Trendy, cheap and easy to do, making investment reasons increasingly to be excellent among millennial and Z generations today. Coupled with a variety of online applications that make access to play investment online, thus making investment enthusiasts higher. Such as investing in stocks, gold and online mutual funds.

However, as stocks become more and more popular and the online features that support them are becoming more and more sophisticated, the real purpose of self-investment is fading.

Although today there are still many people who invest because they are aware of the importance of investing for healthy finances. But it turns out that there are still many people who play investing by simply investing money, without properly understanding the purpose of investing, the risks and strategies and ultimately leading to losses.

Well, for those of you who really want to invest the right way. Let’s start again from the most basic things about investment itself. So that in the future you can prepare yourself better before investing.

What is Investment ?

Investment is the activity of placing capital in the form of money or other valuable assets into an object, institution, or party with the hope that the investor or investor will benefit after a certain period of time. Because of the hope of getting a profit in the future, this investment is also known as investment. The term investment itself comes from the Italian word, investire which means to use or use. Generally, funds or assets invested by an investor will be developed by the agency or party that manages it. The profits from the development results will later be distributed to investors as a return in accordance with the provisions between the two parties.

Economically, in investment, investors will buy something that will not be used now. Something that is purchased is stored as an asset which after a certain period of time can change in value. Investment does not always lead to profit. There is also a risk of loss in investing. Therefore, it is very important to understand the types of investments and their risks.

There are 2 types of investment, short term & long term

1. Short Term

As the name implies, this type of investment has a fairly short period with visible results after 3 to 12 months. Another term for short-term investment is temporary investment to secure the assets owned while waiting for the emergence of other investment opportunities that have a more optimal return.

There are 2 characteristics of this short-term investment, namely: 1. This investment must have high quality; 2. Investment instruments must be highly liquid and easily resold. You may think that short-term investing is perfect, but there are also downsides to short-term investing. One of them is that this investment has a relatively much lower return than long-term investments. The most popular type of investment instrument is mutual funds.

2. Long term

The opposite of short-term investments, long-term investments fall into the category of investments that take years to begin to feel the results or returns. For example, many investors take up to 10 years to then sell it and realize a return. Not even a few long-term investments that are only bought without resale.

Every time we start investing, we must know the risks that will be borne. In the type of long-term investment that takes a relatively longer time to generate returns, this investment generally has a much more optimal return, but has a higher risk.

So, to maximize this long-term investment, investors must have a large enough capital. You should also be aware of and accept the fact that long-term investments can continue to lose money during the first few years. Therefore, you should analyze it quite deeply before deciding to take this type of investment. One of the most popular long-term investment instruments is stock investment.

The most popular investment instrument in Indonesia

Share

Stocks are one of the most popular types of investment in Indonesia and can be your best investment choice. If you buy shares of a company listed on the Indonesia Stock Exchange (IDX), you act as a shareholder of that company and are entitled to dividends equal to the percentage of shares you own in the company. In addition to the right to dividends, you can also benefit from the difference in the selling price of the shares. Its liquid nature and ease of trading will certainly benefit you when you want to give these shares to others when your share price rises.

In terms of returns, investing in stocks yields higher returns than other types of investments. However, along with the nature of high returns, investing in stocks also carries a high risk because prices fluctuate and are highly dependent on economic, political and certain circumstances such as holidays.

Mutual Fund

The definition of mutual funds is related to the capital market, meaning that it is a forum used to raise capital from the investment community and then invested in a securities portfolio by investment managers. In this case, as an investor, you only need to provide capital which is then managed by the investment manager to be invested in a stock portfolio. The securities portfolio in question includes money market products, bonds and stocks. At this time, to start investing through mutual funds, you don’t need millions of rupiah, but with a minimum of Rp. 100,000 you can already choose mutual funds as your investment choice. Mutual funds are also classified as long-term investments that are safer than stocks.

There are several types of mutual funds, namely stock, bond, and money market mutual funds. For those of you who want the highest return, you can choose mutual funds. Another advantage of mutual funds is that the money you invest will be managed by an investment manager, so you don’t have to worry about monitoring them every day and can be your best investment choice.

