Digital investment startup Pluang launched the Micro E-mini S&P 500 Index Futures investment product to expand millennial access to affordable, practical, and safe investment products on the stock index of publicly-traded companies in the United States. This product can already be purchased through the Pluang application, for the time being, it is only available on the Android version.
Pluang’s breakthrough is bold and can be said to be the only fintech startup that offers investment alternatives in this sector. Most players in Indonesia are still working to popularize the habit of investing in gold or mutual funds.
Pluang’s Co-Founder Claudia Kolonas explained that the company is aiming this investment instrument to provide an opportunity for Indonesian investors to diversify their investment portfolios, considering that this alternative is still common to most Indonesians.
In fact, he admitted that the company did not yet have an industrial picture of how many investors were interested in investing offshore (abroad).
“We hope this will be a unique opportunity to introduce new investment products. We are not the first [to provide this product] there are two or three brokers who provide the S&P 500, but we are the first fintech company. With easier application access, it will be much more interesting, ”explained Claudia during a virtual press conference, Tuesday (29/9).
The index futures product offered by Pluang is transacted on the world’s largest derivatives exchange, the Chicago Mercantile Exchange. Companies are interested in choosing the S&P 500 Index because this index has a superior performance with a growth of 325.54% in the last 10 years as of December 31, 2019.
Meanwhile, in the last five years this index has provided a yield growth of 75.89%. Meanwhile, in the last three years the growth was 48.7%. Thus, this index shows a positive trend movement in the long term.
This performance is supported by superior issuers’ constituents. Only issuers that have been able to report positive profits over the past four quarters and have a market capitalization of more than $ 3.7 billion can enter the index.
Meanwhile, the 10 largest constituents in the index as of August 31, 2020, consisted of Apple, Microsoft, Amazon, Facebook, Google, Berkshire Hathaway Inc, Johnson & Johnson, Visa, and Procter & Gamble.
Risk and legality
Claudia explained that the Pluang S&P 500 investment is classified as a passive investment because investors usually use a long-term buy and hold strategy. Therefore, passive investing reduces the uncertainty arising from the strategy of selecting individual stocks and the market timing strategy that experienced investors typically use.
“We want to attract millennials not only to invest in gold but also to start entering and studying investing in the S&P 500 index.”
However, he continued, this investment has a moderate to high risk because it is triggered by various factors, such as market volatility that may occur ahead of the US election in November 2020. Plus, the movements of the S&P 500 index are often against gold, so diversification between the two asset classes can be considered.
“Therefore, apart from having a medium-high risk profile, this product is also recommended for investors who already have investment experience.”
In this regard, investors who are suitable for plunging into this instrument are those who want to be involved in the international economy, do not have the time to always monitor individual stocks, do not have medium to long term plans, and are challenged to face moderate-high risks because they follow the risks of the US equity market. .
Regarding regulations, Claudia stated that Pluang by PG Berjangka has obtained a permit for Distribution of Customer Mandates to Overseas Exchanges (PALN) by BAPPEBTI. PALN is a contract offering activity and channeling customer orders for the contract using a system provided by the exchange.
The regulation was made to grow the multilateral industry in the world of futures companies in Indonesia.
Explained further, the nominal investment fund here starts from $ 35 depending on the market at that time. In the process of channeling from customer funds to the index exchange, after the customer top up the balance to the Pluang application, the funds will be immediately forwarded to the PG Berjangka segregate account and forwarded to the Indonesian Derivatives Clearing House (KBI).
The next process is that the transaction is listed on the Jakarta Futures Exchange. Then, the funds were forwarded by KBI to a separate Prime Broker account used by Pluang in the US, namely Straits Financial, which is a brokerage member on the Chicago Mercantile Exchange (CME). At the last stage, this broker will buy the contract on the CME exchange.
It is certain that sales and withdrawals of funds can be done in real time, aka there are no delays in disbursement. This advantage is superior to futures products compared to index mutual funds ETFs (Exchange Traded Funds) whose disbursement or purchase schedules must follow stock exchange operating hours and add administrative costs.
“The S&P 500 index has much greater liquidity than ETF mutual funds and there are no administrative fees here, so it is more effective for investors to take profits.”
Since this instrument is still new to Indonesians, of course there are educational challenges that Pluang must often socialize. Claudia said that her company received many questions from customers because they were not familiar with the concept of futures products.
It doesn’t stop at futures products, Pluang is currently waiting for permission from the OJK and BAPPEBTI to market mutual fund investment products and cryptocurrencies.
“To date, we have offered gold investment because we want to offer investment products that are easy to understand. But in the future, we want to add other products, such as mutual funds and crypto but are still waiting for permission from the relevant regulators,” Claudia said.
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Original article is in Indonesian, translated by Kristin Siagian
