Mutual Funds Philippines: Best Time To Invest

Mutual funds are an ideal investment for beginners in the Philippines. They are a form of investment where money from multiple individuals is pooled and used to invest in stocks, bonds, and other securities. The fund is managed by a professional fund manager, who makes investment decisions on the investors' behalf.

Mutual funds are a great option for those who don't have the time or expertise to grow their money. They are also highly accessible, with some funds requiring a minimum investment of only ₱1,000.

There are four main types of mutual funds in the Philippines: stock/equity funds, balanced funds, bond funds, and money market funds. Each type caters to different investment goals, risk appetites, and timeframes.

When investing in mutual funds, it's important to consider factors such as the fund's performance, risk level, fees, and the competence of the fund manager. It's also crucial to remember that mutual funds carry a certain level of risk, and there is no guarantee of returns. However, with proper research and a long-term investment horizon, mutual funds can be a great way to grow your money in the Philippines.

Low Minimum Investment

Mutual funds in the Philippines are an excellent option for those looking to invest with a low minimum investment. With a minimum initial investment of PHP 1,000 to 5,000, and additional investments as low as PHP 100 to 1,000, mutual funds are an accessible way to grow your money.

Mutual funds are a type of investment where money from many individual investors is pooled together and managed by a fund manager. This means that, as an individual investor, you can access a diversified portfolio of equities, bonds, and other securities without needing a large amount of capital. The fund manager handles the investment decisions and allocates the fund's assets to produce capital gains or income for the investors.

One of the main advantages of mutual funds is the low minimum investment requirement. This makes mutual funds an attractive option for beginners who want to invest without committing a large sum of money. The low minimum investment also allows investors to diversify their portfolio and reduce the risk of losing their investments.

When investing in mutual funds, it is important to consider the fees associated with the fund. Mutual funds typically charge standard fees for the initial investment, early exit, and ongoing management services. These fees can impact your overall returns, so it is crucial to carefully review the fund's prospectus and fact sheet to understand all the associated costs.

Overall, mutual funds in the Philippines offer a great opportunity for individuals to invest with a low minimum investment and benefit from the expertise of professional fund managers. By investing in mutual funds, individuals can access a diversified portfolio of assets and potentially grow their money over time.

Passive Income

• You can earn a passive income that is higher than what you would get from a savings account or time deposits. You don't need to be involved in the fund's operations, but you can still benefit from the increase in the value of your investments. This is ideal if you are working towards a long-term goal.
• Mutual funds are professionally managed, so you don't have to worry about actively managing your investments. Fund managers will handle your portfolio and make investment decisions on your behalf.
• You can start investing with a small amount of capital. Some mutual funds in the Philippines only require a minimum investment of ₱1,000 to ₱5,000.
• You can easily invest in mutual funds online.
• Mutual funds are regulated by the Securities and Exchange Commission (SEC) in the Philippines, so you can be assured that your investments are relatively safe.
• Mutual funds offer diversification, which can help reduce the risk of losing your investments. Your money is invested in a variety of assets from different companies and industries.
• Mutual funds can be a good way to invest in the stock market without needing to have a lot of knowledge or time to actively manage your investments.

Trust Fund for Children

A trust fund is a great way to secure your child's future. Here's a guide to help you set up a trust fund for your children in the Philippines through mutual funds:

Step 1: Understanding Mutual Funds

Firstly, it's important to understand what mutual funds are and how they work. Mutual funds are a type of investment vehicle where money from many investors is pooled together and managed by a professional fund manager. The fund manager invests the pooled money into different assets, such as stocks, bonds, and other securities. The goal is to generate capital gains or income for the investors.

Step 2: Eligibility and Requirements

In the Philippines, mutual funds are offered by investment companies such as Sun Life, ATRAM, and Philam, among others. These companies are regulated by the Securities and Exchange Commission (SEC).

