Note: This article discusses Indonesian financial products and markets. The principles apply globally, though specific products, regulations, and tax treatments vary by country.

Balanced Funds or Build Your Own Portfolio?

After understanding asset allocation, you have two practical choices:

1. Buy a balanced mutual fund — one product that already contains a mix of stocks and bonds
2. Build your own — buy stock index funds and bond funds separately

Each has its advantages and disadvantages.

What Is a Balanced Mutual Fund?

A balanced mutual fund (reksa dana campuran) is a mutual fund that invests in a mix of stocks and bonds simultaneously. The composition is typically:

• Stocks: 30-70%
• Bonds and money market: 30-70%

The investment manager determines the exact allocation and can change it according to market conditions.

What Is Building Your Own (DIY)?

Building your own means you buy separate products and determine the proportions yourself:

• Stock index fund (e.g., Bahana IDX30) → 70%
• Fixed income fund (e.g., Sucorinvest Stable Fund) → 20%
• Money market fund → 10%

You determine and maintain the allocation via rebalancing.

Complete Comparison

Aspect	Balanced Mutual Fund	Build Your Own (DIY)
Ease	✅ Buy 1 product, done	❌ Need to buy 2-3 products, manage yourself
Allocation control	❌ Determined by investment manager, can change	✅ You determine yourself
Transparency	❌ Allocation can change without you knowing	✅ You know exactly the composition
Cost	❌ Higher expense ratio (1.5-3%)	✅ Lower expense ratio (0.5-1%)
Rebalancing	✅ Automatic by investment manager	❌ You must do it yourself
Suits risk profile	❌ Fixed allocation, cannot be adjusted	✅ Can be adjusted by age/goals
Tax	✅ 0% (same)	✅ 0% (same)

Main Problems with Balanced Mutual Funds in Indonesia

1. High Costs

Balanced mutual funds in Indonesia typically charge expense ratios of 1.5-3% per year — because these are actively managed products. Compare with building your own:

Portfolio	Annual Cost1
Active balanced mutual fund	1.5-3.0%
DIY: 70% index fund (0.7%) + 30% fixed income fund (0.8%)	~0.73% weighted average
Difference	~1-2% per year

A 1-2% per year difference sounds small, but over 20 years it could reduce investment results of Rp 100 million by Rp 50-135 million.

2. Less Transparent

Investment managers of balanced mutual funds can change the stock-bond allocation anytime. Maybe today it’s 60% stocks, next month 40% stocks. You don’t know for sure and can’t control it.

With DIY, you know exactly: “70% of my money is in IDX30 index fund, 30% in fixed income fund.”

3. Cannot Be Adjusted

Balanced mutual fund allocation is fixed per product. If your risk profile changes (e.g., approaching retirement), you have to sell and switch to another product — instead of just changing proportions.

When Do Balanced Mutual Funds Make Sense?

Although DIY is generally better, there are situations where balanced mutual funds can be a reasonable choice:

1. You really don’t want the hassle — better to invest in balanced funds than not invest at all
2. Very small capital — if you only invest Rp 100,000 per month, splitting into 3 products feels cumbersome
3. Bibit robo-advisor feature — Bibit offers automatic allocation similar to DIY but with single dashboard convenience

Note on Bibit Robo-Advisor

Bibit has an interesting feature: based on your risk profile, the app will recommend allocation between stock mutual funds, fixed income, and money market. This is essentially automated DIY.

Aspect	Bibit Robo-Advisor	Manual DIY
Allocation selection	Automatic based on profile	You determine yourself
Products	Selected by Bibit	You choose yourself
Additional cost	0% (on top of product expense ratios)	0%
Control	Medium — you can override	Full

Bibit robo-advisor can be a good middle ground for beginners who aren’t confident building their own portfolio.

How to Build a DIY Portfolio

Step 1: Determine Allocation

Based on age and risk tolerance (see asset allocation article):

• Example: Age 30 → 70% stocks / 25% bonds / 5% money market

Step 2: Choose Products

Component	Product	Allocation
Stocks	Bahana IDX30 or BNP Paribas SRI-KEHATI	70%
Bonds	Sucorinvest Stable Fund or retail SBN	25%
Money market	Bahana Dana Likuid	5%

Step 3: Invest Regularly

Each month, invest according to proportion:

• Invest Rp 1 million/month → Rp 700K stocks + Rp 250K bonds + Rp 50K money market

Step 4: Rebalancing

Every 6-12 months, check if proportions still match targets. If not, adjust next month’s investment.

Detailed DIY Portfolio Maintenance

Let’s walk through what actual DIY portfolio management looks like in practice.

Initial Setup (Month 1)

Target allocation: 70% stocks / 25% bonds / 5% money market
Initial capital: Rp 10 million

Product	Target	Amount Invested
Bahana IDX30	70%	Rp 7,000,000
Sucorinvest Stable Fund	25%	Rp 2,500,000
Bahana Dana Likuid	5%	Rp 500,000
Total	100%	Rp 10,000,000

Monthly Investment (Months 2-12)

Monthly investment: Rp 1 million
Split proportionally:

• Stocks: Rp 700,000
• Bonds: Rp 250,000
• Money market: Rp 50,000

No need to adjust anything yet — just keep investing at target proportions.

