What are Mutual Funds?
A Mutual Fund is essentially a company that collects money from different investors and then allocates them in a variety of investment options like stocks, bonds, money market instruments, and others. If you don't have enough knowledge, time at capital to invest in the stock market, MUTUAL FUNDS is one of the the best investment for you. You will be an indirect investor in the stock market because there are Professional Fund Managers who will manage your investment portfolios for you.
A mutual fund is a pool of money. Ibig sabihin, pinagsama-sama ang pera ng mga investor katulad natin . For example, meron kang P1000, ako naman any may P5000 at ang kaibigan mo ay may P100,000 . In total, P106,000 will be invested by the Fund Manager to buy "Blue Chip" companies in the stock market like Jollibee, Ayala, SM, URC, etc. Kapag kumita ang Mutual Fund, ibabalik ang interest sa mga investors.
Kapag kumita ang mutual fund company ng 10%, lahat ng investors ay kikita din ng 10%. Ikaw ay may kita na P100, ako ay may P500 at ang kaibigan mo ay P10,000.
What are the benefits of investing in mutual funds?
Professional Management
Full-time professional fund managers are managing your investments.
Such focus is to analyse the investment products available in the market and actively select those that would give the best possible returns to the fund and its shareholders.
Low Capital Requirement
Mutual funds accommodate investors who do not have a sizeable amount of money to invest. You can start investing for as low as P1000 and minimum additional investment of P500.
Great Equalizer
Managed funds are the “great equalizer” in investments. The rate of return of those investing Php 5,000 is the same for those investing millions of pesos.
The returns are proportionate because each share in a mutual fund represents a unit of ownership, and each share in the fund earns the same amount.
Diversification
There is a saying that goes, “Do not put all your eggs in one basket.” This is especially true in the world of investments which is full of uncertainties.
Diversification is a key benefit of investing in mutual funds and other investment companies that invest in a number of financial assets or portfolios.
Mutual funds provide access to a diversified portfolio, without the difficulties of having to monitor dozens of assets daily.
Liquidity
Liquidity is the ability to readily convert investments into cash.
Mutual funds will usually create new shares to be sold to new investors; there is no finite amount as with stocks.
Since you buy shares directly from the mutual fund, they are redeemable and can be sold back to the fund readily.
Mutual funds are, therefore, considered very liquid investments.
SAFTEY
Safety is a very important consideration for most investors, sometimes even more important than potential returns.
Nevertheless, mutual funds are highly regulated by the Securities and Exchange Commission under the Investment Company Act and its implementing rules.
All of the fund’s assets must be held by highly reputable commercial banks for safe keeping not to mention, mutual funds are very transparent. Investors have not only the right to vote during shareholders’ meetings but are also allowed to know where the funds are invested.
Potentially Higher Returns
Because a mutual fund is managed as a single portfolio, it is able to take advantage of certain economies of scale.
For instance, with its billions under management, it can negotiate for lower stock brokerage fees or command higher interest rates on fixed-income investments.
Tax-Free
Gains realized by investors upon redemption of their shares in a mutual fund have been excluded from the definition of gross income effective January 1, 1998, and are, therefore, not subject to personal income tax stated in R.A. # 8424, otherwise known as the Tax Reform Act of 1997.
This benefit alone makes it more profitable investing in a mutual fund.
The 4 Basic Types of Mutual Funds in the Philippines
Money Market Funds
These are low-risk and can earn somewhere 1% to 4% per year. When you invest here, your money will be put in time deposits and other similar products.
Money Market mutual funds are generally a safer investment, but with a lower potential return than other types of mutual funds. It’s good for people with a short-term investment horizon.
Bond Funds
These are also low-risk and earns similarly as Money Market Funds. When you invest here, your money will be put in government bonds, investment-grade corporate bonds, and high-yield corporate bonds.
Bond Funds are also on the safer side of the spectrum of investments, but likewise has lower potential return when compared to other mutual funds. It’s recommended for people with a short to medium-term investment horizon.
Equity Funds
These are also low-risk and earns similarly as Money Market Funds. When you invest here, your money will be put in government bonds, investment-grade corporate bonds, and high-yield corporate bonds.
Bond Funds are also on the safer side of the spectrum of investments, but likewise has lower potential return when compared to other mutual funds. It’s recommended for people with a short to medium-term investment horizon.
Balanced Funds
Somewhere in between are Balanced Funds, which carry moderate-risks and can earn around 4% to 8% per year on average. This type of mutual fund invests in both the money market and the stock market.
That’s the reason why it is moderate-risk. Usually, half of the fund is in time deposits and bonds, while half is invested in the stock market. But it’s not always an even 50-50 split.
Balanced Funds tend to have more risk than Money Market Funds, but less risk than Equity Funds. And it’s good to invest here if you’re a medium-term investor, which is but not strictly, around 3 to 5 years.
Which Type of Investor are You?
Conservative
Your aim is to protect your capital even with minimal growth.
Moderately Conservative
You value principal preservation, but is comfortable accepting a small degree of risk and volatility to seek some degree of growth.
Moderately Aggressive
You are looking for a sensible mix to maximize your investment over the long term.
Aggressive
You want a potentially higher growth over the long-term and willing to take higher risks.
Which Mutual Fund Companies can I invest in?
How can I start investing in Mutual Funds through IMG?
Invest in Mutual Funds with 0% Entry Fee with IMG Membership Benefit #10
Entry fee (also called Front-end fee or Sales Load) is an upfront fee deducted from every mutual fund investment which is around 1% to 5% of your total investment. For example, if you invest P100,000, only P95,000 will be invested in the mutual fund because P5000 (5% of P100,000) will be deducted as the Entry Fee.
Can you invest in Mutual Funds without an Entry Fee? YES!
IMG Members enjoy a lifetime 0% entry fee to all their mutual fund investments. For example, if an IMG member invests P100,000 to a fund, all of these will be invested because there's no entry fee that needs to be deducted.
This is just 1 of the 30 Lifetime IMG Membership Benefits that Members enjoy.
Do you want to start investing in mutual funds through the IMG Membership platform?
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