Investment in Mutual Funds

[riko diko]

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can anyone just post here details of the topic here? thanks.

[philwily]

Is this the one that companies like Pru Life, Prudential Life offer?
If it is, which one is considered the best?

[aninipot]

PRU Life UK don't want to call it as mutual funds but rather as Personal Investor Account, which they have three of this type namely, bonds fund, manange fund (balanced fund), and equity fund. However, for all practical purposes they are still like mutual fund except for the insurance portion which is 25% of the invested account. That is why the fee is 6% upon investment plus the 1.5% fund management fee which the later is common for other mutual funds.

[darwinencabo]

hey,
Hi aikea guinea,

I want to start investing. Mutual funds seem to be a "safe" choice, if it's low-yield.

How do I reach you?

Darwin
0917-623-8990

[toniboy]

I am just wondering how controversial the mutual fund is. Bakit walang mag dare mag post about the details? Bakit kailangan i-PM or i- text pa? Wala kasi ako sa Pinas kaya d ako makatext n d # displayed. Sana may mag post ng details para at least marami ang makinabang na mga kababayan natin about this investment.

I'm also thinking baka may bayad ang consultation about this.Try ko mag reseacrh and I will post d information about this for the benifits of our kababayans.

Sikap Pinoy, Bangon Pinoy........ May pag-asa pa......

[dagget]

here's my knowledge on mutual funds

mutual funds -this is a pool of money coming from more than 1 investor. It is invested in stocks, bonds, treasuries or commodities to earn an interest or income.

lets say i want to put up a mutual fund.

i invite 10 people to invest 100,000 each.

so 10 x 100,000 is 1 million.

each of the 10 people own 1/10(10%) of the mutual fund

1 million is invested on stocks, bonds or treasuries.

Why do we need to pool funds together and why not invest it individually?

because the more money you have(100,000 vs. 1 million) the better the interest rate is offered. if you look at bank's time deposit the bigger the amount you deposit the more the interest rate.

going back...... 1 million is invested on stocks, bonds or treasuries or commodities(gold, oil etc...)

after 1 year the value of the 1 million invested is already worth 1.5 million.

usually since i am the fund manager i get a cut. say 10% of the fund after 1 year. so i get 150,000.

1.5 million minus 150,000 = 1,350,000.00 divided by 10 people = 135,000 so each of the 10 persons get earns 35%

if you are familiar with stocks and the stock market

you can put up an investment club where you pool your money like 100,000 for each member. if you have 10 members then you have 1 milliion

the investment club puts the money on stocks, bonds, commodities or treasuries.

after 1 year the 1 million is worth 1.5 million

after expenses like brokerage fees and trading fees.

you have 1.4 million so divided to 10 people that is 140,000 for each.

if you have any questions just post them and i will try to answer them.

i personally don't have a mutual fund but i buy and sell stocks.

[toniboy]

@ dagget

Thanks sir for a good explaination;

At least nagkaroon ako ng idea about this mutual fund, I know there's a lot of guys here feel d same way as I do.
Let me ask for a clarification, If u r d one inviting/gather people to put-up a mutual fund, Is that mean that u're d fund manager automatically? In ur example d fund manager earns 150,000 (10% of 1.5M) plus 135,000 [(1.5M-150,000)/10], a total of 285,000. Am I ryt? Ang laki pala ng share ng fund manager,hehe..

Yan lng muna, Till next time. Thanks 4 sharing ur idea. More power & God bless!


Sikap Pinoy.... Bangon Pinoy...... May pag-asa pa!

[dagget]

if im the fund manager in the said example

i get 10% of 1.5 million (150,000)

the balance is divided among the 10 persons who invested so with their 100,000 investment they get 135,000 each

other mutual funds charge more than 10% usually 10% is the minimum.

[evangareth]

What is a Mutual Fund?
A Mutual Fund is an investment company that pools the funds of many individual and institutional investors to form a massive asset base. The assets are then entrusted to a full time professional fund manager who develops and maintains a diversified portfolio of security investments. People who buy shares of a mutual fund are its owners or shareholders. Their purchases provide the money for a mutual fund to buy securities such as stocks and bonds. A mutual can make money from its securities investments in two ways: a security can pay dividends and interest to the fund, or a security can rise in value. The fund passes any dividends, interest or profits on the sale of its portfolio securities, less fund expenses, to shareholders in the form of distributions.

Different Funds, Different Features
In the Philippines , there are currently four basic types of mutual funds---stock (also called equity), balanced, bond and money market funds. Bond funds invest primarily in bonds such as treasury notes issued by the Philippine government and commercial papers issued by reputable companies in the Philippines . Having a full basket of only fixed-income securities, bond funds provide capital preservation while maintaining a conservative stance in terms of asset allocation. Like bond funds, money market funds also have a conservative stance since they have a full basket of fixed income funds. The main difference lies in the term of investments of money market fund investments, which is one year or less. Equity funds invest primarily in shares of stock issued by Philippine corporations. The dominance of stock issues within the portfolio positions the fund to attain a more aggressive rate of growth. Balanced funds invest in both shares of stocks and bonds, thereby accessing the growth potential of stocks tempered with the presence of secure fixed-income instruments. Professional fund managers create value for shareholders by providing superior yields within controlled risk exposures. Certainly, expective in both security selection and asset allocation go a long way in ensuring better long-term rewards for mutual fund investors.
At present, there are a total of 22 mutual funds in the country. Six (6) of these are bond funds, five (5) are equity funds, while the remaining ten (10) are balanced funds while one is a money market fund.

