Halos araw-araw, may mga nagtatanong sakin ng “Aya, wala kasi akong oras para aralin ang stock market at bantayan ito, ano pa ba ang options ko?” o kaya naman, “Aya pwede bang ikaw nalang mag-manage ng pera ko?”
I always answer them, if you do not have the time, patience, and expertise to monitor the stock market, you have an option to invest in a mutual fund.
What is it?
Ang mutual fund ay ang pinagsasamang pera ng iba’t ibang investors at ito ay pinangangalagaan ng isang fund manager. The fund manager will then invest the money in different instruments like stocks, bonds, or both, that can potentially make the money grow long-term.
A Jeepney Ride to Mutual Funds 101
If you are an avid reader of our blog, you are already used to the concept that investing is a journey. In order to get to your destination of financial freedom, you can ride different vehicles to get there.
When you invest in the stock market yourself, para kang nag-mamaneho ng sarili mong kotse. Whether to turn left, right, slow down, or go faster – diskarte mo na yan! Ang importante lang, you SHOULD know how the stock market works and the risks involved, the same way you should know how to drive a car safely.
But if you don’t know how to drive, pwede kang mag-jeep! At sa pagsakay mo sa jeep, kasama mo sa byahe ang iba’t ibang pasahero na kapareho ng ruta ng pupuntahan mo. Para din sa mutual funds where the passengers are investors like you and the jeepney driver is the fund manager.
You trust that the driver will get you to your desired destination safely, the same way you will entrust the fund manager your money, keep it safe, and make it grow. And the same way you pay the jeepney driver, investing in mutual funds has fees too.
The Different Routes
Jeepneys have different routes which tells us where they will go, pick-up, and drop-off passengers. Depending on their specified route, they cannot go anywhere when they feel like it.
Mutual Funds have “routes” too! As I have mentioned earlier, the fund manager can only invest in an instrument depending on how the fund was set-up. To understand this better, here are the different types of mutual fund:
1. Money Market Fund
Kung sandali lang ang gusto mong byahe, at kakailanganin mo yung pera ng madalian, you can get a money market fund where the money is invested in short-term debt securities (bonds). It’s less risky than other funds, but it also has low returns.
2. Bond Fund
Kung kakayanin mo naman ang byahe na medyo matagal ng kaunti, meaning you’re somewhat in between short-term and long-term investing, you can consider investing in a bond fund.
Simply put, ipapautang ang pera sa gobyerno o sa mga company sa Pilipinas kung saan tutubo ito ng interest. It has lesser risk than other funds, at mas malaki ng kaunti ang returns compared sa money market funds.
3. Balanced Fund
Isa pang bagay na mutual fund para sa medium-term investor ay ang balanced fund.
The money is invested in bonds and also in the stock market. If you’re willing to take a risk, but not too much, and you want higher earning potential than a bond fund, this is an option for you.
4. Equity Fund
Lastly, kung kaya mo naman ang malayuan na byahe na tatagal ng 5 years or more, at naiintindihan mo ang mga risk sa stock market at willing ka naman tanggapin ito para sa posibilidad na mas malaking kita ng pera mo, equity fund ang bagay sayo.
There are more types of funds depending on the company offering them.What’s important is that you know:
Where does the money go?
How long can you wait? and
How much risk can you take?
How You Make Money
You earn in mutual funds through price appreciation. When you invest in a mutual fund, you are buying shares of that particular fund based on its NAVPS or net asset value per share. Tumataas o bumababa ang NAVPS depende kung lumalago o hindi ang pera kung saan nag-invest ang fund manager.
If the NAVPS of the mutual fund where you invested appreciates, you can sell your shares for a profit. Likewise, if the NAVPS depreciates, you may incur a loss if you sell.
What is the best?
There are a lot of companies in the Philippines that offer different types of mutual funds. I hope by now, the very first thing you ask whenever you are looking at any investment is whether it beats inflation or not. (Read: Every Filipino’s Guide to Inflation)
To know the daily performance of legitimate mutual fund companies in the Philippines, go to the official website of the Philippine Investment Funds Association (PIFA) at www.pifa.com.ph
Is it for you?
So if you want to be diversified, invest a small amount, and have someone who will do the thinking and monitoring of your investments – mutual funds MAY be the most suitable investment for you!