 Gold and Precious Metals

In addition to stocks, gold and precious metals are one of the investment instruments that are well-known among the people of Indonesia from the past until now. This investment is also suitable for those of you who want to have long-term investments that tend to be safe because the price of gold and precious metals will continue to rise. Fortunately again, the increase was due to the response to certain circumstances that led to the value of paper investment; stocks and bonds, decreased. Prices that tend to rise and are stable is also the reason why many people invest in gold and precious metals.

For those of you who are just starting to invest, it seems that investing in gold and precious metals can be an option, especially for those of you who are still young, such as students.

Bond

Bonds are medium or long term debt securities that can be transferred. This bond contains a promise from the issuer to pay interest in the form of interest in a certain period and pay off the principal debt at a predetermined time to the bondholders. The yield of interest received by bondholders is a coupon.

These investment instruments have maturities ranging from 1 -10 years. The existence of this bond is motivated by efforts to raise funds from the public which will be used as a source of funding. In Indonesia, there are 3 types of bonds that are popular, namely:

1. Corporate Bonds: debt securities issued by private corporations and state-owned enterprises,
2. Indonesian Retail Bonds (ORI): bonds issued by the government which are sold to individuals through selling agents appointed by the government. This type of bond was first issued in 2006,
3. Government Bonds: bonds in the form of government bonds issued by the government.

The choice of this investment instrument can be said to be safer because the possibility of default is quite minimal. Moreover, bonds issued by the government.

Time deposit

Another investment instrument is a time deposit that you can make at the bank. This time deposit has a higher interest rate when compared to regular savings. In addition, time deposits have a clear maturity date, usually 3 – 12 months.

If you withdraw funds before the specified maturity date, you will be penalized by the bank concerned. The larger the nominal amount of money that you enter as a deposit, the greater the profit you will get.

No wonder this investment is one of the safest investments and has a fairly low risk. The easy process also makes novice investors interested in opening deposits.

Property

Property investment has several similarities to gold investment. There are physical objects that you buy here. Its value is also ensured to continue to increase without much fluctuation. In addition, the risk is also relatively low.

There are several models of property investment that are commonly used. The simplest way is to buy land, build property on it and sell it when the price is considered high enough. As for the second way, you can rent out the property to get an income stream.

Don’t forget to consider risks such as building damage. Although the risk of this investment is relatively low, property is an asset that can be damaged over time. You have to take care of it so that its value is maintained. The maintenance costs that have been incurred will also need to be considered when selling the property.

Property investment is classified as a long-term investment. So to get a return, you do have to hold it for quite a long time.

Insurance

When you hear the term insurance, the thing that comes to mind may be protecting. Not only protecting yourself, but also protecting your family and the assets you own, such as your house, vehicle, etc.

If insurance is usually useful as protection, now insurance can also be one of your alternatives in investing. This investment-based insurance is a combination of 2 products, namely insurance and managed funds such as mutual funds. Generally, the premium you will pay is converted in units. This union will be divided into 2 types, namely to pay for insurance costs and to invest. Insurance that is commonly used as a long-term investment is life insurance.

Before buying an insurance policy, you must understand very well how investing in this insurance is done. Every month, you also have to make insurance payments along with the costs. By choosing investment-based insurance, the premium you have to pay tends to be higher than usual insurance.

Therefore, it is very important to be careful about having an insurance company because this investment instrument is included in a long-term investment, so you have to make sure the insurance issuing company you choose has obtained permission from the competent authority who has a good track record.

Peer to Peer Lending

Although this type of investment is still relatively new, this type of investment is increasingly popular because of the legal clarity and convenience it offers. Now many fintech lending-based companies are running this business model. In peer to peer lending, you basically lend some money to parties in need, both individuals and business entities.

As in general loans from banks, this type of investment return comes from loan interest that has been mutually agreed upon. Peer to peer lending rates can reach 18% per year. In addition, you can start investing with this peer to peer lending method for only IDR 100,000.

Those are some types of investment that are popular in Indonesia. Hopefully it will help you in choosing an investment instrument that suits you.

Also read other articles about Startup, business, innovation, and technology on the Ideanation website www.ideanation.id.