Investing 101: Investment Instruments

In the previous chapter we learned and got to know the risk profile in investing.

Have you thought about which one you are?

In this chapter we will discuss various investment instruments in more detail. That way, your knowledge of this investment instrument will become more comprehensive and become a good provision for your investment habits.

The investment instruments we will discuss are deposits, gold, mutual funds, shares, peer to peer lending, foreign currency and cryptocurrency.

Let's discuss them one by one.

Deposit

Deposits basically mean that we lend money to the bank for a certain period, then the bank will use it to turn it over again, for example giving interest-bearing loans to customers.

After the end of the period we will get interest according to the applicable amount.

The periods are 1 month, 3 months, 6 months, up to 24 months. The longer the period we will get more interest.

Oh yes, generally during the period, we cannot withdraw our money. However, several banks have now changed the rules so that we can put money in deposits, then, for example, if we need it, we can withdraw it.

Deposits are suitable for investors who are looking for safety because they are relatively low on risk. As long as the bank is still standing and has not gone bankrupt, our money is still there.

As for interest, the average bank in Indonesia has interest of 5% to 6% per year. This is still relatively higher than the average inflation of 4% per year.

Gold

Gold is the most valuable precious metal today. Gold is also a universal currency where all countries value gold well.

One of the advantages of investing in gold is its strong ability to fight inflation. Gold is suitable for those of you who want to protect wealth or the value of money, not to cash in profits.

Mutual funds

The way mutual funds work is that money is collected from the public or investors which will then be managed by professional Investment Managers into instruments they think are profitable.

Based on the choice of instrument itself, mutual funds are divided into 4.

1. Money Market Mutual Funds

The money of investors who choose money market mutual funds will be placed by the Investment Manager in relatively risk-free instruments such as deposits, Indonesian bank certificates and bonds with maturities of less than a year.

The advantage of money market mutual funds is that we can withdraw money at any time if needed without fees.

Just like deposits, money market mutual funds are suitable for the type of investor who is looking for safety.

Minimum investment is only around IDR 100 thousand.

2. Fixed Income Mutual Funds

For this type of mutual fund, the focus of the instrument chosen by the Investment Manager is bonds with a medium term (1-3 years).

As far as my experience goes, we can still cash in this type of mutual fund investment if necessary.

Because they tend to be safe and have greater profits than deposits, these mutual funds are suitable for moderate investors.

3. Mixed Mutual Funds

As the name suggests, mixed, these mutual funds are placed in various productive instruments such as bonds and shares.

This mutual fund is suitable for moderate types of investors. Want to make a profit but can't tolerate it too much if the investment value drops drastically.

4. Stock Mutual Funds

Stock mutual funds will purchase shares with potential and growth by investment managers. This is suitable for those of you who are in the middle, moderate and aggressive type.

When you want to buy shares but are confused about which shares to buy, by investing in a share mutual fund the investment manager will do it for you.

Peer to Peer Lending

P2P Lending has been quite popular in Indonesia in recent years and is projected to remain popular in the following years as long as the rate of return from borrowers remains high.

P2P Lending works by lending a certain amount of funds which will be used for productive purposes by the borrower. For example, for business purposes.

Usually P2P Lending has a time period too, according to the agreement.

The interest or profit sharing is around 12-15% per year, making P2P lending quite popular because the yield is higher than deposits or mutual funds.

So far I have invested in several P2P Lending. In my opinion, this is a relatively risky investment because the potential for default is quite high.

Several times I got negative results from P2P Lending. However, if you accumulate it, you will have a lot of success.

Foreign currency

Having money in foreign currency can be said to be saving and investing at the same time.

Saving because the essence is the same as when we save rupiah. Potentially eroded by inflation.

However, you can say that it is an investment because the weakening rupiah could be caused by bad things in Indonesia so that the value of foreign currency against the rupiah is getting higher.

On the other hand, the rupiah increasingly loses its value.

For people who have saved money in foreign currency, the value of the money will automatically increase frequently with the latest exchange rate.

I want to save, in what currency?

So far from my observations and results from reading and reading articles. There are several currencies that are quite strong and stable because of their large capital and use in the world.

The list of foreign currencies is

• USD – American Dollar
• Euro – The money of European countries
• GBP – The money of the United Kingdom
• CHF – Swiss currency

You can choose between the four currencies above.

Cryptocurrencies

Cryptocurrency is a new currency that is mined through algorithms and blockchain. This is predicted to become money in the future because it runs on blockchain, while blockchain itself is a technology that makes it possible to avoid corruption.

By far the most popular cryptocurrencies are Bitcoin and Etherium.

I myself have invested in Bitcoin and Etherium 2 years ago, but at the beginning of this month I sold everything to switch to gold because I felt safer in gold.