Updated: Oct 31
Writer: Athaya Hardono | Photo: Quincy's personal collection | Illustrator: Carina Audrey | Editor: Christoforus Reynaldo
What happens when we’re finally in our 20s? It’s so much more than just being able to walk casually into a konbini to buy a bottle of sake. Along with that, comes a hefty amount of responsibilities. Unfinished thesis, life after graduation, work… and the list goes on — these are just a few of the seemingly endless agenda waiting to be planned and done. Our dreams have since then shifted from being a princess in a magical kingdom to having money that actually works for us; the answer to that fantasy would be to START INVESTING!
Lucky for us, APUIna has recently got the chance to chat with Quincy Wirija, a financial advisory professional who gave insights on how to start investing young.
What is the difference between saving and investing?
QW: The difference between saving and investing can be distinguished by several factors; based on its use of proceed, time horizon, instruments, and associated risks. The most discerning feature between the two would be its use of proceed, or what the money's for. From the way I see, savings are predominantly used for short-term necessities of usually under 1 year. Knowing that the fund is going to be used in the near future, the money should then be readily available when we need it and should be put in safer instruments, where it has a low risk of losing its value.
In contrast, an investment carries a long-term horizon and therefore should be designated for needs in the more distant future. An example could be a retirement fund that you are going to use in 30 years or a house deposit fund that you are going to use in 10 years. With longer tenor of investment, we could put these funds in instruments of higher risk that would proportionately provide us with a potentially higher return. While it is important to decide on what the fund is for, deciding upon when we are going to use the fund becomes key in determining where the investment fund should be allocated.
When is the perfect time for me to start investing?
QW: I think the answer would be as early as you’ve detected the need to spend or buy something. In essence, every decision to invest should be balanced by a clear goal. The goal should then be emphasized with a clear timeframe. So if you’ve planned specific goals for the future — say if you’re preparing for a travel fund that you are going to use in 5 years, you could start plotting your investment plan for your specific goal along your timeline.
Why do I need to start investing early?
QW: Time is a crucial factor in investing, as it leverages our investment value. Early investments lead to compounding returns — the sooner we start investing, the bigger return we’ll eventually get. There is a concept called “compound interest” which explains more to this.
Suffice to say, investing early could also move us through the worry. That is because we will have a greater tolerance for risk when we start investing early. Take for example that we have been investing for our pension fund in the stock market, which prices plummeted because of an unforeseen crisis. Despite the circumstances, there is no need to be excessively anxious as we have tolerated an ample amount of time for the capital market to recover and restore the value of our investment. The case would surely be different if we had just started investing at a much later age as it will leave us with more uncertainty and worry.
What do I need to know before I start investing?
QW: First and foremost, you should familiarize yourself with the instruments. You do not need to deep-dive into each one of them, but be sure to thoroughly understand the concept of each. For instance, you should understand the concept of debt and equity instruments, the benefits and associated risks of each, and so forth.
The second is to never buy a pig in a poke. In other words, you should never purchase an instrument just because it is currently in trend or that all your friends have been using it. The best reason to start investing is for yourself and your identified needs. This is important to keep in mind as the instrument you choose should be adjacent to your goals and adjusted to your personal risk profile.
Which investment product should I choose?
QW: It all comes back to the needs and risk profile of each investor. Although if I might suggest, Mutual Funds (Reksa Dana) could be a great option for novices seeking to amplify their investment knowledge. Money Market Funds (Reksa Dana Pasar Uang), Fixed Income Funds (Reksa Dana Pendapatan Tetap), and Index Funds (Reksa Dana Indeks) is a great starting point for those just starting to invest.
To illustrate, conservative investors who would usually put their money into deposit accounts (deposito) tend to allocate their investment into Money Market Funds, as it is a derivative product of deposit accounts. Fixed Income Funds could also be an interesting option for moderate-risk profiles, seeking a longer tenor period. For those who are eager to associate their investment in equity instruments, you should consider investing your money in Index Funds. Index Funds are more preferable for novices as it has a lower expense ratio as compared to Equity Funds. It is also deemed as a safer instrument because of its truly-diversified portfolio with no human bias.
Please note that the suggested instruments above do not rule out the possibilities for using other instruments. Despite the risk profile of each, please be mindful that it is important for us to always read and learn the fund fact sheet of each product. Most importantly, be sure that you have a comprehensive understanding of the product before you finally decide to invest.
About our Interviewee
Quincy Wirija graduated from Prasetiya Mulya Business School in 2016 and has since acquired 3 years of experience in financial advisory services, covering a few M&A, debt restructuring, and fund-raising projects. Quincy is currently working as an Associate at Deloitte Indonesia in the Financial Advisory Services division. Prior to joining Deloitte, Quincy has worked as an Associate Consultant at Trust Capital Indonesia as well as been exposed to several other industries including hospitality, multi finance, transportation, and manufacturing. Quincy is also a Professional Financial Modeler (PFM) designation holder and a Chartered Financial Analyst (CFA) Level 2 candidate.