For better or worse?: Taking stock of Indonesia’s retail investment craze

Stock market investing used to be a niche pursuit, but as it gains popularity among everyday people, experts warn of the risks.

Yohana Belinda

Yohana Belinda

The Jakarta Post


Popular uptake: In recent years, stock and cryptocurrency markets have gained significant popularity. (Unsplash/Jeremy Bezanger) (Unsplash/Jeremy Bezanger)

March 3, 2022

JAKARTA – Stock market investing used to be a niche pursuit, but as it gains popularity among everyday people, experts warn of the risks.

Not long ago, investment was an intimidating prospect for regular Indonesians. The specialized knowledge and the lack of resources to develop it combined with horror stories of investors losing everything in a matter of minutes deterred many would-be dabblers.

In recent years, however, stock and cryptocurrency markets have gained significant popularity. The last two years in particular have seen an increase in retail investors, particularly of the millennial generation.

In fact, the number of stock market investors in the country has increased by some 65.74 percent over the course of the pandemic. CNBC reported that in September of last year, a record 6.43 million Indonesians were invested in the stock market.

Cryptocurrency markets have seen similar growth. Last October, reported that 9.5 million people were invested in crypto.

What accounts for this rise?

Ease and inclusivity

Investment apps have been the gateway into trading for many retail investors.

Bayu from Jakarta, who works at a financial firm and has elected to use a pseudonym for this article, said he had begun participating in an algorithmic trading program in 2020, after a close friend had bragged about a daily profit of 0.4 to 1 percent. Prior to joining the trading app, Bayu had never done any retail investing.

Eugene Giovan, a Malang resident who owns a transportation business, also joined an algorithmic trading program in 2021, after a neighbor shared how much he had been making through the scheme.

Within the first few days of joining the trading service, Bayu discovered that the trading program he invested in had been shut down by authorities as it did not have the required license from the Commodity Futures Trading Regulatory Agency (BAPPEBTI).

“The company [representatives] told me that they were trying to get a license in Indonesia. They also promised they would return the money to me, but there have yet to be any updates,” Bayu said, adding that if he was not reimbursed he would lose Rp 18 to 19 million.

Eugene, too, learned soon after investing that the algorithmic trading platform that he had joined was one of the many of its kind to have been banned in Indonesia on accusations of fraud.

Bayu now chooses to focus on balanced, long-term investment rather than short-term trading. “From what I learned, you should not be tempted by the high profit or gain that trading tools offer to you. I can’t say which investments are safe enough for you, but you should check the company’s background,” Bayu added.

On the bandwagon

Prathama Nugraha, an entrepreneur based in Jakarta with a decade of experience in investing, said that usually, scam ‘investment’ platforms promoted instant, effortless earnings. They employed taglines like, “Get money while doing nothing” or “Do you want to be successful at a young age?” and approachable-looking influencers to attract young people.

“They sometimes have random or even established people promote their platforms. Sometimes these people show off their sports cars or even their expensive watches to get more attention,” Prathama said.

“Some platforms will tell people to persuade their friends. It’s just multi-level marketing, and you will get a commission once you get another client into your circle using referrals. The more clients you have, the more profit you’ll get,” he added.

Andy, an investor who has seven years of experience in the stock market, added that algorithmic trading platforms were often a ‘money game’.

“I joined a money game in 2015. So what happens in the money game is that we generate profit from the available members. [Some] members give their money to the others and it continues like that. This type of fake investment will always be part of the industry, and people need to be equipped with the right information” said Andy, who quit the “money game” in 2019.

‘Alghorithm’ or the same old brokers?

Vandy, who also chose to use a pseudonym and has run a brokerage for almost 20 years in Central Jakarta, said “Any number in the report you get from an algorithmic trading program can be manually inserted by us.”

“It’s all a scam,” he said, acknowledging that even his company regularly engaged in such practices.

Vandy said companies like his could get away with it because clients had no legal leg to stand on and that the only way to get their investment back was by intimidation.

“We had a former client come in, shout and bring along some hired thugs. That scared us straight, and we transferred him the amount he lost that same day,” Vandy said, laughing.

For better or worse?: Taking stock of Indonesia’s retail investment craze

Double-check: Kevin Winsonata urged would-be investors to be more careful with investment instruments and check the legal status of an investment application at the Financial Services Authority (OJK) or the Finance Ministry’s Futures Exchange Supervisory Board (Bappebti). (Personal Collection/Courtesy of Kevin Winsonata)

Kevin Winsonata, a portfolio manager and investment consultant in Jakarta, said people misunderstood the concept of trading and investing.

“Trading is different from investment. The former is a short term investment, while the latter is a long term one,” Kevin explained, adding that in real trading, people did not always profit.

“You need to check the listed trading tools at the Financial Services Authority (OJK) or BAPPEBTI,” Kevin added.

Theo Derick, cofounder of Coffee Meets Stock, a stock advisory platform and community based in Jakarta since 2019, suggested that those in search of lower-risk investments choose a mutual fund or government bonds. If someone was seeking a medium-to-high risk investment, he added, would suggest the stock market or the cryptocurreny market.

Crypto craze

Cryptocurrencies have also attracted many Indonesian investors .

Christoper Vittorio Simon, an entrepreneur based in Jakarta, started investing in crypto in 2021 along with his peers.

“I invest with a few of my friends. I’ve currently got my initial investment back. Last year, I started investing with Rp 130 million [$ 9,059.01], and we’ve had a profit within the last two or three months,” Christoper said.

“I used the profit to start my businesses, an online clothing store called drip.experiments. I knew from the start that we might not get our profit instantly,” he continued.

But major losses, too, are a distinct possibility.

A 30-year-old Jakarta-based retail and food industry professional who has elected to go by the pseudonym David shared his experience of investing in cryptocurrencies.

“Last May 2021, I lost [US]$3 million, the price of Bitcoin back then plummeted from $60,000 to $30,000,” he said. “I chose the wrong strategy. As I was looking for more gain, I bought coins with the assets that I already had. But later, the market crashed significantly, so I lost a lot of money,” he continued.

For better or worse?: Taking stock of Indonesia’s retail investment craze

Tips: Theo Derick (center) notes that people should diversify their investments to minimize risk. (Personal Collection/Courtesy of Theo Derick) (Personal Collection/Courtesy of Theo Deric)

Good or bad?

Theo, the Coffee Meets Stock cofounder, said people should know the risks before investing and noted that diversification was important. “With diversification you can actually lower the risk of your investment,” Theo noted. “You need to keep learning about the investment market that you choose. As the market is always evolving, you need to be aware of it. Lastly, not being too greedy for profit is always important,” David said.

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