Tuesday, 18 September 2012


The financial system of a country could not stand on its own but they were inter-related with financial system of other countries globally. Any occurrence that happened in a financial system in another country.

To illustrate, downturn of stock market index in a country could have the risk of down turning index of shares in another country because investment could be done at home or overseas on trans-regional basis. Development of stock market index in America or Europe always served as reference to investors in Asia including Indonesia.

In the event that the stock market in New York (Dow Jones Industrial Average Index) strengthened, normally the regional stock market index in Asia also rises, and vice versa. This was known as the sentiment factor which psychologically influenced investors attitude in their investment maneuvers.

The above illustration was appropriate to visualize the present situation in the world. The present economic condition in America and Europe must be watched on. In doing investments the public needed to observe the risks which originated not only from the product itself but also from the external factor.

Within the context of banking, for example, Bank Indonesia disclosed that any product offered by the bank, including those by Syariah banking system promised their benefits but also their respective limitations. Besides benefits, the products also held certain risks.

Therefore customers needed to understand the product’s characteristics before using them. In short, it was noteworthy that not all of the products offered by banks were purely banking products. The pure banking products were: saving account, giro, fixed deposits, credit, and Syariah financing.

The Reksadana Insurance and Bank assurance were investment and insurance products released by other financial institutions and marketed through banks as selling agent. As selling agent, banks were not responsible for the performance of Reksadana and Bankassurance products.

According to BI, the risk incurred in savings account, giro and fixed deposits, was when there was problem or difficulty during drawing or liquidating of funds in the banks where the money was deposited.

The inherent risk in other products like Reksadana, were things like lowered Net Asset Value (NAB) in share-based Reksadana caused by lowered portfolio shares price in that Reksadana.

Meanwhile every product incurred external risk from domestic or external condition or even psychological condition of the people. The external risk were among others curve line motion of shares index, curveline of exchange rate value, fluctuation of monetary exchange rate value, movement of interest rate, financial crisis in another country, public’s confidence index in financial condition, public’s confidence index in political stability, and rumors spreading in the market.

For that matter BI advised that before taking any product offered by bank, it was necessary to know the risk that might occur and know how to minimize the risk.

The risk appetite of each customer differ from one person to another. The risk profile of a person would determine the risk tolerance level of that person.

Generally speaking, the better the comprehension of someone’s risk profile, the higher the risk profile, the higher the risk appetite and risk tolerance of that person which would eventually increase his/her risk mitigation capcity. All in all the performance of his/her investment would be maximized since the risk was manageable.

As with banking product, the Government had procured facilities to minimize the risk of savings account, giro, and fixed deposit Through the Board of Deposit Insurance (LPS).

Among the requirements of LPS: bank interest rate which was in accordance with the stipulation of LPS. Broadly speaking, investment has its risks and the following are some tips to be observed by beginners who are starting to learn to invest.

Firstly, recognize and identify the financial institution where the money is placed. Never loosely invest money in any financial institution whose legal status is not clear. Avoid financial institutions whose reputation is bad or notorious in the eyes of the public. Reference by the mass media could be used as guideline in choosing a financial institution who is trustworthy and prospective.

Secondly, know and understand the risk in any financial product because every type of deposit and investment has their risks never be easily submissive to any sweet persuasion or high promises which are not reasonable. It is also necessary to check whether the product being offered is listed in the Supervisory Board or not. Never be trapped into buying hollow or blank investment plan.

Thirdly, adjust the type of deposit and investment with the risk level. If fund owner did not have enough understanding about a certain product, it is best to invest money in simple products like savings account or fixed deposit. As soon as the candidate investor has better understanding of products, it is permissible to invest in stock, bonds or Reksadana insurance.

Fourthly, it must be borne in mind that every type of deposit and investment which are high-yielding also bear high risk. This is in accordance with the principle of high risk, high return. In this case investors are advised not to be careless, greedy and irrational in buying an investment package. Be rational. Know your own capacity before buying any investment of high risk. Some types of risks are notable, i.e. market risk, liquidity risk and default risk.

Fifthly, if knowledge and experience are insufficient, but investor is highly ambitious to heavily invest, it is advisable to use the services of a financial consultant body or personal consultant. A security agency has certified Investment manager (MI) who could be appointed as investment advisor before actually investing. Big banks employ financial advisors or financial planners who could assist his customer in buying investment products, So why not start to invest now?

Business News - August 3, 2012

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