Ways and Benefits of INVESTMENT
How to invest for young people in 5 easy steps
Based on data from Indonesian Central Securities Depository (KSEI), it was noted that the number of investors or unique investor identification (SID) in the national capital market at the end of 2020 reached 3, 87 million investors. This figure increased by 56% compared to the end of 2019. Of the total investors, almost half are under 30 years old, while the age group of 31-40 years old represents 25% of the total number of investors nationals. investors in 2020. In other words, 70% of investors in the market capital of Indonesia are young people.
If you have decided to start investing in the capital market, try following the following guide on how to invest in the financial markets:
Guide on how to invest
1. Understand the concept and the risk of investing
Insurance is basically the simplest financial risk management mechanism. Anything that poses a risk to a person's financial situation must be insured. While not everything can be insured, there are at least two types of insurance that are very important to have; namely life insurance and health insurance.
For young people, these two types of protection are often overlooked because they believe that the risk of illness and death is not too great. The protection of life and health is sometimes considered a necessity for older people who are already married. Of course, this assumption is not correct, because no one can predict the risk of illness or death.
So, when talking about the most important insurance, the answer is that buying life protection and buying health protection are equally important. However, if you are still in a situation where you need to prioritize premium spending, you can consider options based on the following guidelines.
2. Have clear financial goals
The next step if you want to start investing is to record the financial goals you want to achieve through investing. Financial goals are simply interpreted as a condition that you want to achieve against a certain financial fund goal over a certain period of time. By having financial goals, the way you invest can be more focused because you have clear goals and strategies.
You can also share financial goals based on time goals. First, short-term financial goals are financial goals that you want to achieve in less than 3 years.
For example: back-to-school and year-end vacation funds, down payment funds for the first home, etc. Second, the medium-term financial goals, i.e. the target funds you want to raise over a 3-5 year period. For example, funds for marriage in 3 years, funds for postgraduate studies and others. Third, the long-term financial objectives, namely the target funds to be achieved over a period of more than 5 years. Included here are pension funds, children's education funds in universities, etc.
From each of these financial goals, determine the target funds we want to achieve. For example, the funds for the wedding in 3 years is Rp. 100 million, the funds for the down payment for the first house are Rp. 150 million, and so on.
3. Determine the investment instrument
After defining a financial goal ranked by time to achieve, you can begin to determine the right choice of investment instruments based on the time horizon of your financial goals and your risk profile. The time horizon is very important as it will affect the risk rating of an investment instrument and its effectiveness in helping you achieve the predetermined target funds.
For example, if your financial goal is to build a wedding fund of IDR 100 million in 3 years, the right investment choice is a low to medium risk instrument such as money market mutual funds. and fixed income mutual funds. Equities are not recommended for 3-year financial objectives because the risk of their price fluctuation is too high in the short term.
When referring to risk grouping based on
time horizon, you can use the following references.
- Short term financial goals < 3 years
- Medium-term financial objectives 3-5 years
- Long term financial goals over 5 years
Besides considering the time horizon, when choosing an investment instrument, be sure to also pay attention to your risk profile as an investor. How to check? You can complete a risk fill sheet each time you want to start investing. There are 3 categories of risk profile, namely conservative, moderate and aggressive investors.
The characteristic of a conservative investor is that he likes stable investments, does not want the capital of the investment (initial capital) to decrease, does not like fluctuations in the value of investments. Then, moderate investors are investors who can still accept price fluctuations, hope that their initial capital will not run out at all, and are quite content if their investment exceeds the level of inflation and bank deposits. Finally, aggressive investors, i.e. investors who are willing to take the risk of losing their investment capital, are comfortable with large price swings because they want their investment to grow many times above the rate. deposit interest rate (risk-free rate).
