Mutual funds are one of the investment options available to people who want to grow their funds in a practical way. Funds from multiple investors are pooled together and managed by an Investment Manager, who invests them in various instruments according to the type of mutual fund. 

Before starting mutual fund investing, it is important to understand what a mutual fund is, how it works, its product types, benefits, and the risks that need to be considered. With this understanding, you can make investment choices that are more aligned with your financial goals and risk profile. 

What Is a Mutual Fund? 

According to the Financial Services Authority (OJK), a mutual fund is an investment vehicle used to pool funds from the public, which are managed by a legal entity known as an Investment Manager and invested in securities such as stocks, bonds, and money market instruments. 

Meanwhile, according to the Indonesia Stock Exchange (IDX), a mutual fund is an investment vehicle used to pool funds from investors and subsequently invest them in a securities portfolio managed by an Investment Manager. 

In simple terms, the definition of a mutual fund is an investment vehicle that pools funds from multiple investors and invests them in a securities portfolio managed by an Investment Manager. In a mutual fund, funds from multiple investors are combined and professionally managed by an Investment Manager with expertise in managing investment portfolios. 

How Do Mutual Funds Work? 

So, how does a mutual fund work? 

When you purchase a mutual fund, your investment is pooled together with funds from other investors. The Investment Manager then manages the funds and allocates them to assets according to the product’s investment policy. 

Each product has a different asset composition and set of characteristics. Therefore, the risks and potential investment returns may also vary from one mutual fund to another. 

Before investing, investors need to understand the characteristics of the product and consider them in relation to their individual investment goals and risk profile. 

Types of Mutual Funds 

In general, there are several types of mutual funds you should know before starting to invest. 

1. Money Market Mutual Funds 

Money market mutual funds invest in money market instruments and/or debt securities with maturities of no more than one year, in accordance with applicable regulations. 

This type generally has a lower level of risk compared with some other types of mutual funds. Nevertheless, investors still need to understand money market fund risks before choosing a product. 

2. Fixed Income Mutual Funds 

Fixed income mutual funds invest most of their funds in debt securities or bonds. 

These products have different characteristics from equity and money market mutual funds. Investors should still consider their risk profile and investment goals before choosing this type of product. 

3. Equity Mutual Funds 

Equity mutual funds invest most of their funds in stocks listed on the capital market. 

Their value can be more volatile, so this type of product should be considered in relation to the investor’s risk profile and investment time horizon. 

4. Balanced Mutual Funds 

Balanced mutual funds invest in a combination of stocks, debt securities, and/or money market instruments. 

This composition gives them different risk characteristics and potential returns compared with other types of mutual funds, depending on the product’s investment strategy. 

Benefits of Mutual Fund Investing 

Mutual funds offer several benefits that investors may consider. 

1. Investment Diversification 

Funds in a mutual fund can be allocated across several assets according to the product’s investment policy. This diversification means the funds are not solely dependent on the performance of a single instrument. 

2. Professionally Managed 

Mutual funds are managed by an Investment Manager responsible for managing the portfolio according to the product’s investment strategy and policies. 

For investors who do not want to manage their portfolio independently, this mechanism can be one factor to consider. 

3. Convenient Access to Investments 

Mutual funds can provide people with access to investments starting with relatively affordable amounts, depending on the product selected. 

This makes mutual funds one option for investors who want to gradually build an investment habit. 

4. A Variety of Products 

Investors can choose products based on their characteristics, investment goals, time horizon, and risk profile. Since each product has a different asset composition, it is important to read the product information before making a purchase. 

Differences Between Mutual Funds and Bonds 

Mutual funds and bonds can both be used as investment instruments, but they have different mechanisms. 

1. Source of Investment Returns 

For mutual funds, investment returns come from the performance of the assets in the portfolio managed by the Investment Manager. 

Meanwhile, a bond is a debt security issued by the government or a company. Bondholders may receive coupons according to the terms of issuance. 

