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/

A round of applause to SteadyTito for being this week’s Featured Trader! 

Trader Steady Tito has been a member in the Investagrams community since 2018, making this his 5th year in the platform. On his entire stay, he remained a valuable community member as he constantly shares his analysis and insights on stocks that are showing strength.

Based on observation, Steady Tito is fond of trading on strength when prices are attempting to break resistance. He supports price action using the Relative Strength Index (RSI) and Moving average convergence divergence (MACD), 2 of the most commonly used and effective indicators, to validate strong breakouts.  

Steady Tito spotted Lepanto Consolidated Mining Company (PSE:LC) , a company that specializes in Gold mining, when it was attempting to break its resistance at 0.1450 just a few days before it made its way to 0.1560 level, an instant +7.50% gain. It’s MACD was trading slightly above 0 levels showing signs of strength, followed by its RSI still approaching overbought areas. For this kind of setup, it is wise to look for proper entries whether you wait for a bounce off the resistance to buy on support or buy on a strong breakout with volume.

Remember to never give in to FOMO! 

Buying due to FOMO is one of the worst methods done by an emotional trader who does not have a solid plan, ending with them slicing their portfolio’s hard earned profits. If you’re late to PSE:LC, best to wait for a retest back to its support or a short pullback to minimize your risk and also widen your profit window on this trade. Buying at its peak will not give you an attractive risk-reward ratio as your cutloss level is far below your average price. Worst case scenario, you will avoid cutting your losses and hope that the stock will recover.

The best traders don’t just make good profits, but also have the best risk management setups.

To learn more about Risk Management, visit here 

FUNDAMENTAL VIEWPOINT

Aside from looking at its technical view point, one of the main catalysts of the stock’s strong uptrend is due to the weak U.S dollar and strong inflation happening globally especially in the U.S which often drives metal prices like gold higher. As you know, U.S inflation is at its hottest it has been since 1982 reaching 7.5% over labor shortages and tight oil supply.

The operation of PSE:LC engages in the exploration and mining of gold, silver, copper, lead, zinc, and all kinds of ores, metals, minerals, oil, gas, and coal and their related by-products (PSE EDGE). This uptrend may stay intact for a while, but always remember to have your setups ready and manage risk.

Once again, KUDOS to SteadyTito for being this week’s Featured Trader! We hope you’ll enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.