Due to popular demand, here it is – a posting dedicated to mutual fund investing for dummies. Thanks to Alfa and Hachiko for this idea. We will definitely wait for the glorious, painful detail of your mutual fund experience! 
There are a lot of definitions of mutual funds out there, but I am most fond of using the analogy of a car pool. Car pools help you get to your destination without having to worry about taking the best route – you let someone you trust take the wheel so you can focus on other things like..uhh..fighting stress!
Mutual funds can help you reach your financial goals without having to worry about the everyday ups and downs of the stock or bond markets. It is also a way of giving newbie investors a taste of what it is like to own stocks and bonds – at a much lower entry level. Imagine, for a P5,000 investment for example, you instantly have a diversified portfolio!
Compared with the mutual fund industry in other markets, though, ours is still very young and certainly a lot of things still need to happen for it to grow.
I began writing about mutual funds when, under the direction of my then-editor Sheila Samonte-Pesayco, our team published the country’s first section in a national newspaper dedicated solely to Personal Finance. That was around 1998 or 1999. A lot has changed since then, and certainly mutual funds are more popular now. In fact, judging from the discussions in this blog, it is fast becoming a hot investment instrument that offers superior earnings compared with the more traditional time deposits.
However, the industry still has a long way to go. Definitely, it is still light years away from successfully drawing the more than P1-trillion deposits of Filipinos languishing away in banks’ time deposits.
Here are some useful links that I’ve collected through the years:
The website of the Investment Company Association of the Philippines has a “Mutual Funds 101” website that you should check out.
How to choose a mutual fund
Discover mutual funds as savings tool
Investing your hard-earned money (Look beyond regular savings accounts)
Retirement plans vs mutual funds
Can I lose everything I’ve invested in mutual funds?
Useful tips:
- Every human being learns how to chew with small bites. In investing, start with the simplest concepts: read the fine print.
- Don’t depend on the agent to explain everything. Ask for the prospectus and take out a magnifying glass if you need to.
- Things to watch out for are sales loads, management fees and charges. These can have different forms and can attack a fund from many angles.
- Fees and charges depress your returns. While your mutual fund investment is not taxed as opposed to the 20 percent withholding tax on time deposits, you pay commission or sales loads sometimes in the form of entry and exit fees anywhere from 0.25 percent to three percent.
- The trick is to spot the high commissions and sales loads on those prospectuses and scrap these funds from your list. Stick with funds that offer the lowest operating expenses and commissions.
Happy investing, everyone!
April 1st, 2007 at 7:25 pm
Hi Richardson, good move, in theory anytime is the best time to buy, on the premise that no one can outguess future market movements and an “election discount” is already factored into stock prices. As my Philequity contact actually told me: “kahit pa mga taga-loob hindi makabili sa pinaka-mababang NAV”. Lesson: real investing success occurs over the long-term; short-term success is usually just toss-of-the-coin luck
April 1st, 2007 at 1:33 am
MAA prospectus:
http://www.maa.com.ph/downloadable%20document.html
April 1st, 2007 at 12:48 am
oda,i was referring to philippine mutual funds.i think i can optimize my investment with some hedging if i go long term.
nina and alijeffty
thanks for the info. how come there is no available prospectus to download on their site.
March 31st, 2007 at 5:33 am
i have the privilege of being instrumental in the launching of the country’s first euro denominated mutual fund, the rationale behind this are:
the eurozone collectively, based on data we gathered have already surpassed the US in terms of GDP as of the end of 2005, with unrestricted trade among themselves, it is forecasted that growth in europe would outpaced the US by about 2% to 3% per annum in the next decade.
second is the relative interest rate levels, all things being equal, currency values have been observed to move in line with movements in interest rates, a 25bps drop in interest rates for example would correlate to about quarter per cent depreciation, after 17 rate increases in the US in the last few years, the growing consensus is that US rates are toppish and may indicate a softening policy going forward. the pressure to cut rates is becoming more imminent with growing concerns of the slowing of housing data-a major driver of the US economy.
the philippine savings and investment market is predominantly denominated in pesos and USD, as the base currency of an investment vehicle would have a bearing on its final value at the time of consumption, a euro fund may provide access to diversification to a third currency
for more info, you may check out http://www.maa.com.ph/mutualife.html
thanks
March 31st, 2007 at 4:02 am
Don, there are two and both are bond fund: MAA Privilege Euro Fixed Income Fund and ALFM Euro Bond Fund. Here’s the link of Phil Mutual Funds.
http://www.icap.com.ph/memlist.asp