Many people use investment as passive income. However, it is, sometimes, misunderstood that investment will be profitable and that it can multiply money many times over. Many people end up falling for fraudulent investments that promise ridiculous profits.
To avoid this, it is necessary to be careful in choosing an investment. Make sure the investment instrument you choose is registered with the OJK and that you have studied and understood it. In addition, with the many types of investments out there, you need to know your risk profile and investment objectives to avoid making the wrong choice.
You can find out your risk profile online and easily. Simply answer a few questions in the form of a questionnaire. Are you interested in knowing your investment profile, please try here.
It is important to know your risk profile because it can be an indicator of your risk appetite, which affects your investing style. In the investment world, there are at least 4 types of investment risk profiles. Let’s check out the explanation below!
Very Conservative
This type of investment profile usually refers to novice investors who are just starting out. Very conservative means that they are prudent and prefer investments that are stable and secure. In addition, these investments have a short time period of about 1 year. A very conservative risk profile is suitable for investment products with minimal risk, such as Money Market Funds. These mutual funds rarely undergo price fluctuations, so potential losses can be minimized.
Conservative
This type of investment profile remains cautious but confident in choosing investment products that offer greater returns. In general, people in this profile are looking for investments with a time period of 1 to 3 years. Conservative risk profile is suitable for investment products that are quite stable such as bonds or fixed income funds. In addition, conservative types can choose Fixed Income Funds.
Moderate
This profile type is ready to accept short-term fluctuations, meaning that they will not be surprised by a slight drop in investment value. It offers a balanced return potential with investment period of between 3 to 5 years. Investment products that are suitable for moderate profiles include Balanced Funds whose risks are still relatively low compared to Equity Funds.
Aggressive
It is safe to say that this profile is ready to make a profit as well as face the risk of loss. Simply put, the aggressive type is a risk taker who is ready to invest in volatile financial instruments such as Equity Funds. With investment period of 5 years and more, the aggressive types are usually advanced investors who are able to analyze the market.
Can Investment Risk Profile Change?
Yes, it can! Because over time, as you get older, increase your knowledge and life experiences, family responsibilities and income, your investment goals may also change. For example, if you initially have a goal for your wedding, in five years it may change to setting up a future for your children and household. So, updating your profile risk can be done regularly. Once a year or every two years.
If you already know your risk profile, it’s time to check out some of the tips below to start investing:
1. Set Your Investment Goals
There are many investment goals, such as preparing funds for education, marriage, emergency fund, buying gadgets, even for retirement, and so on. Having an investment goal is important as it can motivate you to invest more consistently.
2. Measure Financial Capability
Once you have an investment goal, the next step is to measure your financial capability. This means that you need to allocate how much money you can set from your income for investment. Now, if your investment goals, fund allocation, and financial capability have been measured, it’s time to determine the investment period.
- Short-term Investment: Investment within 1-3 years. Some examples of short-term investments are fulfilling a dream to buy the latest gadget in 2 years, traveling to your favorite place in one year, saving money for college in three years, and so on.
- Medium-term investment: Investments over a period of 3-5 years. Medium-term investments can range from preparing a wedding fund, buying a vehicle, preparing a down payment for a house, or anything else can be realized within that time frame.
- Long-term investment: it refers to investments for 5-year goals and longer. In fact, it is common for long-term investments to be over 10 years. Many investors invest in this long-time horizon for goals such as preparing for retirement, children’s education, pension, and other goals that take a long time to realize.
3. Create a Priority Scale
There are primary goals, and there are aspirational goals. Primary goals usually have a lower risk tolerance, higher liquidity needs, and shorter investment horizon. For example, buying an efficient and affordable family car to improve mobility. Aspirational goals, on the other hand, have a higher risk tolerance, lower liquidity needs, and a longer horizon. For example, buying a luxury two-door car in the future. This goal can be treated as a “bonus” one the primary goal is realized.
If you already know your risk profile, investment goals, and investment priorities, it’s time to start investing by downloading myBCA and using the Welma feature! For those who just want to start investing, make sure you have created an SID (Single Investor Identification) first, check how to do it by clicking the button below: