Basic Investment Decisions
The basis for investment decisions according to Tandelilin (2005) consists of:
Return
The main reason people invest is to make a profit. In investment management the level of return on investment is referred to as return. One thing that is very reasonable if investors demand a certain level of return on the funds that have been invested. Investors' expected returns from their investments are compensation for opportunity costs and the risk of decreasing purchasing power due to the influence of inflation.
In investing, it is necessary to distinguish between expected returns and realized returns. Expected return is the level of return that investors anticipate in the future. While the return that occurs or the actual return is a return that has been obtained by investors in the past. Between the expected level of return and the actual level of return obtained by investors from the investment made may be different.
Risk
In addition to the above, an investor must always consider risk in the investment process. So in investing, in addition to paying attention to the rate of return, investment must always consider the risk level of an investment. The level of return is directly correlated with risk, namely: the higher the return, the higher the risk. Therefore, investors must maintain the level of risk with a balanced return.
The time factor
The time period is important from the definition of investment. Investors can invest in the short term, medium term, or long term. The choice of investment period is actually an important thing that shows the expectations or expectations of investors. Investors always select time periods and returns that can meet expectations from consideration of returns and risks.
Investment process
The investment process is a series of activities that result in the purchase of real assets / securities. The investment process revolves around investment decisions related to maximizing investor wealth.
Steps in the investment process:
Knowledge of investment returns and risks.
Knowing the attitude of investors towards risk. Each investor must be willing to accept investment risks that are sometimes in real assets and securities, and can identify a combination of returns and risks that can be accepted. In other words, before accepting investment risk, investors must be in a logical financial position, and must be prepared to use reasonable reasons for the decision making process.
Knowledge of each type of securities / assets available for investment, including expected returns and risks associated with these types of assets / securities.
Select several securities / assets that can provide an acceptable return and risk based on the needs of certain investors.
Mutual Fund Investment
Mutual funds are a forum and pattern of funds / capital management for a group of investors to invest in investment instruments available in the market by buying mutual fund participation units. These funds are then managed by Investment Managers into investment portfolios, whether in the form of shares, bonds, money markets or other securities / securities through Investment Management Companies (Mutual Funds).
Advantages:
Small investors can diversify their capital so they can minimize the risk of loss.
Facilitate investors who do not have the expertise or profits to invest in the capital market.
Investors are assisted by professional investment managers.
Information transparency and high level of liquidity.
Weakness:
Risk of reduced participation units (proof of participation in mutual funds in the form of collective investment contracts) if the price of securities (stocks, bonds and other securities) falls.
Investment managers may have difficulty providing money if many investors simultaneously sell back.
Risk of default if the mutual fund insurance company does not immediately pay compensation or pay less than the mutual fund coverage.
Examples of Investment Products Available in the Market
Savings
Deposit
Stock
Property
Collectible items
Foreign Currency (Foreign Exchange)
Bond
Bank Certificate (SBI)
Money market securities
Bonds payable certificate
Mutual fund