Mutual Funds

What is a Mutual Fund?

A mutual fund collectively pools money from individual and corporate investors. These funds are managed by a professional fund manager who invests the collected money in financial securities such as stocks, bonds, or money market instruments. The value of a share of the mutual fund, called the Net Asset Value (NAV), is calculated daily based on the fund’s total value divided by the total number of outstanding shares.

Stock Market Down, US Economy Tanking – 4 Investment Suggestions

Many people trembling about the news. Our economy plummeted 174 points this week (as of now). And that’s a great loss for our economy. The US is facing debt crisis… What do ordinary people like us do in times of this great economic turmoil?



Pray? Save your money in a piggy bank? Bury your money elsewhere? Not this time… This is the time to get proactive… This is the time for educated Filipinos to make profit… This is the time to INVEST. Remember the phrase “Be greedy when others are scared… Be scared when others are greedy” – Warren Buffet. This is the time where a lot of people are afraid. And we must take advantage of that and get greedy investing.

So what are the possible or good investments to buy during this time?

DISCLAIMER: THESE ARE FOR EDUCATIONAL PURPOSES ONLY.  INVESTING HAVE RISKS AND NEVER USE MONEY THAT YOU CAN NOT AFFORD TO LOSE. WE ARE NOT HELD LIABLE FOR ANY LOSS THAT YOU MAY GET.

Investment Suggestion # 1: Mutual Funds & Index

As I am a fan of mutual funds for newbie investors. I would buy mutual funds that track the stock index. (As I already have done so myself). Remember, mutual funds which tracks the stock index… Be it international or Philippine stock index.

Investment Suggestion # 2: Blue Chip Companies

Buy bluechip companies. Though it may be a little pricey (still pricey even on down economy), buy stocks of companies that are already successful… In layman’s term, companies that are already an “institution”, that has been around for quite some time. More often than not, these companies may not be that badly affected by the down market and will recover after a few months.
Investment Suggestion # 3: Save US Dollar Currency

It’s time to go to your nearest money changer and buy a lot of dollars. Keep those dollars with you and wait for the dollar to get strong again. There will be a risk here, should the dollar never to bounce back again. But then again, in investing, there are risks.

Investing Suggestion # 4: Buy Gold

If you really want a stable and strong investment. Buy gold.

Types of Mutual Funds
 
There are mainly four types of mutual funds in the Philippines: stock (or equity), bond, balanced, and money market. 

Stock or equity funds invest in shares of stock of Philippine corporations listed in the Philippine Stock Exchange. Equity funds offer the highest possibility of growth among all mutual fund types, but they also have a corresponding high amount or risk.

Bond funds invest primarily in fixed-income securities such as bonds or treasury notes issued by the Philippine government and commercial papers issued by reputable Philippine companies. Because these bonds are normally guaranteed, the possibility of loss is very low. Investing in bond funds provide capital preservation while maintaining conservative asset growth. The return of an equity fund and a bond fund.


Money market funds are similar to bond funds because they also invest in fixed-income securities and the growth of the fund is conservative. The main difference lies, however, in the term of money market fund investments, which is usually short-term such as one year or less.

How to choose a good mutual fund

Choosing which mutual funds to invest in ultimately depends on the investor’s growth goal and risk tolerance. If the purpose is capital growth, equity funds are the way to go. Bond funds are chosen, on the other hand, if the investor prefers capital preservation over risky capital growth. For those who want medium risk and medium growth, balanced funds are the best option. Money market funds are for those who wish to earn a conservative amount of return in the short-term.

According to the Investment Company Association of the Philippines, a duly recognized association of investment companies in the country, there are currently a total of 22 mutual funds. Six (6) of these are bond funds, five (5) are equity funds, ten (10) are balanced funds, while one (1) is a money market fund.

How to invest in Mutual Funds in the Philippines

This is a question we usually get from our readers. First, we advise anyone who wants to make an investment to learn more about the investment opportunity.   In the case of mutual funds, we suggest investors to take time to read and study our Mutual Funds Philippines Primer.
Assuming the investor has understood all risks and has decided to go ahead, here are the steps to invest in mutual funds in the Philippines.

1. Choose a fund you want to invest in. We have provided here a list of companies offering mutual funds in the Philippines and you can also check their historical performance here.

2. Find an authorized agent selling the fund or contact the company using their contact details. You may also visit their office where an agent will be assigned to you.

3. Fill out the application documents. You will normally be asked to complete three forms: the Personal Information Sheet, the Investor Profile Questionnaire, and the Order Ticket. The forms may vary depending on the mutual fund company but they usually have forms to get your personal details (Personal Information Sheet); identify your risk tolerance and investment goal (Investor Profile Questionnaire); and determine the shares of the fund you want to purchase (Order Ticket).

4. Make the payment only in authorized payment centers. This can be the office of the company or a bank branch in partnership with the mutual fund. Make sure you get a copy of the payment receipt and the Order Ticket.

5. Ask the agent how you can monitor your funds. Some funds give you online access where you can track your portfolio while some funds just give you NAVPS updates which means you’ll have to compute your own mutual fund income.

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