DO YOU WANT TO KNOW MORE ABOUT MUTUAL FUNDS?
What is mutual fund?
Mutual fund are pooled investment funds. This means that money of investors are put together and then invested. You will have a portion of ownership of the fund depending on how much you invested.
HOW TO INVEST IN MUTUAL FUNDS?
First is you go directly to the mutual fund company like RAMPVER financials ,Sunlife,Philam Life, Philequity, Manulife, ALMF etc. You will fill up some forms and begin by depositing the initial investment.
The other way is if you have trading account like COL financial and FirstmetroSec. They both have a service where you can invest in some of the mutual funds in the market. Not all the mutual funds in the Philippine are available via COL and FirstmetroSec but there still plenty enough to choose from.
WHERE ARE MUTUAL FUNDS INVESTED
It will depend on the type of the mutual fund. The common investments of mutual funds are stocks and bonds.
WHAT TYPE OF STOCKS OR BONDS MUTUAL FUNDS INVEST?
These will depend on the objective of the fund. Most equity mutual fund (those that invest in stocks) invest on companies consisting of the PSEi (top 30 companies). Bond mutual funds invest mostly on government and corporate bonds.
HOW WILL I DETERMINE MY OWNERSHIP IN THE MUTUAL FUND?
When you invest, you will be given shares. The number of shares will depend on the price of the Mutual fund share called NAVPS (net asset value per share). You will divide the amount you invested by the current NAVPS. So if you invest P5,000 when the NAVPS is 100. You will have 50 shares.
HOW WILL I EARN MONEY IN MUTUAL FUND?
Of course this is the question you’ve wanted to know. You will earn when you redeem your shares at a gain (Take note of the bold words). You will earn money in mutual funds when you redeem/sell your shares. So for example you invested P10,000 when the NAVPS is P100. You have 100 shares. After a year, the NAVPS went to P105 and you decided to redeem. You will receive P10,500 (P105 x 100 units).
The amount you will receive is your number of units multiply by NAVPS. Therefore if you redeem when the NAVPS is lower when you have bought it. In our example if you redeemed when NAVPS is 95, you will get only P9,500.
HOW NAVPS IS DETERMINED?
NAVPS is the total assets of the fund less liabilities divide it by total number of shares.
In simple terms the NAVPS is the value of the investments of the fund divided by all the shares.
So in substance the NAVPS will goes up or goes down depending on how the investments are doing. If it is a stock mutual fund. The NAVPS will goes along with how the stock market or the prices of stocks are doing.
NAVPS is computed daily.
IS THE RETURN IN MUTUAL FUND GUARANTEED?
No, it is not a fixed interest investment like term deposits. Like I’ve said earlier, the amount of your investment will depend on how the investments of the fund are doing.
WHAT ARE THE FEES?
The fees involved in mutual fund are early redemption fee, sales load fees, and management fee.
Early redemption fee is when you redeem your investments within a specified period. The early redemption period will depends on the mutual fund. Early redemption period can range from 0 days to 180 days. If you redeem your mutual fund within that period, a percentage will be deducted from your investment. Usually this is around 1%
Sales load are charges that are deducted to your investments when you invest or redeem. Sales load can be front end or back end. Front end load is charge when you invest. It is deducted to the amount you invest. Back end load is charge and deducted when you redeem your investments.
Sales load may vary from fund to fund. The charges can range from 1 to 3 % depending on the mutual fund. Some has only front end fees, some has only back end fees, some charges both, while some do not charge sales load.
If you become a member of IMG you will have a benefit of ZERO load forever on ALL fund load by RAMPVER financials
Management fees are charge to the assets of the fund. It is already reflected in the computation of the NAVPS. So if you redeem 50 units when the NAVPS is 100. You will receive P5,000. There is no need to deduct the management fee because it is already deducted in the computation of the NAVPS. It is the payment to the fund managers of the mutual fund.The percentages ranges from 1% to 2% annually.
WHAT ARE THE TYPES OF MUTUAL FUNDS?
In reality there are different kind of mutual funds. But you can classify them depending on what type of investments they invest:
Money Market
Bond and
Equity
MONEY MARKET FUND
These are the most conservative investments. The fund invest in short term investments like time deposits, treasury bills etc. This type of mutual fund is ideal for safekeeping of your money. These mutual funds are virtually risk-free but also have very minimal returns.
BOND MUTUAL FUND
These are funds that invest in bonds. Basically a bond is a debt obligation of a company or government. When you invest in bond, you lend money to a company or the government. .
Bonds will have higher return compare to money market but are less than the potential returns of stocks mutual fund.
EQUITY MUTUAL FUND
Equity mutual fund invest in stocks. This type of mutual fund has the highest potential returns but also has the highest risk.
ARE MUTUAL FUNDS GOOD INVESTMENTS FOR YOU?
If you are someone who has just started investing , mutual funds (also UITF) are the best investments for starters in my opinion.
Why?
Because investing in mutual funds is simple and affordable.
The hardest decision you will have to make when investing in mutual fund is what mutual fund to invest.
Compare to investing in stocks directly, you don’t have to do stock picking.
Mutual fund has low initial investment, you can begin investing for P5,000 and then add additional amounts for P1,000.
I think if you want to invest in the stock market. Investing in mutual funds are your best choice. Aside from simplicity and affordability, you are provided with instant diversification.
