The Importance of Understanding Investment Risks in the Capital Market

Wednesday, 21 September 2022

The Importance of Understanding Investment Risks in the Capital Market

JAKARTA. Investment is one of the important things in the principle of financial management. With investment, the income we receive is not only used up to buy consumption needs but can be placed in an instrument for its value to increase.

Investment instruments are also still developing and expanding. If in the past the choices were limited to property, debt securities, or stocks, now along with the development of technology, other instruments have started to gain popularity, such as cryptocurrency and Non-Fungible Tokens (NFT).

However, despite the rise of cryptocurrency and NFT investments, stock investments continue to be a popular choice among Indonesians.

According to the Head of the IDX Jakarta Representative Office, Marco Putra Kawet, the number of stock investors in 2021 was recorded to grow by 136.13% from 2020 to 1.4 million investors from 590.000 investors.

Meanwhile, the number of Single Investor Identification (SID) issued until the end of 2021 was 3.4 million, an increase of 103.6% from the number of SIDs as of 31 December 2020, which was only 1.1 million.

Although the figure has increased, Marco said the number of investors in the capital market is still very small compared to the total population of Indonesia. This means that the opportunity to develop instruments traded in the capital market is still quite large.

He conveyed this in a webinar organized by the MUC Attorney at Law on Wednesday (21/9) titled Rights and Obligations of Indonesian Capital Market Investors.

Advantages of Investing in the Capital Market

According to Marco, there are several advantages that can be obtained by capital market investors compared to other investment instruments. First, investors are entitled to dividends distributed by the company.

Second, investors can also get capital gains from the transaction results of the company's shares owned.

Third, the advantage of investing in the capital market is that investors will have two separate accounts consisting of an account containing assets and containing funds. This is to prevent fraud or misuse of investment funds.

In addition, transactions on investment instruments in the capital market are also carried out using Indonesian time.

Investment Risk in Capital Market

However, as with any type of investment, the instruments in the capital market are not free-risk either. One of them, was entangled in fraudulent investments.

Therefore, apart from being required to expand the reach of the capital market to all Indonesians, the stock exchange authorities and related entities also often face various problems, such as the rise of fraudulent investment cases.

Thus, in addition to educating the public about the attractiveness of investment in the capital market, regulators and other capital market authorities are also required to provide an understanding of the rights and obligations of investors in the capital market.

In addition to the risk of being entangled in investment fraud, there are several other risks that investors in the capital market must understand. Some of these risks, such as falling stock prices, may cause investors to lose.

This decline in stock prices can occur due to several things such as government policies that have an impact on issuers in certain sectors, or due to the company's financial performance declining, or other sentiments.

Another risk to know is the Buble Price or price increase that is not accompanied by valid data. Hence, even if the stock price is growing sharply, you should not be overjoyed just yet; you need to be cautious.

The next risk is suspension, which is the cessation of trading on certain shares by the stock exchange authority for a reason, such as a bubble price. In addition, the existence of a delisting company or exit from the stock exchange could be due to violating the rules or voluntarily being one of the risks that investors must be aware of.

The Importance of Authorities' Information

To avoid these various risks, investors must always be vigilant and pay attention to any information submitted by the stock exchange authority through the information disclosure channel.

For example, to find out abnormal stock price movements as mitigation of bubble price risk, investors can look at the Auto Rejection for Lower Limit (ARB) indicator.

ARB is the limit on the decline in the share price of each issuer in one day which cannot be more than 7%. If there are issuers whose share prices fall more than 7%, they must be careful.

Another indicator is the Auto Rejection for Upper Limit (ARA), which is the limit for the increase in stock prices in one day which is set at 20%, 25%, and 35%.

So, if there is a share price that passes ARB or ARA, usually the company will be included in the Unusual Market Activity (UMA) list by the authorities.

On that occasion, Senior Associate of MUC Attorney at Law Kiki Amaruly also said that it was important for everyone to understand how to invest properly in the capital market.

For this reason, every investor or potential investor should be provided with qualified information related to the capital market, so as not to be a victim of fraud.

To that end, MUC Attorney at Law in collaboration with MUC Consulting and supported by the MUC Tax Research Institute and Majalah Pajak again held a webinar on legal and business law entitled JUSTISE or Jurist Talk in Series.

For information, JUSTISE is a discussion event facilitated by competent business law experts and practitioners to discuss the latest legal and business law issues.


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