Having a personal investment in the financial market has now become a
productive lifestyle among young people or first jobbers. The old view that
investment can only be done by people of mature age is no longer
relevant.
This can be seen from the demographic data of investors, which is
increasingly dominated by the young millennial age group.
Based on data from the Indonesian Central Securities Depository (KSEI), it
was noted that the number of investors or Single Investor Identification
(SID) in the domestic capital market until the end of 2020 reached 3.87
million investors.
This figure increased 56% compared to the position at the end of 2019. Of
the number of investors, almost half of them were under 30 years old, while
the age range of 31-40 years reached 25% of the total number of domestic
investors in 2020. In other words, 70% of market investors Indonesia's
capital is young people.
If we are unanimous about wanting to start investing in the capital market,
try following the guidelines for how to invest in the following financial
markets:
Guide to Investing
1. Understand Investment Concepts and Risks
Insurance is basically the easiest financial risk management mechanism.
Anything that poses a risk to a person's financial condition should be
insured. Although 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 ignored because
they feel that the risk of getting sick and dying is not too big. Mental
protection and health are sometimes considered as the needs of mature age
groups who are already married.
Of course, this assumption is inaccurate, because no one can predict the
risk of getting sick or dying.
So, when talking about which insurance is more important, then the answer
is, both buying life protection and buying health protection are equally
important. However, if you are still in a situation where you have to
prioritize spending premiums, 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 list the financial goals
you want to achieve through investing. Financial goals are simply defined as
a condition that you want to achieve in relation to a certain financial fund
target for a certain period.
By having financial goals, the way you invest can be more targeted because
you have clear targets and strategies.
You can also divide your financial goals according to the target time.
First, short-term financial goals are financial goals that you want to
achieve in less than 3 years. For example: homecoming and year-end vacation
funds, first house down payment funds, and so on.
Second, medium-term financial goals, namely the target funds that you want
to collect in the range of 3-5 years. For example, marriage funds in 3
years, postgraduate school funds, and others.
Third, long-term financial goals, namely target funds to be achieved in a
span of more than 5 years. This includes pension funds, children's education
funds at universities, and so on.
From each of these financial goals, determine the target funds that we want
to realize. For example, a marriage fund in 3 years, a down payment on a
first house, and so on according to your future needs.
3. Determine the Investment Instrument
After having financial goals that have been categorized based on the
timeframe for achievement, then you can begin to determine the choice of the
right investment instrument according to the time horizon of your financial
goals and risk profile.
The time horizon is very important because it will affect the assessment of
the risk of an investment instrument and its effectiveness in helping you
achieve the predetermined target of funds.
For example, if your financial goal is to prepare a marriage fund in 3 years
of USD 100 million, then the right investment choice is an instrument with a
low-to-medium risk level such as money market mutual funds and fixed income
mutual funds.
Stocks are not recommended for 3-year financial purposes because the risk of
price fluctuations is too high in the short term.
When referring to risk grouping based on the time horizon, then you can use
the following reference.
- Short term financial goals < 3 years
- Medium term financial goals 3-5 years
- Long-term financial goals above 5 years
In addition to considering the time horizon, in choosing an investment
instrument, make sure you pay attention to your risk profile as an
investor.
How to check it? You can fill out the risk filling sheet every time you want
to start investing. There are 3 categories of risk profile, namely
conservative, moderate and aggressive investors.
Conservative investors are characterized by the fact that they like stable
investments, don't want the principal investment (initial capital) to
decrease, and they don't like fluctuations in investment value.
Then, moderate investors are investors who can still accept price
fluctuations, hope that their initial capital will not run out completely,
and are quite satisfied if their investments grow beyond the inflation rate
and bank deposits.
Finally, aggressive investors, namely investors who are ready to take the
risk of losing their investment capital, are comfortable with sharp price
fluctuations because they want their investment to grow many times higher
than deposit interest (risk free rate).
4. Open an Investment Account
After having a clear plan of financial goals and a choice of investment
instruments, it's time to execute the plan. To invest in the capital market,
you are required to 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 manager company if
you want to start investing in mutual funds online, and so on.
Usually what is needed to open an investment account is a personal identity
card, a Taxpayer Identification Number, a bank account number, filling out
an initial investment form, and other requirements that you can check at the
relevant financial institution.
Currently starting to invest is easier with the existence of financial
technology (fintech) companies that allow you to start just from a gadget
without having to go to the physical office of the company concerned.
Oh, yes, investment capital is also not expensive, you know. You can start
investing with minimal capital. For example, a mutual fund investment can
start with just IDR 100,000. Stock investment is also not expensive, which
is enough to buy 1 lot (100 shares) as a start.
5. Execute Disciplined Investment
In investing, you need to have the right strategy. Strategy helps you
optimize the capital you have in order to achieve investment targets
according to financial goals. For example, for investing in equity funds,
you choose the dollar cost averaging (DCA) strategy or monthly investments
because you do not have specific time to monitor daily stock market
movements.
There is also a value investing strategy in stock investment, and other
strategies that can be chosen according to your convenience and financial
goals.
Don't forget to evaluate your investment performance regularly at least
every semester. You can check the performance of the investment return
reports that are regularly sent by securities or related investment
managers.
The five tips on how to invest above can help you get started with
investing.
Before starting to invest, it would be better if you start by having
financial readiness. Some indicators of financial readiness include:
financial cash flow conditions are surplus or not in deficit, controlled
debt installments do not exceed 30% of the value of regular monthly income,
and already have an emergency fund of at least 30% of the ideal emergency
fund target value.