Elvin @ Journey To Millions says
Hi Sir Aya,
I already learned these concepts in pesos and sense episodes but I still love reading your post. Ang galing-galing nyo pong mag-explain ng concepts. I really like the analogy of jeepney and mutual fund. I hope more Filipinos will find this site, para marealize nila na hindi nakakatakot mag-invest sa mutual fund or even sa stock market. Makakaasa po kayo na I’ll share your website to my friends.
mary jean says
So what is better mutual or segregated fund?
reynante ipil says
good job sir Aya and more power to you and to your program,salmat po.
Hi Aya, I’ve been reading about mutual funds as I’m planning on investing on it too other than stock market. the jeepney concept is really a good example. Filipinos can relate to it more. More power to you!
hehe ganda ng analogy =)
Someone told me about mutual fundz,and i ask him wt is it? Sbi nya research q daw,and then i read about it ..and i like it .. Like others im loking forward to invest in your company..godbless
What can you say about Lump sum investing? AdvisaBle ba ito sa mutual funds? If hindi, saang investment mas bagay ilagay ang lump sum? Thank you.
Aya Laraya says
Ok ang lump sum sa Real Estate.
For mutual funds, mas ok ang Cost-Averaging.
Ok, thank you.
Sir Aya! thanks po sa article na ito… gusto din po talaga kasi maiintindihan about sa mutual funds, since na iniisip ko rin na iinvest ang 13th month pay ko sa mutual fund… salamat po ulit… malaking tulong po ito..
God bless you more.
grace pestano says
panoh poh mag invest? at magkno poh dpt ang dpt i2nvest?
Hi aya…kaka open ko lang po ng fami account pero ofw po ako … apparently someone from philippines offered to transfer my account under him so he can be the account executive. ..ano po ba ang ibig sabihin nun? May impact po ba ito sa investment ko…lahat naman daw po ng money transactions will be same as it was..no need to pay him anything.
Aya Laraya says
Not sure what that means. Talk to the agent who initially sold you the funds.
John Daniel Castillo says
http://www.pifa.com.ph link not working..
Aya Laraya says
Its working again.
anthonette iniaca says
hi sir aya, okey lang po ba mag invest ako sa mutual funds at pipiliin kung stockbroker and citiseconline program, student po ako gusto ko po mag invest sa kanila ng 5k , sa shares lang po ba pwede kumita?
anthonette iniaca says
okey lang po ba sa easy investment program po me mag invest?pano po if nag invest me 5k, okey lang po ba kahit mas mababa sa 5k next month invest ko?pano me kikita except po sa pagbili ng shares at pagbenta?
Hi Aya, puwede bang mag-apply ng mutual fund sa pilipinas? Meron bang online ang application? Ano pong company.
OFW po ako gusto mag-apply ng mutual funds pero hindi po ako makakauwi sa pilipinas.
Aya Laraya says
You can email the Mutual Fund company you are interested in and ask if they accept overseas applications. Most of them do but you will still have to mail them your account opening forms.
san ba ako dapat mag invest ng mutual fund
mark Anthony says
tnx sir Ara.. I was lighten up by the episodes watched from pesos and sense. I have an account in col. as well as in mutual funds. hoping to attend a seminar of yours in the future. I’m an ofw. hopefully I can meet you in person. God bless sir Ara.
Sherwin Nofuente says
Hi Sir Mark / Sir Aya,
Sir would like to check with you on how did you manage to start and have a mutual fund account. I tried to mail pifa but i did not teceive any reply.
Thanks a lot..
hi sir aya,merry xmas ang ganda po ng article nyu ngbabasa po kasi aq dahil gusto ko matutu muna bago mkapag simula sa pag invest isa akng ofw at pag my tym aq ito ginagawa ko ngbabasa ng mga article about financial lireracy…sana mka pag umpisa na aq sa pag uwi ko nxtyer..
God bless po more power…
hi aya! ano po ang magandang company para sa mutual fund? and magakno ung minimum na investment? I’m plannnig to invest this coming 2014.
