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- 1. How to invest in IDX Composite index funds in 2023
- 2. Where can I invest in the IDX Composite index?
- 3. How do I invest in the JKSE index?
- 4. The different ways to invest in the JKSE
- 5. How much does it cost to invest in the IDX Composite index?
- 6. Should I invest in the IDX Composite index?
- 7. FAQs
How to invest in IDX Composite index funds in 2023
It only takes a few minutes to invest in the IDX Composite index. One of the simplest and most popular ways to invest is to buy shares in a Vanguard IDX Composite ETF through an online trading platform.
Where can I invest in the IDX Composite index?Copy link to section
Both IDX Composite ETFs and IDX Composite CFDs are available to invest in through eToro .
Here are three more places to buy the IDX Composite, ranked according to their cost, security, and features.
77% of retail CFD accounts lose money.
How do I invest in the JKSE index?Copy link to section
The easiest way is to sign up to a stock broker, open an investment account, and buy shares in an IDX Composite ETF or CFD. This guide explains how to do it:
Step 1. Sign up to eToroCopy link to section
We recommend using eToro to invest in IDX Composite. Sign up for a brokerage account and deposit some money. You may need to supply a form of photo ID to verify the account.
77% of retail CFD accounts lose money.
Step 2. Decide how to buy IDX CompositeCopy link to section
This boils down to choosing between an IDX Composite ETF or CFD. ETFs are generally better suited to investors who want to passively track the IDX Composite’s performance. CFDs offer a greater range of trading options: you can use leverage, short the index, or buy and sell it outside of trading hours.
Step 3. Invest in the IDX CompositeCopy link to section
Sign into your trading account and search for the IDX Composite. Hit the ‘buy’ button and enter the details of your purchase, such as how much you want to spend. Hit ‘buy’ again to execute the trade.
Step 4. Monitor your investmentCopy link to section
When you buy a CFD, the trade goes through more or less instantly, and you’ll be able to see your new open position in your trading account. ETF purchases can take longer, and if you buy outside of traditional trading hours it won’t go through until the next morning.
Your trading account will show the price change in the IDX Composite since you bought it, so you can see your profit/loss at a glance. Use that information, along with your own research, to decide when to sell the IDX Composite and close your position, ideally at a profit!
The different ways to invest in the JKSECopy link to section
As we mentioned above, there are numerous ways to put your money into the IDX Composite. ETFs and CFDs are the simplest options for beginners, but there are alternatives. Here’s a brief overview of each option and who it’s best suited for.
IDX Composite ETFsCopy link to section
An ETF (exchange-traded fund) is an investment fund traded on a stock exchange, much like a stock. Exchange traded funds can hold different assets, such as individual stocks, bonds, or commodities, or serve as a proxy for a stock market index.
An IDX Composite ETF is one way of investing in the IDX Composite. It’s simply an investment fund that mirrors the performance of the IDX Composite. When you buy shares in the fund, the value of your investment will rise or fall with the IDX Composite itself.
ETFs are ideal for new investors because they have a very low minimum investment. You can start with a few pounds and get exposure to some of the world’s largest companies. They’re also practical if you plan on trading the IDX Composite index, because you can buy or sell shares in the fund throughout the day.
Examples of popular JKSE ETFs
- iShares MSCI Indonesia ETF (EIDO)
- VanEck Vectors Indonesia Index ETF (IDX)
- Xtrackers MSCI Indonesia ETF (INDA)
IDX Composite index fundsCopy link to section
An index or mutual fund is an investment fund that aims to track the performance of a stock market index, such as the IDX Composite. It’s very similar to an ETF, in that there are low management fees and you can buy shares through your online broker.
However, there are a couple of differences. IDX Composite index funds are only priced at the end of each trading day, so you can buy or sell shares in the fund once per day. There may also be a higher barrier to entry, through a much larger minimum investment when you invest in IDX Composite index funds.
That means an IDX Composite mutual fund is better suited for long term investors with a higher initial budget, where the infrequent trading and barriers to entry are far less of an issue.
Examples of popular JKSE index funds/mutual funds
- Schroder Dana Prestasi Plus (SDPPX)
- CIMB Principal Equity Fund (CPEF)
- Manulife Dana Ekuitas (MDE)
IDX Composite CFDsCopy link to section
CFDs (contracts for difference) are a way to speculate on IDX Composite price changes with more flexibility than if you use an ETF or index fund. A CFD is a ‘derivative’, which means it gets its value from the underlying asset – in this case the IDX Composite – but it’s separate from it.
As a result, CFDs can be leveraged, where you borrow money to multiply the size of the trade, or they can be used to go ‘short’, where you place a trade on the index to fall in value. You can also buy and sell them outside of regular trading hours.
All of this means IDX Composite CFDs offer the potential to outperform a fund that passively tracks the IDX Composite’s performance. Of course, you can also underperform it as well. Tools like leverage and shorting introduce a lot more risk, and are best left to experienced traders.
IDX Composite futuresCopy link to section
Futures contracts are agreements to buy or sell the JKSE at an agreed price on a set date in the future. IDX Composite futures are a means to predict how you think the index is going to perform over a set time frame, such as the next three or six months.
Most futures contracts involve leverage, so you only put up a small part of the total trade value (the margin) when you buy one. That makes futures more risky, and they require a bit more financial expertise to understand as well.
Some traders use futures as a hedge against the performance of stocks they own. For instance, if you own stocks that are part of the IDX Composite then you might want to short the IDX Composite so that you still make some money if the price falls.
IDX Composite stocksCopy link to section
Another way to invest in the IDX Composite is to buy shares in the individual stocks that the index tracks. It isn’t practical to buy every share in the index, but you can invest directly into a few of the most heavily weighted stocks in the IDX Composite in order to get broad exposure to its performance.
