TIPS: Mortgage Through Mutual Funds

It has been known about since 1995, but only one percent of Indonesian people who want to borrow money from mutual funds. It may be that some people are still unfamiliar about the mutual fund.


Moreover, the National Survey of Financial Literacy conducted in 2013 by the Financial Services Authority (FSA) revealed that Indonesian people were still uneducated about finances. This condition might be the cause of why mutual funds has not been so popular.


Mutual fund itself is an investment alternative for investors, particularly small investors and investors who do not have much time and expertise to calculate the risks on investment. Generally, a mutual fund is defined as a vehicle used to collect funds from investors to be invested in the portfolio securities by the Investment Manager as in Capital Market Law No. 8/1995.


The mutual fund has a series of advantages for those who are not experts on how to maximise the money and do not have the time.  Above all, mutual funds are suitable for small investors, because the money to invest in mutual funds does not need to be a large amount. Capital of USD 100-200 thousand is enough to buy mutual fund products. And these can now be bought online.


Money from investors is managed by a professional investment manager. They are in charge of ‘taking care’ of public money to be distributed to a number of investment portfolios. Also the investment manager must first explain the level of risk and investment period.


Mutual funds can be used for those who have financial goals in the years ahead. Could be a year, two years, or over five years. For example, to have a financial goal to save up a deposit for a home loan (mortgage) or to have a car in the next few years.


Generally there are four types of mutual funds as an investment portfolio, among others:


Money Market Mutual Funds


The investment Manager will invest the investors money in money market products which mature in under a year, with Bank Indonesia certification. Investors get dividends. This type is relatively safe and minimal risk. Money market mutual funds should be used for short-term financial planning.


Fixed Income Mutual Funds


Investors who have medium-term financial goals can choose these kinds of mutual funds because the return on investment (ROI) is derived from the investment of funds in government or corporate bonds. Profits could reach 10 percent per year.


Mutual Fund Shares


These fall into the category of high-risk mutual funds because its portfolio relies on given stock shares always fluctuating. For those who have long-term financial plan, there is no harm in choosing this type.


Mixed mutual funds


This type of mutual fund is a combination of fixed income mutual funds and stocks. That is, these funds have an investment product that consists of money and bond markets. This type is used for financial purposes in the next five years. The risks are in the middle between fixed income mutual funds and stocks.


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