Josephine Norton
Mutual funds are a great way to maximise your earning potential. They are a type of investment company that pools money from many individual and institutional investors to create a large asset base. This money is then used to invest in different assets, such as stocks, bonds, and other securities.
In the Philippines, mutual funds are affordable, convenient, and beginner-friendly. They are also highly regulated, with the Securities and Exchange Commission (SEC) ensuring safe and secure investments.
There are four main types of mutual funds in the Philippines: Money Market Funds, Bond Funds, Balanced Funds, and Stock/Equity Funds. Each type caters to different investment timeframes, financial goals, risk appetites, and instruments.
Investing in mutual funds offers several benefits, including diversification, liquidity, and the expertise of professional fund managers. However, there are also some disadvantages, such as fees and charges, a lack of control over your portfolio, and potential risks.
To invest in mutual funds in the Philippines, you can follow these steps:
- Evaluate your financial goals, risk appetite, and how much money you are willing to invest.
- Choose a mutual fund company that is regulated by the SEC and fits your needs.
- Talk to an agent from the company to guide you through the process.
- Pick the best type of mutual fund for your needs.
- Submit the required documentation, such as an Investor Profile Questionnaire, personal information sheet, valid IDs, and an Order Ticket.
- Track your investment and monitor its performance.
| Characteristics | Values |
|---|---|
| Definition | "An investment fund that collectively pools money from individual and corporate investors, with the pooled money being managed by a professional fund manager who invests in stocks, bonds, money market instruments, or other securities with the goal of providing an acceptable level of return to contributing investors. |
| Types | Stock/Equity, Balanced, Bond, Money Market, Feeder |
| Pros | Easy to set up, Low initial investment costs, Professional fund management, Diversification, Better potential returns, Protection against inflation, Compound interest |
| Cons | Fees and charges, Less control over your portfolio, Potential risks |
| How to invest | Evaluate your goals, Choose the right company, Talk to an agent, Pick the best type of mutual fund, Submit the requirements, Track your investment |
What You'll Learn
Mutual funds are a great way to maximise your earning potential
Expertise
Mutual funds are managed by expert fund managers who will choose which investment options are best suited to your financial goals. They will do all the legwork for you, from analysing the market to deciding which investment options to seize. This is especially beneficial for newbie investors who may not have the skills and knowledge needed to grow their money.
Diversification
Mutual funds pool money from multiple investors and invest in a diverse range of products to minimise exposure to potential losses. This diversification is a common investment strategy for managing risk. When you buy a mutual fund, you're not just investing in one company but in a basket of stocks and other safer securities like government/corporate bonds.
Affordability
Mutual funds are ideal for those who don't have a lot of money to shell out. In the Philippines, you can start investing in mutual funds with as little as ₱1,000, and additional investments can be as low as ₱500.
Accessibility
Mutual funds are easy to set up and manage. All you need to do is visit the nearest bank or mutual fund company and submit the requirements and initial deposit. You can also invest in mutual funds online through platforms like COL Financial, First Metro Securities, and SeedBox.
Long-Term Growth
Mutual funds are ideal for those with a mid-to-long-term investment horizon. The longer you stay invested in a fund, the better the chance for gains, as the underlying investments become less prone to market fluctuations over time.
Protection Against Inflation
Mutual funds offer better potential gains compared to savings accounts, which means you have a better chance of protecting your capital against inflation.
Compound Interest
The longer your money is invested in mutual funds, the higher the potential earnings.
Convenience
Mutual funds save you the tough process of researching and constructing your own portfolio as a beginning investor. They are also a more convenient option than investing in stocks, as you don't need to monitor the market daily or make trades.
Regulation
Mutual funds are registered companies regulated by the Securities and Exchange Commission (SEC) of the Philippines, providing greater transparency and accountability.
Dividends and Shareholder Rights
Mutual funds may provide dividends and offer some shareholder rights, such as the right to vote and receive dividends.
Low Fees
While mutual funds do involve additional fees such as management and front-end charges, online mutual fund platforms like COL Financial and FirstMetroSec waive the normally charged front-end fees.
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Mutual funds are an ideal stepping stone to investing
You Don't Need to Be a Millionaire
Mutual funds are a great option for those who don't have a lot of money to invest. In the Philippines, some funds only require a minimum investment of ₱1,000, with additional investments starting at ₱500. This makes mutual funds accessible to newbies who don't have a large sum of money to invest.
Expert Fund Management
Mutual funds are managed by expert fund managers who will choose the best investment options to suit your financial goals. These professionals will make investment strategies and decisions on your behalf, maximising gains while minimising risks. As an investor, you can benefit from their expertise and full-time service without having to actively manage your investments.
