Building wealth—both financially and in overall well-being—rests on three pillars: generating income, managing finances wisely, and making effective investments. While traditional assets such as gold and property remain popular, the capital market provides compelling advantages. It offers attractive potential returns through capital gains and dividends, coupled with high liquidity that allows investors to access funds whenever needed. Moreover, capital market investments are safeguarded by government regulations and supervised by the Financial Services Authority (OJK), ensuring stronger protection for investors

Capital market investments are also affordable, easy to learn, and accessible anytime, anywhere through various digital platforms. Furthermore, with Bank Indonesia’s recent 75 bps interest rate cut in January–August 2025, these investments have become even more appealing amid ongoing global economic uncertainty.

So, what preparations need to be made before investing in the capital market, given that its product mechanisms differ from those of banking? In general, capital market instruments that offer higher potential returns also carry higher risks that must be understood. Because of these risks, every investor needs to understand their own individual risk profile before deciding to invest.

Here are some key factors to consider before investing in the capital market:

1. Determining Risk Profile

There are three main factors to consider when determining a risk profile. First: Financial Goals. Financial goals should meet the SMART criteria (Specific, Measurable, Achievable, Relevant, Time-bound). The clearer the goals set—including the investment horizon—the easier it will be to determine risk tolerance. In general, the longer the investment horizon, the higher the tolerance for risk.

Second: Risk Capacity. Risk capacity reflects an investor’s financial ability to absorb potential losses. It is influenced by age, income, and the availability of emergency funds. The higher an investor’s income, the greater their capacity for risk, and vice versa for those with lower income.

Third: Risk Tolerance. Risk tolerance is a psychological aspect that measures how much potential loss an investor is willing to accept when investing. A more risk-taking investor will have a higher risk tolerance compared to someone who is more risk-averse.

The three factors above will determine whether an investor has a conservative (low-risk), moderate (medium-risk), or aggressive (high-risk) profile. Once the risk profile is understood, the next step is to select the appropriate capital market products.

2. Choosing the Right Products

There are at least three main products available in the capital market: stocks, bonds, and mutual funds. Stocks represent ownership in a company. Returns from stocks can come from capital gains and dividends. Since stock prices are highly volatile and influenced by market risks (such as macroeconomic conditions and politics) as well as business risks (such as a company’s financial and operational performance), stocks are considered a high-risk investment. This product is more suitable for investors with an aggressive risk profile:

Bonds, on the other hand, are debt securities issued by either the government or corporations. Government bonds (such as ORI or SUN) are relatively safe because they are guaranteed by the government. Meanwhile, corporate bonds carry a higher level of risk, depending on the issuing company’s ability to repay its debt. To help assess the risk of default, corporate bonds are usually rated by credit rating agencies.

Mutual funds are collections of stocks and/or bonds managed by professional investment managers. There are several types of mutual funds: money market funds, fixed income funds, balanced funds, and equity funds. Investors with a conservative risk profile may choose money market funds, where most of the portfolio is placed in liquid, low-risk money market instruments. Investors with a moderate risk profile may opt for fixed income funds, where most of the portfolio is invested in bonds. Investors with an aggressive risk profile may select equity funds, where the majority of the portfolio is invested in stocks.

3. Consider Personal Financial Strength and Economic Conditions

After determining your risk profile, also take into account your financial strength and investment timeframe. Assess how much capital you are able to invest and the period of time needed to achieve your future investment goals. Review domestic economic conditions, including inflation rates, interest rates, and the exchange rate.

Last but not least, if you choose stocks, conduct both fundamental and technical analysis of the companies you plan to invest in. Fundamental analysis focuses on a company’s performance, including cash flow, profitability, and business growth, while technical analysis looks at the price movements of the company’s stock.

Whatever type of capital market investment you choose, be sure to invest through a trusted securities company that is registered with and supervised by the OJK. As a securities company with more than 25 years of experience, Mandiri Sekuritas provides customers with convenient access to investments through its innovative digital platform: Growin’ by Mandiri Sekuritas. Through this platform, investors can start investing in various capital market products, including stocks, mutual funds, and bonds. Want to learn more about capital market investments? Visit growin.id, download Growin’ from the AppStore or PlayStore, or access Growin’ via Livin’ by Mandiri to invest in stocks.