The most heavily weighted stocks in the IDX Composite tend to be the largest companies by market capitalisation. If you invest directly in those largest stocks, you gain exposure to the index without taking on the risk of all the underlying companies.
One reason to do this is that these larger companies with the highest market cap dominate the index anyway, so that it can give you the impression of a diversified portfolio while actually being reliant on the performance of those particular stocks.
For the IDX Composite index, the largest stocks you might choose to invest in are:
|Bank Central Asia Tbk PT (BBCA)||7.91%|
|Telekomunikasi Indonesia (Persero) Tbk PT (TLKM)||7.05%|
|Bank Rakyat Indonesia (Persero) Tbk PT (BBRI)||6.63%|
|Unilever Indonesia Tbk PT (UNVR)||5.19%|
|Bank Mandiri (Persero) Tbk PT (BMRI)||4.90%|
|Astra International Tbk PT (ASII)||3.67%|
|Bank Negara Indonesia (Persero) Tbk PT (BBNI)||3.41%|
|Semen Indonesia (Persero) Tbk PT (SMGR)||2.70%|
|Indofood Sukses Makmur Tbk PT (INDF)||2.46%|
|Astra Agro Lestari Tbk PT (AALI)||2.38%|
The flip side of investing directly like this is that you lose the diversification and stability that comes with buying into an entire index. It requires much more hands-on management to do your own stock picking, so it’s best suited to more experienced investors.
How much does it cost to invest in the IDX Composite index?Copy link to section
From $0 to $5, depending on how you invest. For each option, you must consider the cost of buying the actual asset, whether that’s an ETF, index fund, CFD, or share, plus the fees associated with it.
|Instrument||Trading fee||Management fee|
|Exchange traded funds||$0-$5.99||0-0.2%|
|Index fund / mutual fund||$0-$5.99||0.1-2%|
*A fee comparison of 3 leading brokers for example purposes
ETFs and CFDs are generally the cheapest option overall, as they have low fees and a low minimum investment. Index funds and mutual funds have low fees but may have a high minimum investment. Buying individual stocks is the most expensive option in absolute terms, because the share price of a single large company is often more than $100.
All options are likely to include a trading fee, which you pay each time you make a transaction. Some trading platforms offer zero-fee trading, with others it may be a few dollars.
Then ETFs and index funds each have their own expense ratio. Expense ratios refer to an annual management fee, charged as a percentage of your total investment. Expense ratios are usually no more than 0.05%, so if you invest $1,000, you would pay $5 per year in management fees.
Should I invest in the IDX Composite index?Copy link to section
Yes, IDX Composite investing is a great choice if you’re looking for a safer investment with more price stability compared to picking individual stocks. It gives you an instantly diverse portfolio with exposure to a broad area of the stock market.
The flip side is that you have less control over which companies you invest in. An index committee decides how the index works, and you can’t pick and choose the underlying companies you like the most. The IDX Composite is better suited to hands-off investors, compared to those who have the skills, experience, and desire to pick their own stocks.
What are the advantages of investing in the IDX Composite index?Copy link to section
An index provides instant stock market diversification, where you spread your risk across a large number of underlying companies, rather than one or two. Here are some more reasons why you might want to invest in the IDX Composite index:
- The index gives exposure to Indonesia’s economy. The IDX Composite includes companies in various sectors of the Indonesian economy. This means investing in it provides exposure to the country’s economic growth potential.
- IDX Composite is a diverse index. The index comprises the biggest companies in Indonesia from a wide range of industries. This results in a diverse index that is less prone to being impacted by industry-specific downturns.
- Indonesia is a growing market. Indonesia is considered an emerging market which is expected to grow substantially in the future. The IDX provides exposure to the broader Indonesian economy, which makes it a top long-term investment opportunity.
- Many stocks pay dividends. Many of the stocks listed in the IDX index pay dividends. If you invest in an ETF or mutual fund that tracks the performance of the IDX, you’ll be able to receive a share of these dividends.
What are the disadvantages of investing in the IDX Composite index?Copy link to section
The main risk of investing in the IDX Composite is that all the underlying companies are related in some way, so a broader economic downturn that affected the entire country would likely affect many stocks in the index at the same time. Here are some more risks of IDX Composite investing.
- The IDX can be volatile. Like any other stock market index, the IDX Composite can be volatile. However, as it’s an emerging market index, volatility is generally higher than with other indexes, which can result in significant fluctuations in price.
- Indonesia has an unstable political environment. Indonesia’s political landscape is volatile, and there is often instability in the country. This could lead to an impact on the performance of companies in the country.
- There is currency risk. Investing in the IDX Composite exposes investors to currency fluctuations. Changes in the Indonesian Rupiah relative to other currencies may impact investment returns.
FAQsCopy link to section
An ETF is a better option if you want to be able to buy and sell shares in the IDX Composite throughout the day. An index fund is better suited to long term investors with a larger initial sum to invest.
An ETF is the best way for a beginner to invest in the IDX Composite index. It’s easy to buy shares in an ETF and the costs are relatively low. You only have to pay the trading fees and a small annual management fee.
Yes, if you choose the right online broker. Not all brokers offer index investing, so make sure to find a broker that offers the IDX Composite index before you sign up.
The IDX Composite itself does not pay dividends, but many companies listed on it do. If you invest in an IDX Composite index fund or ETF then you will receive a percentage of the dividends paid out by those companies, based on the number of shares you own in the fund.
The iShares MSCI Indonesia ETF (EIDO) is the best fund for investing in the IDX Composite index. It’s an ETF, which means it invests in all of the companies that comprise the index and tracks its performance.
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