Year-End Review (Month 12)

After 12 months of investing + market movements, your portfolio might look like this:

Product	Current Value	Current %	Target %	Difference
Bahana IDX30	Rp 17,500,000	74%	70%	+4% (overweight)
Sucorinvest Stable Fund	Rp 5,300,000	22%	25%	-3% (underweight)
Bahana Dana Likuid	Rp 900,000	4%	5%	-1% (close enough)
Total	Rp 23,700,000	100%	100%

Rebalancing decision:
The drift is small (+4% / -3%). For next 6 months:

• Reduce stock purchases slightly (from 70% to 60% of new money)
• Increase bond purchases (from 25% to 35% of new money)
• Keep money market at 5%

No need to sell anything — just adjust the flow of new money.

When to Actually Sell and Rebalance

You’d only sell and rebalance if drift becomes significant:

Example: After a major bull market

Product	Current Value	Current %	Target %	Drift
Bahana IDX30	Rp 85,000,000	82%	70%	+12%
Bonds + Money Market	Rp 19,000,000	18%	30%	-12%

Now the drift is too large. You would:

1. Sell Rp 12.5 million from stock fund
2. Buy Rp 12.5 million bonds/money market
3. Return to 70/30 allocation

Why this matters:
That 82% stocks means you’re taking more risk than intended. If market crashes 30%, you’d lose more than you planned for.

Investment Manager Drift Risk

This is an underappreciated problem with balanced mutual funds: the investment manager can change allocation without telling you.

Real example pattern from Indonesian balanced funds:

Fund X in 2018:

• Stated target: 50-70% stocks
• Actual: 65% stocks (aggressive)

Fund X in 2020 (COVID crash):

• Actual: 35% stocks (defensive — shifted to bonds during panic)

Fund X in 2021 (recovery):

• Actual: 55% stocks (moderate)

Problems:

1. You don’t control when they reduce stock exposure (they might go defensive right before a rally)
2. You don’t know current allocation without reading monthly reports
3. Their market timing may not match your risk tolerance or investment timeline

With DIY: You decide when to rebalance, and it’s based on your plan, not investment manager’s market view.

The Hidden Cost of Turnover

Balanced mutual funds that do active management also have portfolio turnover — buying and selling stocks frequently.

Metric	Active Balanced Fund	DIY Index Approach
Annual portfolio turnover	50-150%	5-15%
Implicit trading costs	0.3-0.8% per year	0.05-0.15% per year
Tax efficiency (capital gains)	Lower	Higher

High turnover means:

• More trading commissions (paid by the fund, reducing your returns)
• More taxable events
• Higher tracking error

DIY index funds have very low turnover — they only trade when the index composition changes.

When Balanced Funds Win: Automation Value

There IS one scenario where balanced funds make sense despite higher costs:

If you won’t actually do the rebalancing.

Behavioral research shows many DIY investors:

• Set up the portfolio correctly
• Invest regularly for years
• Never rebalance
• End up with 90% stocks right before retirement (due to stock growth)
• Panic sell when market crashes

If you’re likely to forget or avoid rebalancing, a balanced fund’s automatic rebalancing (even with higher fees) might produce better actual outcomes than an abandoned DIY portfolio.

Key question: Are you willing to spend 1-2 hours per year reviewing and rebalancing?

• Yes → DIY will save you significant money
• No → Balanced fund or robo-advisor is better than neglected DIY

20-Year Comparison Example

Assumptions: initial investment Rp 50 million + Rp 1 million per month, 70/30 stock/bond allocation:

	Balanced Mutual Fund	DIY
Market return	10% per year	10% per year
Expense ratio	2.0%	0.7%
Net return	8.0%	9.3%
Result after 20 years	~Rp 853 million	~Rp 1,010 million
Difference		+Rp 157 million

Rp 157 million more just because of lower costs. That’s the real impact of a 1.3% expense ratio difference over 20 years.

Conclusion

Choice	Suitable For
Balanced mutual fund	Investors who truly don’t want to manage portfolio at all
Robo-advisor (Bibit)	Beginners who want convenience but low costs
DIY	Investors willing to spend 30 minutes every 6 months for rebalancing

Recommendation: If you’re reading this article, you already understand enough to build your own. The cost difference will be very noticeable over the long term. No need to be complicated — just 2-3 products with clear allocation.

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Disclaimer: This article is for educational purposes only, not investment advice.

Related Articles

• Asset Allocation Strategy
• Portfolio Rebalancing Guide
• Active vs Passive Mutual Funds
• Investment Policy Statement
• How to Evaluate Portfolio Performance

Footnotes

1. Expense ratios vary per product. Data can be found in each mutual fund’s fund fact sheet or OJK. Lower costs directly increase investor net returns. ↩