The Basics of Investing in Mutual Funds in the Philippines
Mutual funds have become a popular investment vehicle in the Philippines in the past years. The main reason for its popularity is the fact that it has more advantages over other investment options. If you are planning to invest in mutual funds, a basic rundown is given below to guide you with this particular investment option. .
In a mutual fund company, investors pool in their money to come up with an asset base. A fund manager then becomes responsible with how the assets are to be invested. The fund manager sees to it that the investment portfolio of the company is diversified to ensure maximum gains for its investors. Some of the investments that a fund manager may choose to invest in include stocks, bonds, real estate, and money market investments.
Mutual funds earn income in two ways. One is when the value of security assets increase which is commonly termed as capital gains. The other one is through the interests and dividends earned from the other investments of the fund. Upon earning income, it will then be divided among the shareholders according to the number of shares owned.
There are several reasons why mutual funds are popular today. The most obvious one is the minimal investment required. With P5000, the average Filipino worker can now take part of this lucrative industry. One other reason is that an investor wont have to do so much work to see his money grow as a professional fund manager takes care of this. Mutual funds are also easily converted to cash when needed.
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Even if a mutual fund is a sound investment, it also has some disadvantages. Despite being considered as a low to medium risk investment, there is a slight possibility of not being able to earn. Another disadvantage of this kind of investment option is that you wont be able to decide on the kind of investments the fund will put your money in. Since the fund will be controlled by a fund manager, all you can do is hope that he will make wise investment decisions.
In contrast, mutual funds also have its disadvantages. One of which is that you wont be part of the decision making process with regards to how your money will be invested. Since a fund manager is the one who makes this decision, you can just hope he chooses the right investments for the mutual fund company. The worst that can happen is that your investment will not gain anything, but the possibility of this is very dim.
On the brighter side, a mutual fund is a sensible investment because you dont really have to put in much effort. You just invest money and the work is done entirely by the fund manager from researching to monitoring your investments. The liquidity of mutual funds is another advantage. This means that you can convert your shares to cash whenever you need it. Governing laws state that you will be able to get your money back within seven days upon surrendering your shares. And possibly the best advantage of all is the minimal investment required. Some companies can get an investor started with a P5000 investment, an amount which an average worker can afford.
Dont stop researching on mutual funds once you invest in one, continue the learning process so you can personally monitor your investment. It pays to be responsible when it comes to your hard-earned money.
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