Question po ,Dito po article na to inexplain nio po yung mga uri ng mutual funds.Panu po ba malalaman yung best time na ibenta ang share.panu po ba imomonitor na tumaas na yung NAVPS,like po kasi sa ibang nabasa ko po. pag bumaba po yung NAVPS ng 50% so magkakaroon kau ng lost na 5o% din.so halimbawa po 5 years lang yung contract and matatapos na yung contract mo then that is the time naman po na mababa yung NAVPS panu po bang magandang gawin dun?medio confuse lang po kung panu i cclaim yung share mo.(yun po ba ang tamang term dun?)or panu mo malalamang kumita ka?kasi meron pong risk na cnasabi at yun po yung gusto kong malaman at panu po ba yun?
tin laganao says
hi artcrip! you can monitor a particular MF by searching it up in pifa.com.ph. There, the site can provide you with dates and the corresponding NAVPS on those dates. You can then graph this on Excel spreadsheet, and of course you want to see a rising (increasing) trend. When you invest in an MF, the MF company always notifies you of how many shares you’ve bought with your investment and how much the NAVPS was on the date of purchase. when you sell your MF shares, you want to sell it at a higher NAVPS than you first bought them (say, you bought 1000 shares at 1.00 NAVPS, you would want to sell them if the NAVPS is higher, say 3.00 or even 5.00 NAVPS).
Also, the MF Policy is not like an Insurance policy with contract (of 3 or 5 years, etc.); what the ‘years’ means in an MF is that you have to stay invested (meaning: you don’t sell shares) for that long. If you sell your shares after 3 years of investing, and the MF says you should stay invested in 5 years, they will charge you an “early exit fee” of, say 2% or 3.5% of your total investment worth, depending on the MF company. (Please note that every MF company has different sales load/ fees! for example: FAMI has cheaper fees than PEMI). But, if you stay invested for 10 years and the MF says a minimum only of 5 years, NO PROBLEM! your money would grow even more. the longer you stay invested, the higher the chance of increasing your money.
in claiming your shares and earnings, the MF company will provide you Redemption Forms and you just have to fill these up and VOILA! you get your cash.
I hope this helps. (just so you know, I spent about a year reading, studying, attending seminars and asking around about the how-to’s of investments. It is only early this year that I felt confident enough to dive into it. Happy learning!)
Just opened an account for mutual funds. Sir Aya how will i earn from that? Kapag po ba tumaas ung value ng share where in the fund manager invested my money then i sell it, thats the only time na kikita po ako? Or there are ither ways to earn interest? Salamat po
hello sir Aya,
magkano po ang initial investment ko para sa mutual funds? at papaano po ang gagawin ko? gusto ko po sana mag invest kasi OFW ang hubby ko at gusto ko siyangung tulan para makaipon.. salamat po….
Kumikita ba ang investor (ng mutual fund) by dividends? How much (range or average) in percent? What if we sell our mutual fund para iinvest sa other paper assets, may tax pa ba kaming babayaran? May tax din ba ang ‘dividends’ na nakukuha namin from mutual funds? Kung meron, how much?
arnold mangco says
Sir aya gusto ko png mag invest sa mutual fund her in bacolod, ask ko po kong anong company na pwede mong e recomend mo sakin.tnx po
I already have an EIP account with COL and I’m already investing in bluechip companies using the peso cost averaging method. I am also looking into investing in mutual fund. Do you think if I invest in equity fund would my portfolio be considered as diversified considering I have EIP or would a balanced fund or even bond fund would make it one? What is/are the best mutual fund company/ies in terms of performance? Thanks in advance!
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melchor bulatao says
Hi sir Aya
I invested in bdo balanced fund last 2011
Is it the same in other mutual fund.
Thanks in advance
tin laganao says
Thank you for this wonderful article! The analogy between MF/UITF and Jeepney is really Pinoy.
I have a question:
What happens to my MF and COL stock investments when I suddenly die? If I do have beneficiaries, will they still have to pay tax to claim my funds and earnings? If I don’t, will the government just get all my investments for FREE?
I hope you can enlighten us, thank you very much!
Do you recommend investing in MF where you are currently located? I am located here in Abu Dhabi, UAE and I want to invest in MF Balanced Fund. Is 3 years time enough? While we are still here I am thinking of placing the money there instead of investment. Thanks in advance.
Btw, I am now an investor, I have COL account. I always wanted to learn Stock market but I always thought it is complicated. Thanks to Pesos and Sense! Thank you for Financial Literacy Awareness…
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Arlene Cayabyab says
Gano katindi/kalaki yung risk sa stock market/mutual funds?
Kapag nalugi yung company same with my money
matanong ko lang po kc bago lang po ako gusto ko mag invest sa mutual fund monthly po ba na nag babayad?
I think stock market is the best way to invest, only you need to study things about before trying.
cristaline reyes leonardo says
Sir aya sa mutual fund po mag kano po ba ang hulog?