3 Types of Investment Method pt.1

Just by choosing these 3 types as follow!
Portfolio system method that can be done right away  
Second lesson from Morningstar about money plan flow practice

Finally, you must have know about the yield or return to achieve the target. Then, next letââÅ¡¬ÃƒÆ’¢Ã…¾¢s think this point which is ââÅ¡¬ÃƒÆ’…to realize the target return, what investment and how big the investment that should be done?.
A lot of beginner investors stumble on this step, but there is nothing to worry. You can adjust the suitable investment for you based on three types of method that will be introduced now.

Mutual Funds have a lot of variations, roughly they are divided into 5 types.

In mutual funds, there are a lot of variations. But if you look closely, there are a lot of way to classify mutual funds. In this case, we will use two point of views to decide the mutual funds, first ââÅ¡¬ÃƒÆ’…what kind of investment I will doââÅ¡¬ and second ââÅ¡¬ÃƒÆ’…in what kind of market I will do investment?ââÅ¡¬

What kind of investment to be done ? :Mainly there are two kinds of investment, those who focus on bonds (bonds type) and second focus on equity (equity type) ?1.

In what kind of market you will invest? :Primarily can be classified in three investment type, domestic investment, developed country investment, and emerging country investment. Although classification based on location are still not common in Indonesia, but for learning let us still take a look.

pembagian investasi reksa dana

If classified there are 6 types

According to this classification, there will be big difference in risk and return. Please take a look picture bellow. This is graph that shows risk and return from those 6 item classes.


Return and Risk of each class assets


If taking a look in this picture, then can be understood that equity investment in emerging market is attractive due to high return. However need to be remembered the risk is also high. In the other side domestic bonds have small return but as exchange the risk is also low.

Risk and Return are like two sides of a coin. If return is high, the the risk is also high, vice-versa. There is never a lucrative deal like ââÅ¡¬ÃƒÆ’…low risk high returnââÅ¡¬. But everyone want low risk high return, right? Because of that there is a principle that can get us closer to the ideal.

I think you can understand the implementation of high return from bonds investment and lowering the risk of equity investment. You can see the above picture again. In 6 portfolios shown in the picture, it is return and risk if investing money equally in 6 classifications present which 3 of them are bonds and other 3 are equity. What do you think?

This means in order to get stable investment while keeping the risk level, diversified investment is better (this is called crossed portfolio than investment only in equity or bonds.

Then after understanding the importance of investment assets allocation, the next problem is determining how much should you invest on each of the class? The percentage will continue to change according to how big is your investment target.

Beside mutual fund investment, there are other investment types such as real estate, commodity, themed investment (such as shale gas, biotech, etc), hedge funds, etc. but in this case for those who just state investing, equity and bonds mutual funds are chosen.?1

Actually, this is the portfolio that suit you!

Which is the best investment type? How much money should be invested and what is the percentage? This percentage will keep changing depending on your return target.

In those target, please check it with therse three type bellow. Which one is most suitable for you. You will understand the ratio of investment asset allocation that you want. Do you remember your own target from the first part of the series?

tipe stabil

?Target is less than 3%?
Stable Investment Type

For those who have investment target less than 3% is stable investment type. Because there are margin or allowance in fund balance needed from investment period to life evetn, then it is unnecessary to buy mutual fund with relatively high risk like emerging market mutual funds. Allocate the fund in 4 type and start investing with domestic bonds investment and then let us manage the investment stably.


tipe standar

?Target above 3% less than 5%?
Standard Investment Type

For you who have investment target above 3% but less than 5%, this kind of investmebt is standard investment type which is the main road of mutual fund investment. If managing the investment by allocate the fund into 5 kind of investment except domestic investment, it is not impossible to achieve the target!


tipe aktif

?Target above 5% and less than 8%?
Actively Managed Investment Type

For those who have investment target above 5% and less than 8%, it is needed to do active investment management. LetââÅ¡¬ÃƒÆ’¢Ã…¾¢s achieve that target by raising the ratio of emerging market and developed market equities without investing to domestic bonds with low return. However, in this kind of investment need to be remembered that the risk is also high.

For whose who do not find any suitable choice above, in the other hand for those with more than 8% investment target. Then what should you do?


If having target more than 8% ?

For those who have more than 8% investment return target, unfortunately it is unadvisable to investing in mutual fund. Although you might have heard mutual funds that have performance above 8%, need to be remembered that in the essence mutual fund investment is investment with medium or long period.

Definitely there are numerous investment which offer 8% return in 1 year. After all it is if talking only for 1 year. Finding mutual fund with consistent more than 8% return yearly is difficult task.

If the target is above 8%, let us retry the planning from the start. Is it possible to extend the period until the life event, saving everyday little by little, then review the home loans and insurance, and it is possible to increase the monthly investment? If you can find parts that can be adjusted, try to recalculate the target calculation with financial calculator. For ââÅ¡¬ÃƒÆ’…format assetââÅ¡¬ type, please click this link, and for ââÅ¡¬ÃƒÆ’…asset usageââÅ¡¬ please click this link.

When hearing ââÅ¡¬ÃƒÆ’…mutual fund investmentââÅ¡¬, perhaps a lot of people would think about product selection. Of course because the performance of mutual fund investment is mixture between ââÅ¡¬ÃƒÆ’…good and badââÅ¡¬, then it is important to choose the product carefully.

However, more important points than choosing mutual fund are stuffs like what kind of mutual investment? How big is the asset allocation? In investment management world, it is said ââÅ¡¬ÃƒÆ’…product selections play 20% role in determining whether the performance is good or bad, the 80% is depending on assets allocationââÅ¡¬. Thinking about assets distribution is a very crucial aspect.


Next: 3 Types of Investment Method pt.2