments. Easy isn't it?
That concludes the brief explanation of the differences between Equity Mutual Funds and Fixed Income Mutual Funds. Visit the following link https://www.dbs.id/id/treasures/investasi/mutual-funds/what-is-mutual-funds-and-equities to invest. So that you can gain the results that suits your aspirations.
