A Mutual Fund is a type of investment where a pool of cash is collected from many investors and is invested in different tradable assets such as a pool of stocks, bonds, money market, and the like.
Mutual Funds are one of the most diversified forms of investment, as funds have no limits when it comes to allocating their assets. More than local companies or Blue Chips stocks we know funds invest in, funds can go as broad as to investing in government securities, bonds, fixed income instruments, money market instruments, and even on global companies across the world.
In the Philippine setting, mutual funds can be invested in the top 30 companies that are listed in the Philippine Stock Exchange. These companies are Jollibee, Meralco, Ayala Land, Inc. and more. Other mutual funds also offer different investment opportunities in bonds, money market, and real estate to maximize returns and minimize drawdowns.
Ultimately, the performance of the said fund will heavily depend on the performance of the overall markets and the fund manager itself.
How does it work – What are the benefits of investing in a mutual fund?
First of all, investors always have the option to invest in securities by themselves. What sets Mutual Funds more preferable among other investors are the convenience, diversification, and affordability especially if you don’t plan on actively trading your investment funds.
Mutual funds are professionally managed by professional fund managers working to capitalize on market opportunities and generate income for investors. In layman’s terms, you allow professionals to conduct the necessary in-depth research and fund allocation for your investments.
Pros
- Affordable – You can invest in Mutual Funds for as low as 50 pesos using the Investa app https://www.investa.ph/
- Liquidity – Easy and quick withdrawal of funds
- Risk – Although you should never expect a 100% guaranteed return, investing in mutual funds is less risky than investing in individual stocks due to the diversification of your portfolio.
- Professionally Managed – Professionals will manage your portfolio to maximize returns.
- Less Time Consumption – Fund managers will perform all the necessary research provided for you.
Cons
- Fees – Take account the commission fees, interest, and related fees.
- Holding Period – Holding your funds at a longer period of time will maximize revenue and minimize costs of withdrawal. Withdrawing funds too early may incur larger fees.
Factors to Consider in Choosing the Right Mutual Fund for You
One of the most common investing principles is to understand your Risk Profile to recognize which fund is right for you.
Note: Rate of Return is proportional to Level of Risk
Conservative Investment (Low risk – Low Return)
A conservative approach to your mutual fund indicates that the said investment will be focusing more on fixed income securities. These types of securities offer little to no risk, but in return it offers a smaller window of returns in comparison to the Moderate and the Aggressive fund.
Moderate Risk Investment (Medium Risk – Medium Return)
A moderate approach to your mutual funds indicates that this said investment will be balanced. It is spread across fixed income securities to high risk assets. The profit factor and the risks involved are in the middle of being steady and erratic, as the name of the fund suggests.
Aggressive Investment (High Risk – High Return)
An Aggressive approach to your mutual fund indicates that the said investment will be focusing more on high risk assets. These types of securities offer greater profit potential at the expense of greater risks involved in comparison to the Conservative and the Moderate fund.
Fund Manager
It is necessary to conduct research on the fund manager to fully recognize their investment strategies and outlook on the market. This will help you select a fund that invests in securities that you also believe will bring you attractive returns in the long-term.
For as low as 50 pesos, you can now invest in mutual funds using the new Investa app! Register for free at https://www.investa.ph/