4. Open an investment account
After establishing a clear plan of
financial goals and choosing investment instruments, it's time to execute the
plan. To invest in the capital market, you must have an investment account. How
to open an investment account is not difficult. You can do this through the
right financial institution, such as a securities company if you want to invest
in stocks, or an investment management company if you want to start investing
in mutual funds online. etc
Usually what is needed to open an investment account is a personal ID card, tax identification number (NPWP), bank account number, initial investment form filling and other requirements which you can check with the relevant financial institution. Nowadays, starting an investment is even easier with the existence of a financial technology (fintech) company that allows you to start only from a gadget without having to go to the physical headquarters of the company concerned.
Oh yeah, for investment capital it's not expensive either, you know. You can start investing with minimal capital. For example, investing in mutual funds can be started with as little as IDR 100,000. Investing in stocks is not expensive either, i.e. you only need to buy 1 lot (100 shares) of stocks to get started.
5. Execute Disciplined Investments
In investing, you need to have the right strategy. The strategy helps you maximize the capital you have available so that you can achieve investment goals based on your financial goals. For example, for equity mutual fund investments, you choose a cost average (DCA) strategy or regular monthly investments because you don't have a specific time to monitor the daily movements of stock markets. There are also value investing strategies in stock investing and other strategies that can be chosen based on convenience and financial goals.
Don't forget to periodically evaluate the performance of your investments, at least every six months. You can check the performance of ROI reports that are regularly sent by the relevant securities or investment managers.
The five investing guides above can help you get started investing.
Before you start investing, it would be good to start with some financial preparation. Several indicators of financial readiness include: whether financial cash is in surplus or not in deficit, the burden of controlled debt repayments does not exceed 30% of the value of monthly routine income, and already has an emergency fund in place. at least 30% of the ideal target value of the emergency fund.
Similarly with personal insurance, try to meet basic insurance needs such as health insurance and life insurance to protect your financial situation against various life risks. We may also choose insurance with investment benefits, such as Manulife Investment Protector products or others that you can see here.
So if these readiness indicators have
been met, we can prepare for the next stage of investment. Conversely, if it
turns out that the financial situation is not ready, it is better to focus on
improving it first, so that you can then start investing in a healthy financial
situation.
7 benefits of investing in your life, have you started yet?
In recent years, the younger generation has become increasingly aware of the importance of a healthy financial situation, one of which is through investment activities. For those of you who haven't invested yet, check out the following 7 benefits of investing as reported by Pintu Academy.
1. Avoid inflation
The choice to invest or not is yours. However, if you don't invest and grow the money you have, then subconsciously the value of your money will decrease over time. This happened because of inflation, which lowered the value of money, there was an increase in the price of goods and a decrease in the purchasing power of people.
2. Opportunity to earn extra income
Currently, the daily needs seem endless, continue to increase, and the value increases. If you rely only on your main income, it may not be enough to meet your daily needs. This is where the importance of investing for both the short and long term comes in. With the right investment, you can earn passive income. As if out of work, but can get income.
3. Helps build well-being
Investing will help you build economic prosperity. In fact, it's obvious, but a lot of people still don't realize it. Imagine if you had 100 million rupees and invested that money in investment instruments with a rate of return of 7% per year, you could earn 7 million per year without doing anything.
4. Preparation for the retirement period
Have you ever calculated the amount of living expenses you will need when you retire and are no longer actively working? If you think “Ah, retirement is still far away”, time can pass very quickly and suddenly retirement is in sight.
5. Facilitate the achievement of financial goals
Everyone should have their own financial goals. For example, to prepare wedding expenses, send children to higher education, etc. With the return value you get from your investment, you can use it to achieve various financial goals in your life.
6. Make the money work for you
Have you ever felt like your money just “just goes through” and ends up being used to pay various bills? With investment, your money can actually earn you more money. Compared to simply keeping it in an account, the investment will be more profitable. High risk investments can offer higher returns. Conversely, low-risk investments usually also offer lower returns.
7. No need to bother working out anymore
If people are looking for extra work that takes time and energy to earn income, you can earn income more easily through investment. Although it also depends on the type of investment you choose. For example, between investing in bonds and stocks, of course, the advantages of investing in bonds are different from stocks in terms of the level of profit and risk.
