FAQ’S ABOUT MUTUAL FUND INVESTMENTS

What are Mutual Funds?

To start with, there are what we call Mutual Fund Companies, some examples are the following:

1.Philam Asset Management, Inc. (PAMI)

2.Philequity Management, Inc. (PEMI)

3.ATRAM (Former ATR KimEng)

4.SOLDIVO FUNDS

5.Sun Life Asset Management Co. Inc.

At marami pang iba..

Each of these companies offer/sell a range of their Mutual Fund investments to us/to you. If you buy now one or several of these, that’s the time that you say something like: “May Mutual Funds ako!” or “Nag-Invest ako sa Mutual Funds.”

Mutual Fund investments are actually “pooled funds”. They are pooled or pinagsama-sama together para makabuo ng mas malaki or mas strategic na fund which is then further invested in different financial instruments (such as stocks,equity,bonds,commercial papers,fixed income,etc.)

Question: Sinong nagpu-pool at nagi-invest ng pooled funds?

Answer: Eh di yung Mutual Fund Company which you have chosen to get one or several products from. Specifically yung tinatawag nila na Fund Managers nila.

Question: Are they legit companies?

Answer: Mutual Funds are legitimate financial institutions and are highly regulated by the Securities and Exchange Commission (and the PSE to a certain extent.) Another way of saying that, Mutual Funds are (very) legal – they are specially designed/composed for the “average investors.”

Note: Mutual Funds are not “fixed-income/rate” instruments (e.g. savings account, time deposit, special deposit.) They are subject to the volatilities of the stock market. They offer potentially higher returns with relatively higher potential risks than fixed-income structures.

Question: How do we make use of them as financial instruments?

Answer: Dahil “pooled” nga, you can now have a chance to participate in the stock market and other more sophisticated investments kahit maliit lang ang pera mo (usually, entry capital can be as low as P10k to even P5k lang – para ka lang bumili ng mumurahing cellphone.)

Owning or Investing in a Mutual Fund is Recommended by Experts in the following scenarios:

1.Pag di ka naman well-versed sa stocks or equities and you do not have (yet) the proper (skills, attitude, and time) tulad ng mga professional investors – or kung wala ka namang interes para magpakadalubhasa sa area na ito, but you really feel that you need to be part of higher-yielding investment vehicles so that you can out-pace inflation, as you move towards your life’s investment objectives (ang hirap kayang humabol pag naiwan ka na diba?)

Note:Of course, you should at least know the basics man lang di ba? Do your own research! Better yet, be part of group who has trained financial mentors.

2.Pag maliit lang ang naka-allocate mong pera for “riskier” investments or di mo pa kaya emotionally maglagay ng malaki dahil natatakot kang malugi (at di mo pa nare-realize na sa Opportunity to Earn ka dapat naka-focus at hindi sa potential losses.)

3.Pag “Long-Term” (5 years and up) ang investment objectives mo – e.g. retirement/pension, health and medical needs**, college education ng mga anak mo (pamangkin, inaanak, etc), pondo para sa pangarap mong luxury cruise, etc.)

**You should also have a Long-Term Care (LTC) investment na dapa ka-tandem ng short-term healthcare plan which is provided by your company (while you are employed lang, pano pag hindi na?)

4.Pag bangko lang ang alam mong paglagyan ng pera mo – congratulations – meron kang kulang-kulang 0.25% per annum sa savings mo. Practically *risk-free (?) pa! Habang kinakain ng 3-5% inflation rate ang natutulog mong pera.

*Very dangerous talaga pag hindi mo alam ang rule-of-72!

Question: Paano ako kikita?

Answer: Through Capital Gains or pag nag-appreciate yung value ng shares mo.

Example: Kung bumili ka ng 500 shares at P10/share last year (so, worth P5,000 iyon) tapos this year, naging P15/share na, so may P7,500 kana na puwedeng ibenta (or sell, redeem, cash in, parepareho lang yan). Therefore, meron kang 50% gain equivalent to P2,500. Example lang to kapatid pero this is very possible.

Or through Accumulation of Shares sa pamamagitan ng consistent buying of additional shares (think of it as para kang naghuhulog lang sa bangko every month or quarter) – this second approach is what experts call Cost Averaging Method.

Question: Para ba silang mga Insurance Company (yung mutual fund companies?)

Answer: Insurance Companies offer products (Insurance Products) that serve as “Protection” while Mutual Fund companies offer pooled funds (mutual funds) that serve as “Investment.”

At any rate, both Protection and Investment are critical building-blocks in establishing a Solid Financial Foundation – parang Offense and Defense, Left and Right, Day and Night lang iyan, magkaiba pero parehong mahalaga. Delikado pag wala ang isa sa kanila.

Question: May mga pagpipilian pa ba (choices?)

Answer: Sa Mutual Funds, you have the power to choose from amongst the products that they offer. Generally, 3 main types lang iyan, iba’t iba lang ang tawag nila –

(a)Equity/Stock Fund,

(2)Fixed-Income/Bond-Fund

(3)Balanced Fund (a blend of Equity and Bond funds)

Question: Kelangan ko bang bantayan lagi ang investment ko? (baka mapuyat ako)

Answer: The Fund Manager (and a team of qualified professionals) will generally do that for you – yaan mong sila ang magpuyat, trabaho nila yun. Monitor mo lang din siyempre ang pondo mo (pera mo yun eh, kelangan subaybayan mo diba.) Make it grow (by accumulating more shares on a regular basis) and Stick to your Investment Plans and Goals (or the reason/s why you did invest in the first place). The rest is victory!