Everything you need to know on how to invest mutual funds in the Philippines and making money and making millions from it are shared in this special page. I consider this as Mutual Funds 101 too as I shared many tips and important concepts about this kind of wealth building. So if you are a beginner, you’ll surely learn from this thread.
What is mutual fund? Why rich and smart people have mutual funds and why you too should open one? What’s the difference between mutual fund and UITF? How much money you need to start opening a mutual fund? What are the best mutual fund companies to invest with? Is your fund insured in the PDIC just like savings account? Those are just some of the questions we are going to answer here so read on.
What you need before investing in a Mutual Fund
- Knowledge – you’re lucky because you learn the basic knowledge and concept of Mutual Fund 101 here aside from getting to know your Fund so continue reading.
- Time – every investor must have his/her target time or goal for the fund’s life
- Money – of course you must have the fund in order to earn some more
What is Mutual Fund?
As always I like making things short but concise so I had the definition summed up for you.
-it is a type of investment wherein you join other investors and corporations to form a massive fund which will be handled by an expert/professional who is called fund manager for diversified portfolios of stocks, bonds, securities, money markets and other mutual funds.
Things are mutual just like a budding love and relationship. Are you familiar with MU (a.k.a. Mutual Understanding?) After you get to know each other and fell in love with MF, you still need to get to know MF and trust MF. Since you have a mutual bond, when the fund incurred loss, you incur loss too and when it incurred profit, you incur profit. Either way, you still invest.
A Mutual Fund is like riding a bike with your lover. He drives and you just hug him as you journey along… You are going somewhere and obviously you just let him drive till you both reached the destination. Like a Mutual Fund, you let the Fund Manager drive his way and execute strategies to make your fund grow and maximize earning potential until you reap profit on your target period.
That’s not all you need to know yet. You need to know which way you’re going…Know the types of MF.
Different Types of Mutual Funds in the Philippines
Before you open an account, you need to know what kind of account suits you. Their classifications are:
Money Market Funds – are invested in short-term (one year or less) debt instruments, fixed income securities, special savings and short-term bonds. These types of funds are suitable for low-risk taking investors and individuals who are looking for profit and higher returns than savings and time deposits.
Bond Funds – are invested in medium to long-term debt instruments, fixed income securities and government and corporations bonds (1 year or more). These types of funds are suitable for risk-tolerant investors who are looking for higher yields and returns.
Balanced Funds – are invested in equity securities and some fixed income securities in other words, a combination of debt instruments and shares of stocks of Philippine companies. These funds are suitable for risk-taking individuals who are aware of stock market investment and their possible profit and gains.
Equity Funds – are invested purely on shares of stocks in the Philippine stock market and are suitable for aggressive and risk-taking investors who understand the stock market and possible capital appreciation.
Apparently, the higher the risk, the higher the return or profit.
3 Factors in Choosing Mutual Funds
Which Type of Mutual Fund suits you? There are three things to consider before deciding which type of MF you will choose to open and invest.
- Your Risk tolerance – are you an aggressive or conservative type of investor? How would you take the risk, to what extent and level in order to reach your earning potential? Remember, there’s always risk attached to investing and there’s no guarantee you’ll gain or lose.
- Your Financial goal – why and how are you investing? Are you investing half of your regular salary or investing a million pesos you have made recently? Are you expecting capital preservation or you’re expecting money growth for future retirement? How long would you like to maintain it and when is your target time to redeem the fund.
- Your Time – How long would you like to put your fund? This is simply about your time horizon in investing until redeeming. If you have a target profit, you also have a target time.
How to open Mutual Fund account in the Philippines?
How to open mutual fund account in the Philippines? Before anything else, the investor is given an assessment by answering a form usually called Investor Profile Questionnaire. From the result or score, he could know what type of investor he is (conservative, moderate, aggressive) and he could also choose what type of MF is suitable for him.
The Mutual Fund licensed representative or adviser is usually the one who will assist an investor in opening an account and choosing an account appropriate for him. They would tell the investor everything they need to know and tackle about the investment they are getting into. They would also advise and give recommendations as to what type of mutual fund suitable for their financial status and goal. It’s important to read and understand the fund’s prospectus before you start your investment.
When the investor finally decided, he can open his account just by submitting the requirements.
