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rofessionals boost customers'€™ funds through various investment products.

For those with disposable income, Indonesia'€™s economic growth provides an attractive opportunity to multiply funds through good investment.

So, which investment products do they choose, and why?

According to a recent report, bank deposits are the preferred investment product among Indonesians.

Analysts believe that, currently, approximately 47 percent of Indonesian have their savings invested in the form of bank deposits.

'€œBank deposits are expected to give benefits through interest rates. Depending on the deposit nominal, the interest rates range from 5 to 7 percent. This excludes interest tax,'€ said wealth management practitioner Albertus Hendro. '€œThe important thing for them is that they feel secure about the money they invest,'€ he added.

However, many are unaware of inflationary pressures that affect the value of their funds.

'€œFarming your money in bank deposits is similar to freezing it for an indefinite time '€” it is not really an investment, just short term allocation,'€ certified financial planner Dwi Handoko said when asked to describe the inflation issue.

'€œOver time, inflation occurs and the value of assets in cash terms will decrease; customers need alternatives to multiply their finances faster'€.

Mutual funds

Apart from bank deposits, an increasingly popular investment product is mutual funds. Many banks are selling mutual fund products to take advantage of the growing demand for the product.

Albertus has found that many investors are unfamiliar with mutual funds. '€œMany are apt to think that mutual funds are similar to bank deposits,'€ he said. '€œAn investment product, like a mutual fund, is not a deposit.'€

'€œThe bank is simply selling you a product ['€¦] it generally receives a commission for performing this service, and may charge you other fees for administering your investment account,'€ Albertus added.

Customers, however, need to be aware that banks are not obliged to provide compensation if the investment that the customer has made does not generate returns as projected, he further said.

Another certified financial planner specializing in pension funds, Erisman Syarifioeddin, advised customers to be well aware of mutual funds, especially events that might affect their investment in mutual funds, such a sharp decrease in the value of their funds or a loss of money.

 '€œThe government does not insure you against such losses, even if you purchased the investment product at a bank. In other words, if you buy an investment product, there'€™s no guarantee that you
will get all of your investment back.'€

Erisman also highlighted that, based on the track record of Indonesia'€™s mutual funds, '€œInvesting your money in mutual funds will allow you to have a good chance of earning more, many years later'€.

'€œWhen you invest in a mutual fund, your money is collectively invested or pooled with the money of other investors and used to purchase specific types of securities.'€

'€œMutual funds are run by investment professionals who decide which investments to buy or sell for the fund.'€

'€œCommonly, these professionals use a wide variety of investment instruments to help increase the value of customers'€™ money, such as stocks, bonds, money market instruments, or other financial instruments. The investments selected will depend on the fund'€™s investment objectives,'€ Erisman added.

'€œCustomers needs to understand the objectives of the fund; they should choose a fund with objectives compatible with their financial goals,'€ he said.

Risk profile

The customer'€™s choice of investment products is of primary importance to banks and financial planners alike.

Ronald Sumampow, vice president of a major bank said, '€œWe must try and match the appropriate fund with a client'€™s risk profile. In that way, the bank will be able to maximize the client'€™s opportunity to achieve optimum growth, while maintaining the investments within customer'€™s comfort risk profile'€.

According to Erisman, the
risk profile is not static. '€œThe profile may change from time to time; it may well be that for a number of years a young family will pursue a high-risk high growth strategy, but attitudes may change'€.

'€œAs couples approach retirement and cannot afford large fluctuations in their capital base, they tend to become more and more conservative,'€ he added.

'€œA good product should enable the customer to organize the movement of their investments to more conservative areas as retirement approaches,'€ Erisman said.

Basic tips

When asked to provide tips on investment, Dwi brought up the first rule: '€œDon'€™t rely on telephone or mail solicitations to purchase an investment product'€.

'€œIf you are contacted by a bank about an investment product and you want to find out more, make an appointment to visit the bank to discuss the risk and historical track record of the product'€.

Highlighting the second rule, Dwi said, '€œNever rely solely on oral explanations '€” always ask for information in writing'€.

Customers need to fully understand the products through written explanations, and related fees should be understandable, he said.

'€œMany sales calls are about potential return features of the products, but many of these come with associated management and transaction fees,'€ he added.

Meanwhile, Albertus commented on the somewhat '€œspontaneous'€ behavior sometimes seen when customers visit banks.

'€œNever ask unqualified bank personnel for advice about the bank'€™s investment products. Ask for their relevant certifications or qualifications prior to consulting bank personnel for investment advice,'€ he suggested.

'€œIn simple terms, customers need to make sure to understand what they'€™re getting into; it is not a game of chance.'€ (Achmad Istamar)