When a prospective customer applies for a stock account at a securities company (or simply called securities house), he or she will open a new cash account called the Investor Funds Account (RDI). RDI is a bank account on behalf of the investor, but only for stock transactions purpose.
Then, how much is the ideal amount of deposit or initial deposit invested in RDI? Is it tens of millions, millions, or a few hundred thousand rupiah?
For comparison, in 1998, when retail investors wanted to invest in shares, they had to spend at least 50 million rupiahs for the first deposit in his cash account. The number was then cut back to 25 million rupiahs. This high amount was influenced by the minimum amount of share purchasing based on lots. At that time, one lot contained 500 shares. That was why the capital market was like an ivory tower. It was exclusive, and only the high profiles ones can invest in stocks.
However, since January 6th, 2014, Indonesia Stock Exchange changed the rules: one lot contains 100 shares, not 500 shares. Slowly, this policy makes stocks more affordable. Now, most people can buy stocks, from the homemakers, drivers and motorcycle taxi drivers, or even security guards.
Furthermore, many securities are enthusiastically encouraging new prospective customers, especially young people, to join the capital market. Reducing the deposit amount is one of the approaches.
Although in practice each security holding has its own policy, the initial RDI deposit required is different. The amount starts from 10 million, 5 million, 3 million, or even only 100,000 rupiahs.
PT Mandiri Sekuritas (Mandiri Sekuritas) has been facilitating investors in stock trading. Customers can open accounts simply through the MOST Web at www.most.co.id, MOST application, MOST App on laptops and computers, or use MOST Mobile on smartphones. Mandiri Sekuritas also recommended an ideal deposit amount of 10 million rupiahs.
Why with that number? One of the primary considerations is that with a deposit of 10 million rupiahs, investors can focus on investing in leading stocks (blue chips), most of them are in the LQ-45 index. LQ-45 is a roster of 45 most liquid stocks with the largest market capitalization on the Indonesia Stock Exchange (IDX).
The Best Time to Join the Capital Market
Right now is the best time to join the capital market, seeing the Jakarta Composite Index (JCI or Indeks Harga Saham Gabungan/IHSG), the main reference index on the IDX is at a low level. Since the beginning of the year until March 27th, IHSG has dived 27.84% at 4,545.57 levels.
"Who wouldn’t rather buy at a lower price than a higher price? People are really strange on that. They should want the stock market go down—they should want buy at a lower price," Warren Buffett, one of the most successful investors in the world, as quoted by Business Insider, February 29th, 2020.
The decline in the IHSG triggered the valuations based on price to earnings ratio (PER), so that shares on the IDX also fell. PER is a comparison between share price and net profit per share to value stock valuation, which determines whether shares are considered cheap or expensive.
There is no standard PER number. However, the lower the PER, the cheaper the value of the shares. According to the IDX data, now some shares in the LQ-45 index also scored low PER. One of them is the one issued by a textile company established in Solo, PT Sri Rejeki Isman Tbk (SRIL) or Sritex. Since March 27th, the PER of SRIL has been very low, 2.29 times. Since the beginning of the year (year to date), SRIL shares have dropped 41.15% at the level of Rp153/share. With 10 million rupiahs, investors can buy 650 lots of SRIL shares (65,000 shares). Please note that SRIL's shares in the past year reached IDR362/share.
Another low share in the stock market with low PER valuation is PT Matahari Department Store Tbk’s (LPPF) stock, which is 2.80 times at the price level of Rp1,365/share. With 10 million rupiahs, investors can obtain 73 lots of shares.
PT Adaro Energy Tbk (ADRO), a coal mining company that also listed it shares in the capital market, also recorded a low PER stock of 5.63 times at the current price of Rp990/share. With 10 million rupiahs, investors can buy 100 lots of ADRO shares. ADRO shares have exceeded Rp1,655/share in the past year.
To determine the value of a bank, it usually uses the price to book value (PBV) ratio, not PER. PBV is an assessment of the stock price with the book value of the company. Typically, stocks that have high PBV ratios have high valuations (overvalue), and stocks with PBVs below one time have a low price or undervalues.
For example, shares of PT Bank Mandiri (Persero) Tbk (BMRI), the parent company of Mandiri Sekuritas, have PBV of 1.13 times at the price level of Rp4,940/share. To purchase one lot of Bank Mandiri shares, investors only need to pay Rp494,000. However, with 10 million rupiahs, customers can buy 20 lots of BMRI shares, which have reached the highest level of IDR 8,150 per share in the past year.
However, the choice is yours. Do you want to allocate 10 million rupiahs for one share, or invest it in different stocks? Investopedia suggested diversification in stocks. Global investors—retail and professionals—typically have around 15-20 shares in their portfolio, not just one stock.
However, if someone wants to focus on being a long-term investor, he or she should pay attention to the fundamental aspect of the issuer, that is, the performance, in addition to paying attention to PER and PBV. Don't focus on the volume of shares, but you should focus on the quality of the issuer.
So, what will you buy with your first 10 mio?
Happy investing in capital market!
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