Investing in Mutual Funds Requirements
It’s generally just like opening a bank account. The investor is usually asked to submit valid IDs, recent photo and required to fill up some forms for bank profile and personal information, signature card and some forms for the assessment of client and account suitability. After everything have signed, settled and dusted, the client will be given a document confirming his mutual fund account.
How much profit would you earn in a mutual fund?
Some gain higher returns, some get thousands while others millions. It really depends upon the fund invested, the period it is invested and the performance of the fund. Income or losses are computed via NAVPS (Net Asset Value Per Share) from the time you opened your account to the time you closed or redeem. Apparently, the higher the investment and the longer it is invested, the higher the return or profit. So I recommend investing in long term.
I also recommend checking the past performances of the mutual funds so you know which one performs better. You can ask your mutual fund adviser for a copy or just check them at Bloomberg.com or the Mutual Fund company’s website. You must know the name of the Fund before you can check it online.
Computation of Mutual Fund Income or Loss
In order to learn about how to invest mutual funds in the Philippines, you need to know how to compute mutual fund income or loss? Like I said it is based from the NAVPS, the day you got it and the redemption date. Sample computation below assuming you bought 100,000 shares from the best mutual fund company in the Philippines for P100,000 and you plan to redeem it after 3 years.
| Date of Purchase | NAVPS | Amount (P) | Income or Loss |
| June 2013 | 1.00 | 100,000 | n/a |
| June 2014 | 0.80 | 80,000 | -20,000 |
| June 2015 | 1.30 | 130,000 | 30,000 |
| June 2016 | 2.00 | 200,000 | 100,000 |
Are you deducted for taxes when you withdraw your mutual fund?
If you earned gains at the redemption, usually there’s no need for withholding tax since the amounts are net (net asset value) already. Now that is good news.
Is Mutual Fund Insured in the PDIC?
Since this is not a deposit or savings account, your funds are not insured in the PDIC (Philippine Deposit Insurance Corporation). Investing is far different from savings. It’s risky yet the returns are much higher especially if the fund performed well. You may not have that insurance in having a mutual fund yet you could maximize your earnings more likely since mutual fund managers are experts and are equipped in executing the best strategies to make the fund grow continuously and flexible.
They choose the financial instrument they deal with and choose the blue-chip companies to participate with. Want to know about these strategies and stats of your fund? Check or view your mutual fund performance reports.
Why rich and smart people have mutual funds and why you must open one?
Mutual funds are not new to wealthy people as they have many and different financial wheels that drive their money wagon. If you are smart and wise, you too must have one or some already. I’m not gonna discuss about rich and smart people here as I’m just a commoner. And that’s no excuse to have a mutual fund too. I decided to have some mutual funds to diversify my money.
I mean, wouldn’t it be amazing if you let your money work for you instead of you working for more money?”
Think about it. If you just rely on savings and your SSS or GSIS, it won’t be that much. Why can’t you settle a special amount every month for another money wheel so at some time or point in your life, you have 10 million or more. Time is ticking and time is money. Start your investment now. Start by knowing the best mutual fund companies in the Philippines.
What’s the difference between Mutual Fund and UITF?
Yeah I know lots of folk ask this question and I’m gonna share their most differences here. You can also check out my post about Mutual Funds vs UITF in the Philippines in a separate page. They are almost the same as both are pooled investment, managed by fund managers and their types (money market, bond, balanced etc) are usually the same too.
However, in mutual funds, the investor buys shares while in UITF, he buys units. Thus in MF, they report NAVPS while in UITF it’s in NAVPU. UITF are offered in banks here like BDO, Metrobank, BPI and the likes while MF are offered by companies like Sun Life, Philam Asset Management Inc. and many more. UITF and mutual funds also differ in redemption fees.
Bottom line, your concern is always the return so it’s important to learn and check their past performance before you open an account. Start a relationship – get to know a mutual fund and let a mutual fund company get to know you.
To know more, read about Mutual Funds vs UITF and their Similarities, Differences, Advantages and Disadvantages.
My own quote for today:
Wouldn’t it be amazing if you let your money work for you instead of you working for more money?” – Fehl Dungo
Now, you learned about how to invest mutual funds in the Philippines. Share you investment strategies and insights in the comments below. See you soon and thanks for reading!
