Mutual Fund is defined as a container that is used to collect funds from public investors to be invested in the securities portfolio by the Investment Manager . Mutual funds are an investment alternative for investors, particularly small investors and investors who do not have a lot of time and expertise to calculate the risks of their investments .
Benefits of Mutual Fund:
The benefits obtained if investors invest in Mutual Funds , among others :
First , although investors do not have substantial funds to invest in diversifying effect , so as to minimize the risk . For example , an investor with limited funds can have a portfolio of bonds , which is not possible if not do not have a big budget .
Secondly , Mutual Funds facilitate investors to invest in the stock market . Determining good stocks to buy is not an easy job , but requires knowledge and expertise , which not all investors have the knowledge .
Third , the time efficiency . By investing in Mutual Funds in which the fund is managed by a professional investment manager , the investor need not bother to monitor the performance of its investment because it has been transferred to the investment manager
Risk of Mutual Fund Investing
As with other investment vehicles , in addition to bringing a wide range of profit opportunities , Mutual Funds also contains a variety of opportunities risks , among others :
- Risko Reduced Value Units .
This risk is affected by the decline in the price of the Securities ( stocks , bonds , and other securities ) are included in the Fund ‘s portfolio.
- Liquidity Risk
This risk concerns the difficulties faced by the Investment Manager if the majority of the unit holders to resell ( redemption) of units held. Investment Manager difficulties in providing cash for the redemption .
- Risk of Default
This risk is the worst risk , where risk can arise when the insurance company that insured the Fund’s assets are not immediately pay compensation or to pay less than the sum insured when things happen that are not desirable , such as a default of the parties associated with the Mutual funds , broker , custodian bank , paying agent , or natural disasters , which may cause a decline in NAV ( Net Asset Value ) Mutual funds .
Types of Mutual Fund
Judging from its investment portfolio , Mutual Funds can be classified into :
- Money Market Mutual Funds ( Moner Market Funds) . This type of mutual fund only invests in debt securities with a maturity of less than 1 ( one ) year . The goal is to maintain liquidity and capital maintenance .
- Fixed Income Fund ( Fixed Income Funds) . This type of mutual fund invests at least 80 % of its assets in debt securities . Mutual funds have a relatively greater risk than Money Market Mutual Funds . The goal is to generate stable returns .
- Equity Fund ( Equity Funds ) . Mutual funds that invest at least 80 % of its assets in equity securities . Because the investment made in the shares , then the risk is higher than the previous two types of Mutual Funds but produces a high return rate .
- Balanced Fund . This type of mutual fund investing in equity securities and debt securities