Investing in stocks in the first time can be scary, especially if you feel that you don’t have enough knowledge to analyze stocks that you plan to purchase. But if you don’t have time to study and you are already itching on investing your money, there is an easy solution for it, Invest it in mutual funds.
One of the most popular type of investment vehicle is mutual fund. People who don’t have the time to study about investing in stock market usually go for mutual fund particularly equity funds. Mutual fund in the Philippines was introduced in the 1950′s and since then it has become one of the most profitable way to invest for some Filipinos.
What is mutual fund
A mutual fund is a pool of fund manage by professional money managers and invested in stocks, bonds and securities. These are usually regulated by the Securities and Exchange Commission (SEC) and certain policies by the government governs this type of investments.
Mutual funds are also divided into different types according to the objectives of the funds. So, generally choosing the type of mutual fund you want to invest should fall in accordance to what kind of investment you are looking for.
There are basically four(4) type of mutual Funds in the Philippines and these are:
1. Equity funds
2. Income Fund
3. Balanced Fund
4. Money Market Fund
In the following days I will be explaining what are these mutual funds to help you decide which one should you get for your own investment.
Advantages of Mutual Funds
1. Manage Professionally by experienced money managers
2. For as low as 5,000 you can start investing.
3. Big returns, almost comparable and sometimes surpasses the PSE index returns.
4. You don’t have to analyze and study where to invest your money, money managers will do it for you.
Disadvantages of Mutual Funds
1. High fees charged by companies offering mutual funds. This can be in a form of operating costs, sales commission and redemption fees.
2. Your investment in mutual fund is not insured like with a deposit in a bank where in the Philippines it is being insured by Philippine Depository Insurance Company (PDIC).
3. Can be volatile as stocks (equity fund)
Be sure to be around when I post my simple study about performance of mutual funds in the Philippines to help you decide.
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{ 2 comments… read them below or add one }
What do you mean by [Disadvantage 3] the funds will be affected by capital gains tax if the fund performs poorly? I thought Mutual Funds’ gains are not taxable?
You are right Rex, MF are not subject to capital gains tax as prescribed by the Comprehensive Tax Reform Program under Pres Ramos administration. This is to encourage savings and develop capital market. Already corrected my error, thanks for pointing that out.