To invest in mutual funds on behalf of your child, you need to understand the eligibility and requirements. Mutual funds are available to Philippine citizens of legal age. However, minors can also invest in mutual funds through an arrangement called an "in-trust-for account." This means that parents or legal guardians serve as trustees of the account, with the minor as the beneficiary.

To open an "in-trust-for account," you will typically need to provide the following documents:

• Birth certificate of the minor
• Proof of relationship between the guardian and the minor (e.g., birth certificate with parent's name, court order for legal guardians)
• Guardian's bank details, Permanent Account Number (PAN), and Know-Your-Client (KYC) requirements
• Proof of residence and bank account for the minor

Step 3: Choosing the Right Mutual Fund

When selecting a mutual fund for your child's trust fund, consider the different types of mutual funds available in the Philippines:

• Bond Funds: These funds invest in bonds and other debt instruments and are suitable for beginners or those with low to moderate risk appetites.
• Equity Funds: These funds invest in stocks and are ideal for seasoned investors with a higher risk appetite and a longer investment timeframe.
• Money Market Funds: These funds invest in short-term, low-risk instruments and are suitable for beginners with a lower risk appetite.
• Balanced Funds: These funds invest in a combination of stocks, bonds, and other securities, offering a mix of moderate risk and potential returns.

Consider your child's future financial goals, risk tolerance, and investment timeframe when choosing the type of mutual fund.

Step 4: Opening and Managing the Account

Once you've selected the mutual fund company and specific fund, you can open an "in-trust-for account" by following the steps outlined in their account opening process. This typically involves filling out forms, providing the required documents, and funding the account. Remember that the guardian will manage the account and make investment decisions on behalf of the minor.

It's important to monitor the performance of the mutual fund and stay in touch with the fund manager to ensure that your child's trust fund is on track to meet their future financial goals.

Step 5: Understanding Taxes and Fees

When investing in mutual funds, be aware of the taxes and fees associated with them. Mutual funds in the Philippines are taxable, and you may incur fees such as management fees, early redemption fees, and front-end/sales load charges. These fees can impact the overall returns of the trust fund, so be sure to consider them when making investment decisions.

High Liquidity

Mutual funds are highly liquid investments. They offer a great deal of flexibility to investors, allowing them to buy or sell their shares quickly, usually within a business day. This means that if you need to withdraw your money due to an emergency, you can easily do so according to the terms you agreed to when you invested. By law, companies are required to allow the redemption of shares within seven days.

Mutual funds are also regulated by the Securities and Exchange Commission (SEC), which means there are legal repercussions for fund managers who mismanage investor funds. This regulation adds an extra layer of security for investors.

Furthermore, mutual funds are an excellent option for those who want to be able to switch investment strategies or objectives. Investment companies operate multiple funds, so it is easy to transfer from one account to another.

Mutual funds are also a good option for those who want to be able to access their money quickly, without having to wait for a buyer as they might with other investments such as real estate.

Expert Fund Managers

Fund managers are bound to follow the investment objective found in the prospectus and cannot trade just any way they like. They are also not allowed to hold stocks. The prospectus is a document that shares information about the investment's objective, risks, costs, shares being offered, and other policies.

The performance of your investment in mutual funds depends on the fund manager's selection and decision. The risks, gains, and losses the fund will accumulate will be distributed proportionally to all investors.

When choosing a mutual fund, it is important to consider the competence of the fund manager. Their talents and integrity will heavily influence your investment returns or losses.

• Experience: Look for fund managers with extensive experience, such as decades of experience as research analysts or investment bankers.
• Relative performance: Compare the fund's performance with similar funds to determine if it is above average.
• Expense ratio: This measures the fund's operating expenses and fees as a percentage of the fund's assets. A lower expense ratio is preferable as it gives you more value for your money.

With expert fund managers handling your investments, you can benefit from their expertise and full-time service. They will make investment strategies and decisions on your behalf, maximising your gains while minimising risks.

Frequently asked questions