Why Invest in a Mutual Fund?

Interest rates can be volatile and passive short-term investing can erode investment values due to inflation. On the other hand, the stock market has historically outperformed both short and long-term bank deposit rates. Unfortunately, not so many people are familiar with active financial management and effective diversification. Through mutual funds, even investors with limited resources can participate in combinations of these high-yielding investment instruments without the headache of personally selecting and monitoring a portfolio.
Mutual funds are ideal vehicles for growing money over time. It can be used as a savings medium for retirement, education for a child, or building up a long-term cash fund for some specific future financial objective. While largely thought of as a retail financial product, mutual funds are also ideal instruments to augment the yields generated by organizational funds and enhance their level of diversification. Mutual funds have been popular investments for pension and trust programs, other employee benefit funding objectives, and institutional asset-liability matching.


Advantages in Investing in a Mutual Fund

Mutual funds provide a combination of benefits to investors which cannot be matched by other investment instruments. These advantages are as follows:

Professional Management
One of the main attractions of mutual funds is that it affords its investors, particularly the small ones, the services of full-time professional managers whose job is to analyze the various investment products available in the market and select those that would give the best possible returns to the fund and its shareholders.


Low Capital Requirement
Direct investments usually require substantial capital. The minimum investment amounts for Treasury Bills and commercial paper, for instance, range from Php100,000 to Php1 million depending on the bank or investment house you are dealing with. This also holds true for stocks because while an investor may be able to buy one “lot” (shares are sold in board lots of 10 to 1 million shares depending on the price at which these shares are traded) for as low as Php1,000 to Php5,000, he may not find a stockbroker who will service his account because they prefer to deal with high net worth individuals (rich people in layman's terms) or at least with people who have substantially more than just Php5,000.00 to invest. In contrast, most mutual funds in the Philippines require a minimum initial investment amount of only Php5,000.00 and minimum additional investments of Php1,000.00.


Diversification

There is a saying that goes, “Do not put all your eggs in one basket.” This adage is especially true in the world of investments which is full of uncertainties. There is no such thing as a “sure” thing. An important investment principle that requires holding several securities to reduce the risks associated with investing in individual securities is called diversification. When people invest in a mutual fund, they achieve instant diversification because the fund is usually invested in a wide array of securities.


Liquidity

Liquidity is the ability to readily convert investments into cash. Other investment products require investors to find a buyer so that he can liquidate his investment. That is not the case with mutual fund shares because the fund itself stands ready to buy back these shares at the prevailing Net Asset Value Per Share. While the law provides that redemption proceeds must be given within seven (7) banking days from the date of the redemption request, most funds are able to pay the redemption proceeds within a day. Mutual funds are, therefore, considered very liquid investments.


Safety

Safety is a very important consideration for most investors. Sometimes even more important than potential returns (well… on second thought, maybe not). Nevertheless, mutual funds are highly regulated by the Securities and Exchange Commission under the Investment Company Act and its implementing rules. They are prohibited from investing in particular investment products and engaging in certain transactions (this is discussed in greater detail in a latter section). They also have to submit regular reports to the SEC as well as to their shareholders. As mentioned earlier, all of the fund's assets must be held by a custodian bank for a safekeeping.
Potential 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 millions under management, it can negotiate for lower stockbrokerage fees or command higher interest rates on fixed-income investments. In the end, however, it is still the investment adviser who really makes the big difference between making direct investments and investing in mutual funds because very few individual investors can match the experience and skill of full-time professional fund managers.

Convenience
In other countries, mutual funds can be purchased directly from a fund or through a broker, financial planner, bank or insurance agent, by mail, over the phone and increasingly over the internet. The popularity of mutual funds in the Philippines is fast catching up. It may be a matter of time for this level of convenience to be a reality in the country. Funds also offer a variety of other services, including monthly or quarterly account statements, tax information, and 24-hour phone and computer access to fund and account information.

Investment Restriction for Philippine Mutual Funds

1. Mutual funds may not invest in any of the following:
• Margin purchase of securities (investments in partially paid shares excluded)
• Commodity futures contracts
• Precious Metals
• Unlimited liability investments
• Short selling of currencies
• Short selling of investments
• Other investments as prescribed by the SEC
2. Mutual funds are not allowed to incur any debt or borrowing unless at the time of the occurrence there is asset coverage of at least 300%.
3. Investment companies cannot undertake in an underwriting or selling group in connection with the public distribution of securities except for its own capital stock.
4. Funds cannot make any investment for the purpose of exercising control of management.
5. The maximum investment any fund in any single enterprise shall not exceed ten percent (10%) of the fund's net asset value except obligations of the Philippine government or its instrumentalities. Provided, that in no case shall the total investment of the fund exceed ten percent (10%) of the outstanding securities of any investee company.
6. For liquidity purposes, at least 10% of all funds shall be invested in liquid/semi-liquid assets such as Treasury notes or bills, BSP Certificates of Indebtedness, and other government securities or bonds. Savings and time deposits with any government or commercial bank, provided that in no case shall such savings or time deposits be accepted or allowed under a “bearer”, “numbered” account or similar arrangements.
7. The investment of funds in real estate properties shall not exceed 25% of the total investment portfolio.
8. Funds cannot engage in lending operations without prior approval of its Board of Directors. Such approval shall be limited only to corporations or other entities, private or public, determined to be financially sound by the Board.

[benwong]

how bout the risk is there no risk? is this also a form of gamble considering it is invested in company wat are the ader consequences adr than earining money thanks mga bro....