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If you happen to have some extra cash on hand, don't just
rush to the bank and stash it all away in your savings account or a
time deposit.
Why not try investing so as to earn a bigger return, like in the local
stock and bond markets, perhaps?
Although playing the markets with the big shots may seem intimidating
at first, opportunities have long been available for even small-time
investors through such instruments as mutual funds, and more recently,
retail bonds.
Mutual funds could be the best choice, right now, especially if you
happened to miss out on the government's most recent offering of retail
bonds earlier last month.
With a minimum investment amount of as low as Rp 250,000 (US$25), with
the money then being pooled by fund managers to be professionally
managed so as to ensure higher returns, mutual funds have attracted the
interest of many.
The mutual fund industry also appears to have shrugged off the
"redemption" trauma of 2005, when rising interest rates caused bond
prices and the value of fixed-income mutual funds to fall. Many
investors, due to a lack of information on the situation from fund
managers, cashed in their holdings and invested them in higher-interest
time deposits, thereby worsening the decline in the industry's net
asset value (NAV).
Indonesia's mutual fund industry has, in fact, got its momentum back
over the past year amid better macroeconomic stability, including lower
inflation, interest rates and higher growth prospects. The local stock
market also has good prospects, despite global concerns about the
effects of the recent U.S. subprime mortgage crisis.
Given this background, Indonesian Mutual Fund Managers Association
chairman Abiprayadi Riyanto sees the industry's NAV as having the
potential to reach some Rp 80 trillion by the end of this year --
double its level in January.
"Last year, it rebounded from Rp 28 trillion to some Rp 70 trillion at
the present time," said Abiprayadi, who also heads the Mandiri
Manajemen Investasi investment house.
"The industry is also healthier now, with a variety of products, not
only mostly fixed-income funds. Fund managers are also more transparent
in informing and educating investors of the actual prospects and risks
of mutual funds."
Fund manager Agus B. Yanuar from Samuel Aset Manajemen, which manages
Rp 1.2 trillion in investor funds, says the industry has the potential
to grow and attract more investors.
"There is still Rp 1,200 trillion of depositor funds in the banks to
tap into, and the valuation of the Indonesian market is still high
compared to others in the region," he said.
"Meanwhile, there is already a shift in paradigm taking place among the
public from a `savings society' to an `investment society'."
"The sooner the better" is Agus's answer to questions from small
investors as to when is a good time to begin investing in mutual funds,
while reminding them to thoroughly consult and discuss first with fund
managers as regards the prospectus, risks, and terms and conditions of
any mutual fund product they are considering.
Although most mutual funds can be cashed in any time, Agus said they
needed to be seen as long-term investments that still carried risks. In
addition, enough ready cash needed to be kept in savings accounts to
meet short-term needs. Abiprayadi also pointed out that "mutual funds
are complementary to savings and deposits, rather than substitutes."
Meanwhile, Adrian Rusmana of Kresna Securities said fund managers would
have to increase their creativity as the industry market grew so as to
attract more investors, amid such other alternatives as retail bonds
and the possible ending of tax-free status for mutual funds.
"It's common for the portfolio of one mutual fund to be almost the same
as another, with the funds being invested mostly in the shares of such
established companies as Telkom or Astra International," he said.
"Fund managers should be like those in developed countries, developing
more products like growth funds, infrastructure funds, looking at other
emerging markets and even developed markets. Investors will be looking
for ethical, as well as smart, fund managers, who are able to give them
high returns based on tolerable risk.".
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