Diversification
Mutual funds offer diversification by pooling money from various investors and investing in a diverse range of assets, such as stocks, bonds, and other securities. This helps to minimise the risk of losing your investments. With mutual funds, you can invest in a variety of assets from different companies, reducing the risk associated with investing in a single company.
Easy to Buy and Sell
Mutual funds are easy to buy and sell, and can often be purchased online. You can purchase shares on different channels, and they can be liquidated on any given business day. In contrast, other investments like real estate can be cumbersome and expensive to buy and sell.
Different Funds for Different Investors
There are different types of mutual funds to cater to varying investment styles and risk appetites. Whether you prefer a slow and steady approach or want to pursue more aggressive strategies, there are mutual funds suited to your needs. Mutual funds offer a range of options, from fixed-income investments to equity funds that invest heavily in the stock market.
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Mutual funds are professionally managed
A mutual fund gathers investments from various investors with the fund intended to be managed by professional investment managers with the hopes of making money for all investors. The fund manager then uses this massive amount of cash to invest in a diverse portfolio, rather than just putting it in a single stock.
With a mutual fund, you don't need to be a millionaire to start investing. Some funds only require ₱5,000 as an initial investment. There are also funds that allow initial placements as low as ₱1,000, and that gives small investors an opportunity to access high-grade securities that cannot normally be accessed by somebody who has less than ₱100 million.
Mutual funds are ideal for newbie investors who may not have the skills and knowledge needed to grow their money. Not everyone has the time to learn or stay updated on the performance and risks of different investment options.
One advantage of a mutual fund is that it pools all the investors' money and puts it in diverse products to minimize exposure to potential losses. We know all investments involve risks, but these risks are reduced when you invest in mutual funds.
Mutual funds are managed by expert fund managers who will choose which investment options would best suit your financial goals. They will allocate the fund's assets and try to produce capital gains or income for the investors.
As an investor, you will benefit from the expertise and full-time service of a professional fund manager who will make investment strategies and decisions on your behalf. They will ensure maximizing your gains while minimizing risks. All you have to do as an investor is to put in the money.
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Mutual funds are highly liquid
However, there is typically a minimum holding period for your Philippine mutual fund investment, with some as short as 90 days. You can cash out your investment earlier but you may be charged an early redemption fee.
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Mutual funds are regulated by the Securities and Exchange Commission
The SEC also grants a special secondary license to companies that solicit investments from the public, such as mutual funds. This secondary license, as covered in Republic Act No. 8799, is how you can tell if a company is an investment scam or not. Aman Futures, which allegedly duped ₱12 billion in Visayas and Mindanao, operated without this secondary license.
The SEC website lists approved mutual funds that can be offered in the market. Mutual funds must be registered with the SEC and allowed to solicit investments. The SEC also licenses advisors, called Certified Investment Solicitors, who are allowed by law to market mutual funds.
The Investment Company Act of the Philippines (Republic Act No. 2629) governs mutual fund companies. Mutual funds are required to comply with this Act and the Investment Company Act.
The SEC provides oversight and protection for investors, ensuring that mutual funds follow rules and regulations when reporting periodic updates and determining the value of stocks or units of participation.
When choosing a mutual fund, it is recommended to select a company with a strong reputation and a long history of proven success. It is also beneficial to consider the convenience of the company's location and services, the fund's performance and historical returns, and the fees associated with the fund.
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Frequently asked questions
Mutual funds are a way to invest in a variety of stocks, bonds, and other securities without having to choose individual investments. A fund manager handles all the buying and selling of investments, aiming to make money for everyone involved. Mutual funds are perfect for those who don't have the time or knowledge to do stock trading.
Mutual funds offer several benefits such as diversification, liquidity, and the potential for higher returns compared to a savings account. They are also easily accessible and have a low barrier to entry, allowing individuals to start investing with a small amount of money.
When choosing a mutual fund, it is important to clearly identify your financial goals and risk tolerance. Consider factors such as your investment horizon, investment style, and appetite for risk. It is also recommended to seek advice from a professional advisor if needed.
All investments come with risks. You can experience losses if you withdraw your investment when the market price declines. However, you can minimise this risk by researching and timing your investment properly.
There are several online platforms and stock brokerage companies in the Philippines that offer mutual fund investments, such as Rampver Online, COL Financial, and First Metro Securities. The minimum investment amount is typically low, ranging from ₱1,000 to ₱5,000.