2. Risk 

The risk of a mutual fund depends on the type and composition of assets in its portfolio. Equity mutual funds have different risk characteristics from money market mutual funds. 

For bonds, risks may include the issuer’s ability to meet its obligations and changes in bond prices in the market. 

3. Management 

Mutual funds are managed by an Investment Manager according to the product’s investment policy. 

Meanwhile, investors who purchase bonds directly own the debt securities and need to understand the characteristics and risks of the bonds they choose. 

How to Choose the Right Mutual Fund 

When looking for the right mutual fund, do not focus solely on a product’s performance over a single period. 

Being labeled the right mutual fund does not automatically mean that the product is the most suitable for your current investment needs. Past performance does not guarantee future performance. 

Some factors to consider before choosing a product include: 

• Investment goals 
• Investment time horizon 
• Risk profile 
• Asset composition 
• Historical performance 
• Applicable fees 
• Purchase and redemption terms 

By understanding these factors, you can look for products that are more aligned with your financial situation and goals. 

If you are looking for a good mutual fund or the best mutual fund, do not focus only on potential returns. Also consider the product’s characteristics, risks, investment time horizon, asset composition, and the information provided in the prospectus and Fund Fact Sheet. 

Mutual Funds Available Through Partner on neobank 

After understanding what a mutual fund is and its different types, you can also find mutual fund options from partner through the neobank app. 

Mutual fund products available through partners on neobank include: 

• Fixed Income Mutual Funds 
• Balanced Mutual Funds 
• Equity Mutual Funds 

Each product has different characteristics and risk levels. Therefore, before making a purchase, make sure you understand your risk profile and the information about the selected product. 

How to Start Investing in Mutual Funds on neobank 

Before purchasing mutual funds from partner on neobank, you need to complete the SID registration process first. 

How to Register for an SID 

1. Log in to the neobank app, then select the “Wealth” category. 
2. Select “Mutual Funds.” 
3. Select “Register SID.” 
4. Read and agree to the Terms & Conditions, then select “Continue to Form Filling.” 
5. The registration process will be completed within a maximum of 3 business days. 

Once the SID registration process is complete, you can proceed with purchasing mutual funds. 

How to Buy Mutual Funds Through Partner on neobank 

Buying mutual funds on neobank is also straightforward. Follow these steps: 

1. On the Mutual Funds page, select “View Products.” 
2. Select a mutual fund that matches your risk profile, then click “Buy.” 
3. Enter the amount you want to invest, then click “Next.” 
4. Agree to the Prospectus, Fund Fact Sheet, and Terms & Conditions, then click “Buy.” 
5. Enter your PIN, and the transaction is complete. 

Don’t Forget to Check Your Risk Profile Before Buying 

Before starting mutual fund investing through partners on the neobank app from Bank Neo Commerce, make sure the SID Registration and Risk Profile Assessment have been completed. 

After registering for an SID and providing the required information, you can check your risk profile through the neobank app. You will be asked to answer the questions provided, after which you can view products recommended based on your risk profile. 

Before making a purchase, remember to read the “Important Notice Before Purchasing Mutual Funds” and review the available product information. 

This step is important to help ensure that your investment choices are aligned with your risk profile and financial goals. Understanding how mutual funds work, recognizing the types of mutual funds, and knowing their risks can help you make more informed investment decisions. 

*** 

Note: This article is for informational purposes only and does not constitute investment advice or a recommendation. Investments involve risks, including the risk of a decline in investment value. Past performance does not guarantee future performance. Make sure to read the Prospectus, Fund Fact Sheet, Terms & Conditions, and carefully consider the relevant information before investing. 

If you would like to start investing in mutual funds, download the neobank app through the Play Store or App Store. For more information, visit the Mutual Funds page on the official Bank Neo Commerce website. 

PT Bank Neo Commerce Tbk is licensed and supervised by the Financial Services Authority (OJK) and Bank Indonesia (BI), and is a participant in the Deposit Insurance Corporation (LPS) guarantee program.