Deposit or Business Investment? Check out how to invest this deposit!

For novice investors, let's take a closer look at how to invest in deposits, types of deposits, to the advantages and disadvantages of deposits so they can choose an investment option that can give you optimal benefits!

As a novice investor, you must be quite familiar with how to invest in deposits because this instrument is very popular with the wider community for long-term investments.

Apart from investing in deposits, there are business investments that can be an investment instrument option for novice investors. Increasingly diverse investment instruments sometimes make novice investors confused in choosing their initial investment.

In general, the deposit investment method is synonymous with low risk, so it is popular with novice investors. However, low risk is of course also followed by small profits as well.

Unlike the deposit investment method, business investment has various potential risks and benefits so that it can adjust the investor's investment objectives. Even though the risk tends to be greater, this instrument has the potential for greater profit as well.

Therefore, let's discuss more the investment opportunities of these two instruments.

Business Investments and Deposits

In investing you must remember the principle of "high-risk high return" the greater the risk you are willing to take, the greater the potential profit that can be obtained.

How to invest in deposits rely on deposit instruments that have a low risk because the capital you invest through the bank will be guaranteed by the Deposit Insurance Agency (LPS) with a guarantee of up to 2 billion.

Therefore, the method of deposit investment can offer minimal risk. The deposit value that you save will not be affected by market movements, this will minimize your risk but at the same time reduce the potential profit you will get.

Unlike the method of deposit investment, business investment is the placement of capital into a business that is felt to have promising potential for development in the foreseeable future. This investment has the potential to increase in value in the future.

Apart from that, business investment can also give you passive income through dividends within a certain period when the business is making a profit.

But before you make a choice, let's discuss it in more depth one by one.

How to Invest Deposits

Deposits are usually investment products that have been prepared by a bank. The interest given on deposits is usually determined by the bank according to the tenor and the value of the deposit that you will invest. Generally, interest is given in the range of 4-7% which usually refers to the interest rate determined by Bank Indonesia (BI).

Deposits are indeed investments that tend to be safe and stable, but the development in the value of money that you can get is arguably small.

For example, when you deposit 100 million in funds with a 5-year tenor and an interest rate of 5%, you have the potential to get 5 million in profits so that at the end of the period you will get 105 million in cash.

But it's not clear yet because you still have to be taxed. But each instrument of course has its drawbacks. Deposits themselves are widely chosen because the possibility of loss is very small. Deposits themselves have several types that you need to know, namely:

Types of Deposits

Deposits are categorized into three types, namely Time Deposits, Certificates of Deposit, and On-Call Deposits. Here's a more detailed explanation:

Time Deposit, this type is very common and well known among the public. This type is a term saving that you will be able to take at the end of the deposit period. These deposits can be issued on behalf of individuals and institutions whose money can only be withdrawn when it is due.

Certificates of deposit, deposits can also be issued in the form of certificates of deposit that does not refer to the name of a particular institution or individual so that they can be traded.

Deposits On Call, call deposits are deposits with a minimum term of 7 days and a maximum of 1 month. This type of deposit is specifically for storing large amounts of funds.

The difference between Deposits and Savings Investments

When it comes to investing, many people find it difficult to distinguish between deposits and savings. Conceptually, both of them save money in the bank and get interested in these savings according to bank regulations.

The difference between deposits and savings lies in the amount of interest and the flexibility of withdrawing the money you have saved. If you save money in a savings account, you can withdraw the money at any time.

This is different from deposits where your money will get a penalty if you withdraw it before the time agreed at the beginning. However, this is also followed by a return in the form of greater interest than ordinary savings.

Therefore, deposits are included in low-risk investment instruments because the return usually has been determined when saving money.

Advantages and Disadvantages of Deposits

Each investment has certain advantages and disadvantages, along with the advantages of deposits.

1. Excess Deposits

Investment with a flexible period can be at anytime.

Very small risk because your funds are guaranteed by LPS so many people can easily run this investment.

Certificates of deposit can also be used as collateral for credit.

Interest rates tend to be higher than regular savings

2. Lack of Deposits

Low return yields. Even though deposits are the safest investment instruments, the returns on profits can also be said to be the lowest compared to other instruments.

Your money will be held until the end of the deposit period.

Profits from deposit interest will be deducted from various costs such as taxes and administration.

When faced with inflation, the benefits that should be obtained from deposit interest will not provide significant value. This is because the inflation rate could be higher than the deposit rate.

Business Investment

In contrast to deposits, investment is an investment instrument with a greater rate of return if you can choose the right business for you to invest in.

This investment has the potential to provide large returns because you can get profits from business investments from capital gains and dividends which will be distributed at the end of the period when the business makes a profit.

This concept is almost the same as share ownership, but in the business investment, you have the opportunity to own shares in private companies. Various private businesses are now easier for you to access through equity crowdfunding investments.

For your benefit, you have potential benefits from capital gains and dividends, along with an explanation.

Capital gains

Capital gain is the profit you get from the difference between the purchase price and the selling price of the shares you own. Capital gains are usually formed from trading in the secondary market.

For example, if you invest for 10000/lot and within a few months the value increases to 12000/lot, then you get a capital gain of 2000/lot following the shift in the secondary market.

Dividend

Dividends are part of the profits that will be distributed to shareholders. Dividends come from profits generated by the company.

Dividends will be given after approval from shareholders at the GMS. the number of dividends will be adjusted to the size of the shares you have.

However, some companies sometimes do not pay dividends even though they make a profit, because the company wants to use the company's profits to expand or develop the business. Usually, this is adjusted to the results of the GMS

Risks in Business Investments

Investments of course have risks, and so does business investment. The business that you invest in, of course, has the potential for losses, so you will also bear the losses that arise.

Sometimes your business also experiences ups and downs so the value of your investment also fluctuates.

However, this is of course followed by the potential for big profits as well as the increase in profits you get when the business gets big profits.