How to invest in the capital market, advantages, and risks

The Indonesian capital market is now growing and is a suitable place for transactions for those of you who want to develop funds. To do this, you need to know how to invest in the capital market.

There are various investment instruments on the capital market. In order to be able to invest smoothly on the capital market, it is explained here how to invest there.

What is the capital market?

The capital market is a market where securities transactions are conducted by corporations, governments and the public for the purpose of seeking new funds and making a profit.

Investing in the capital market, on the other hand, is the activity of investing in available investment vehicles and making a profit from them.

Various investment vehicles present in the capital market are stock investments, bond investments, mutual fund investments, ETF investments, and others.

Currently, there is only one capital market in Indonesia. We know it as the Indonesia Stock Exchange (IDX), which is headquartered in Jakarta.

BEI itself is different from the ordinary market. In order to invest in the IDX, you must first register with the investment firm according to the procedures. For this reason, you are obliged to choose legal collateral in order to be able to use safe investment methods on the capital market.

How to invest in the capital market

How to invest in the capital market is actually simple and can be practiced by anyone. This is an investment method that can be used.

  • Choose investment vehicles that are tailored to your risk profile
  • Choosing a legal application for investment
  • Determine capital by ability
  • Keep an eye on the price development of securities on the capital market
  • Invest gradually and consistently
  • diversify investments
  • Keep learning to invest

1. Choose an investment vehicle that suits your risk profile

Various investment instruments are available on the capital market. You can choose according to your risk profile.

For example, if you prefer to invest in low-risk, low-reward instruments, that means you are a conservative investor. You can choose money market funds.

Those of you who want moderate rewards with moderate risk are also moderate investors. The right instruments for you are bond funds, bonds and mixed funds.

Aggressive investors are those of you who want to make big profits without sacrificing risk. They are suitable to buy stocks.

2. Choose a legal application for investment

Entering the capital market requires a trustworthy intermediary. Choose securities that have earned the government’s trust and meet legal criteria.

Investment Legal Applications are now easy for you to find. You just have to download it for free and pay only when a transaction takes place.

3. Determine capital by ability

Do not be forced to invest with large capital. You usually borrow money here and there because you think you have a lot of capital to invest. The result is zero, you are even in debt.

Even with a small amount of capital, it is possible to invest in the capital market. In fact, quite a few small investors, namely investors start with minimal capital. You can still invest as long as you do it consistently.

4. Continuous monitoring of the price development of securities on the capital market

You need to monitor prices because the price of securities in the capital market can fluctuate. For example, stock prices are constantly changing. You can sell the stock if the price goes up. From here you can make capital gains.

However, if the stock price continues to fall and you make a loss or capital loss, you may as well sell it so the loss doesn’t get bigger.

5. Invest gradually and consistently

The way of investing in the capital market that should be used is that it doesn’t matter to start small as long as it is gradual and consistent.

For example, how to invest in stocks from Rp. 1 million capital. Then you buy the same stock again the following month after the payday. In 10 months your paid-in capital is already 10 million IDR.

6. Diversify investments

Don’t forget to diversify so your capital is spread across different profitable instruments. Your portfolio will be balanced. For example, if Instrument 1 wins and Instrument 2 loses, Instrument 1’s gain can cover Instrument 2’s loss.

You can practice this diversification in mixed investment funds. Your capital is usually divided into 3 different securities such as stocks, money market, and investments transfer rows.

7. Keep learning to invest

After entering the world of capital markets, you will discover something surprising. No problem, so you can learn it and find new, more concrete steps.

You learn not only at the beginning of investing, but also after entering the investment world. Much can be understood as knowledge.

What are the advantages of investing in the capital market

The benefits of investing in the capital markets can be achieved by investors with genuine investment intent. Here’s the explanation.

  • Offer high profit
  • State monitored
  • Can bring passive income
  • Can be done remotely

1. Offer high profit

Investing in the stock market offers high returns when done right. This is shown by the growing Indonesian capital market. Let’s just look at the value of the JCI, which reached 4,312 in 2012. In 2022, the JCI has reached 7,000.

It is not impossible that the Indonesian capital market will continue to grow in the future considering that more and more people are realizing the importance of investing.

2. State Regulated

Investing in the capital market is safe as long as you choose legal collateral or applications. No issuer dares to manipulate shares and others because the government ensures that everyone can trade in the capital market comfortably.

3. Can bring passive income

Another advantage of investing in the capital market is that you can earn passive income. This passive income brings income without you having to do anything, the money can go straight to your account.

This is why investing is said to help you achieve financial freedom. Especially for long-term investments. You can produce until old age.

4. Can be done remotely

Investments in the capital market are also currently carried out remotely. You don’t have to go to an investment firm, just invest through the application. Registration and transactions are all done online, so you can relax and invest on your own allotted time.

What are the risks of investing in the capital market?

There are various risks that you can encounter in the capital market. This is the risk that usually exists.

  • market condition risk
  • Non-payment of dividends by the issuer
  • Interest rates have gone up
  • liquidity risk

1. Market situation risk

The capital market is a very dynamic place. You will face a rising market because the buying is so high, but then the market suddenly falls because most investors sell instruments because they don’t want to lose.

When the market goes down, you need to take the right steps, e.g. B. make a new purchase because the price of the instrument is going down, or sell it to avoid big losses.

2. Non-payment of dividends by issuers

Issuers may not pay dividends during certain periods because the company is not making profits or losses. Dividends can only be paid out if the company is making a profit, i.e. sales are going well.

The company’s business also has a major impact on the return on investment.

3. Interest rates have gone up

Interest rates may rise to deal with high inflation. Bank Indonesia raised interest rates to control inflation. However, the effect causes share prices and other securities on the capital market to fall. This can also make the capital market sluggish.

4. Liquidity Risk

Issuers can have trouble paying dividends because they don’t have cash. Meanwhile, it takes time to sell assets that aren’t working. This problem usually occurs because the company’s cash flow is not smooth.

Conclusion

How to invest in the capital market. You need to find a legal application to invest there safely and choose the best investment vehicle. Don’t forget to keep watching the Indonesian capital market so you don’t miss any news.