How To Invest--For Dummies

Let’s talk about types of investment. Today there are many asset classes to invest in. Millions of Indonesians have started investing, and we wanted to break down some of the basic around investing for you. One of the first decisions is which types of assets to purchase, which will likely depend on whether you have a short term or long term investment horizon. Read below to find out more!


1. Short term investment: investments over a 3-12 month time frame!

Good for you if:

- you may need to withdraw your investment without warning and need investments that are liquid

- if you are waiting to make a large investment (e.g. buy a house), and you are accumulate assets in the short run up to that investment

- you are risk averse, and scared to tie up your money in one place for a long time


Examples:

- time deposit: fixed term deposit in bank, you can invest from 1-12 months period

- peer to peer lending: individuals can obtain loans directly from others and cuts out financial institution as the middleman.

- money market mutual fund: fund invested into time deposit, central bank deposit, bonds which time to maturity less than 1 year


2. Long term investment: Investments over more than 12 months (and could be up to a lifetime or even multiple generations)!


Good for you if:

- You have idle fund, it is good for you to invest in long term investment

- You are looking to maximise returns and you don’t need the funds soon

Examples:

- Stocks: ownership certificates of a company

- Bonds: fixed income instrument representing a loan made by investor to a borrower

- property: investment in land, house, or apartment

- Gold: investment by purchasing gold bar


Note that many investment instruments these days can be both short term and long term, we’ve just shared how these instruments are normally used! You could keep a stock for 5 days or 5 decades, and neither approach is necessarily right or wrong, it depends on your approach and your goals. Tell us about your approach in the comments! We’d love to hear your thoughts and learn from you




Photo by Lukas from Pexels


Written by Madeleine

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