Investing your money today, is a great choice to make, especially if you care about your future and for your family, in the financial aspect of course.
Mutual funds are one of those type of investment vehicle that literally will grow your money and build wealth for future, if you invested today.
Unlike other first world nation, where the stock market is much bigger than those on developing countries like Philippines.
The Philippines have also a stock market, where public companies are traded and mutual funds is also available for many Filipino investors.
There are many Mutual fund providers and asset management companies, that offers different mutual funds to Filipinos, but choosing the best mutual funds will be a challenge, especially if you don’t have ideal what is a mutual fund.
Mutual fund is just a gathered money, from different individual or investor that a fund manager is allowed to be invested in, on any investment asset that could help that money, make even more money.
Common Mutual Funds in the Philippines for Investing
- Equity Mutual Funds or Equity Funds
Equity mutual funds are type of mutual funds that primarily invested to stocks or equities. This mutual fund will try beat the stock index or the Philippine Stock Exchange Index, which means they tend to have a higher return than the Philippine Stock Index.
Equity or stock or shares, are a portion of company that is offer to the public or investor, so that the company could raise additional money for their purpose. The company will determine how much is the worth of each share or stocks is offered.
With Equity mutual funds, the fund manager is the only one that could invest the money being pooled from the investor. The fund manager will choose a certain equity or stock that he/she deemed to be a great stock to invest in, in order for the capital to grow more money.
With stock investing, the risk is much higher, especially if is just invested on single stock. But Equity mutual funds, it is invested on many stocks or equities that could have a higher return.
This type of mutual funds is for long-term investments, not just about a year, but it’s about of years.
Minimum Period of Investing: 10 Years
Mutual Fund Risk: 4/5
Annual Returns: 12-15% per year
- Equity Index Funds or Index Funds
Equity Index Fund is another type of mutual fund that is primarily again invested on equities or stocks available in the Philippines Stock Exchange. But it is different from the Equity Mutual Funds, because instead of trying to beat the stock market, it will just follow the market trend.
This means that, if the Philippines Stock Market have a return of 10% annually, then this Equity Index Fund will have also a closer return to stock index on that year.
So, if the Philippine Stock Index will go down, then the Equity Index Fund is also expected to have a lower return than other funds.
The fund manager will invest those gathered money from investor, to certain stock that tracks or follow the Philippine Stock Exchange Index, which compose of 30 different companies of Philippines.
Equity Index Fund is similar to Equity Fund in terms of period in investing, you must invest on this on long-term, if you want truly a substantial number of returns.
Minimum Period of Investing: 10 Years
Mutual Fund Risk: 3/5
Annual Returns: 9-11% per year
- Balance Funds
Balance Fund is a type of mutual funds that 50% of money is invested on fixed-income securities, such bonds and the other 50% is invested on equities or stocks. With this balance fund, the risk is also being equally balance between low-risk bond and the highly risky stocks.
This type of fund is great especially if you want a decent return of capital, but will less risk on it. Fixed income securities such bonds and cash, is great short-terms investment, while equities or stocks is great for long-term investments, since it does carry high risk on it.
But the fund manager, might not actually invest on 50/50 strategy with bonds and stocks, they might some other investment vehicle that could greatly generate more returns to the fund.
Minimum Period of Investing: 3-5 Years
Mutual Fund Risk: 2/5
Annual Returns: 6-8% per year
- Bond Funds
Bond Fund is another type of mutual funds that primarily invested on bonds, both Government and Corporate bonds. Bond fund are one of the safest mutual funds available for investing.
Bonds are a contract given by the government or corporation, that represent a loan that have an interest with it, and must be paid in a certain period. Government and corporations issue a bond, if they need to raise money for a certain purpose.
The bond owner will receive yearly interest payment for a certain period of time, then the bond must be paid in full after it.
Many fund managers would love to invest on bonds, especially if the interest rate on banks in lower. But if the interest rate is high, the bond will have a less return. Bonds are a fixed-income securities because the interest is fix when it is being paid.
Bond Fund, is a great investment especially if you want to grow your extra money, but don’t have the waiting time to do so. This is type of mutual fund is short-term investment.
Minimum Period of Investing: 1-3 years
Mutual Fund Risk: 2/5
Annual Returns: 3-5% per year
- Money Market Funds
Money Market Funds are another type of mutual funds available in the Philippines, that is primarily invested on high liquidity instruments, which includes cash, BSP treasury notes, debt securities issued by Philippine Government.
This is type of mutual fund is consider to be one of the safest investment funds today, but with it, it tends to have low capital returns than other mutual funds in the market.
During the Covid-19 pandemic, this the only one that performs well, which means it does have good capital returns while other type mutual funds lose some.
Minimum Period of Investing: 1-2 years
Mutual Fund Risk: 1/5
Annual Returns: 2-4% per year
Those are the different mutual funds available for Investing in the Philippines. If you’re planning to invest on mutual funds, you should first determine how much time you will invest in, how many years your capital will invest in.
THIS IS NOT A FINANCIAL ADVICE, before investing on any of those mutual funds, conduct some research and find some relevant information that could answer some of the questions about mutual fund investing.
Only the tomorrow I can see now.