Choosing the Right Mutual Fund Purchase Method

The buying method or method of buying mutual funds is a method that is not commonly used because many people think that buying mutual funds only needs to be bought like saving or only buying occasionally. However, if we want to get maximum profit or minimal loss, we need to consider the purchase method so that our vehicle for investment becomes more optimal and in accordance with what we expect.

In buying mutual funds, especially mutual funds that have a fairly high fluctuating value, such as equity or mixed mutual funds, carrying out a planned purchase method will result in a form of investment that reduces risk if at any time the market conditions are not friendly.

In practice, buying mutual funds uses 4 types of buying methods, where this buying method is actually more popular in buying shares. However, apparently after testing and experimentation, it was found that this buying method is quite good if it can be applied disciplinedly to mutual funds as well, especially mutual funds which are quite volatile. These 4 types of purchasing methods are:

1. Lump-Sum

Lump-Sum is a strategy used by investors if they want to invest all their funds at the beginning, with the following illustration: An investor has USD 10,000,000 and wants to invest in an ABCD equity mutual fund. ABCD has a NAV (Net Asset Value) price of USD 1,000 per unit, so the investor immediately buys the ABCD equity mutual fund with all the money.

2. Dollar Cost Averaging (DCA)

Dollar Cost Averaging is a strategy used by investors when investing a fixed amount on a regular basis, with the following illustration: An investor has USD 500,000 in cash every month and wants to invest in an ABCD equity mutual fund. Therefore, every month for 10 months, the investor buys the ABCD equity mutual fund according to the NAV price at that time.

3. Constant Share (CS)

Constant Share is a strategy where investors invest their funds to buy mutual funds with the same number of units on a regular basis, with the following illustration: An investor has 500 units of money every month and wants to invest in an ABCD stock mutual fund. Therefore every month for 10 months the investor buys ABCD equity mutual fund according to the NAV price at that time to get the number of units of 500 units every month.

4. Value Averaging (VA)

Value Averaging is an investment method when an investor invests a certain amount of funds on a regular basis so that the added value of the investor's investment is always constant. Of the three previous methods, value averaging is the last method which is quite complicated because managing funds to buy mutual funds requires adjustments due to fluctuations in the NAV price you want to buy. It's just that this method is different from the other three methods where the plan to get a return has been set at the beginning of an investor wanting to invest. It can be illustrated as follows: An investor wants a return if his mutual fund shares are sold every month to generate a return of USD 50,000. So the investor must prepare certain funds so that the return growth target reaches that value.