Understand 5 Ways to Invest in Mutual Funds for Beginners to Profit – Investment is very important to prepare for future financial needs. That’s because investing can generate greater profits than just saving in a bank. One of the few examples of investments that are currently very popular with many people is mutual funds. How to invest in mutual funds for beginners is also quite easy and only requires hundreds of thousands of capital.
Mutual funds are investment instruments that are suitable for beginners because these investments are managed by investment managers and under the supervision of the OJK (Financial Services Authority). So literally, mutual funds are a place to collect funds from investors. Which will then be included by the Investment Manager into the Securities portfolio. Then how to invest in mutual funds for novice investors? Let’s see the following explanation!
1. Set Goals in Investing
The way to invest in mutual funds for beginners is to set investment goals. Making a profit is indeed the goal of every investment, and mutual fund investments are no exception . However, it is important to reaffirm the purpose of mutual fund investments. Think about whether the investment will be used to achieve short-term or long-term goals. Setting this goal is important because it relates to the required profit and risk tolerance.
2. Know the Terms in Mutual Funds
There are many terms in mutual funds that novice investors need to know. There are 3 most important terms related to choosing the right mutual fund, namely CAGR, max dropdown , and total AUM. Compound Annual Growth Rate (CAGR) is the average growth rate of mutual funds over a certain period. So, CAGR is useful for measuring mutual fund performance over a certain period of time.
Max drawdown is the maximum percentage of mutual fund price decline to the lowest point before reaching a new peak for a certain period of time. It is also an indicator of the mutual fund’s risk of loss over a certain period. Meanwhile, the total AUM is the total managed fund of the mutual fund. The higher the total AUM, it can be concluded that the level of public trust in the mutual fund product is high.
3. Choose Mutual Funds According to Investment Objectives
Choosing mutual funds that suit your investment goals is also an important way to invest in mutual funds for beginners. For beginners, it is recommended to choose low-risk investments, for example money market mutual funds. This mutual fund portfolio is money market instruments and deposits. This mutual fund is suitable for financial purposes with maturities of under 1 year.
Then when you are more familiar with investing, please try bond or fixed income mutual funds. The mutual fund has a moderate risk that is suitable for financial purposes with a maturity of 1 to 3 years. If you are proficient and dare to take high risks, then choose stock mutual funds. These mutual funds have high risk and are suitable for long-term goals of more than 5 years.
4. Do Research on Mutual Funds
Before putting money in an investment manager in a mutual fund product, first know what the contents of the portfolio are. For that, read the fund fact sheet (monthly report) and the prospectus of a mutual fund before actually buying it. Then do research and track records of investment managers and learn how to manage money.
5. Buy Mutual Funds and Regularly Invest
After making sure that the selected mutual fund is right, the most important way to invest in mutual funds for beginners is to invest regularly. Adjust the amount to the income you have, for example 10 percent of your monthly salary. Even if it’s a little, as long as it’s routine, over time a lot of money will be collected.
This is how to invest in mutual funds for beginners. It’s never too late to start investing in mutual funds. Even this investment does not require a large capital. Just prepare a capital of hundreds of thousands and start investing while studying the gaps and possible benefits. But other than that, investors need to be prepared for all the risks of failure. Don’t panic because failure is a delayed chance of winning.