Most Filipinos are trained at school either to find employment or go into business. Many are not familiar with what is termed as “passive” income, wherein you invest your money in something and earn profits later. If you have heard of stocks and bonds, mutual funds in the Philippines are another way for money to grow through passive income. Mutual funds Philippines are more beginner-friendly compared to stocks and bonds.
To learn about mutual funds Philippines, how it works, and how to earn from it, we are presenting all the basics here for you.
What is Mutual Funds Philippines?
A mutual fund is an investment company that pools the funds of many individuals and other institutional investors to form a massive asset base (Term taken from the Philippine Investment Funds Association – PIFA). A familiar example of mutual funds in the Philippines is Philam Life Mutual. Other familiar names in the Philippines for mutual funds are Sun Life, Philequity, ATRAM, and ALFM. Be aware that online investment platforms are completely different because they are just online tools that investors use to buy and sell mutual funds. Online investment platforms are not mutual fund companies and do not manage funds.
How Do Mutual Funds Philippines Work?
Mutual funds are managed by professional financial managers or experts. The money used in these funds is pooled from various individuals and investors and used to invest in different assets like investment products, stocks, and bonds. The fund manager manages the mutual funds on behalf of the investors and allocates the fund’s assets to try to produce maximum capital gains or income for all investors.
As an individual investor, you can access equities, bonds, and other securities through mutual funds. If you decide to become a shareholder, you get equal shares in the gains or losses of the fund. Sometimes the fund manager suggests that if the funds are earning much money, some of that money can be used to invest again in other assets.
Types of Mutual Funds in the Philippines
There are four types of mutual funds Philippines you can choose from. You can actually invest in one or a combination, depending on your investment time frames, financial goals, and fund risk and availability.
Also called debt funds, this debt bond instrument requires only a minimum investment and is a good mutual fund for beginners. This is an ideal investment for those who want low to moderate risk while protecting their savings against inflation. These also offer higher profits compared to money markets and time deposits.
These are funds used to invest in the stocks and shares of different companies to make a profit. They can also target a specific sector or company for stock investment. This is a high-risk mutual fund and is more suited for investors willing to have a longer investment timeframe. All investments take place with the Philippine Stock Market (PSE).
Money market funds
This mutual fund invests only in high-quality, short-term cash instruments and cash-equivalent securities. Certificates of deposits (CDs), treasuries, bankers’ acceptances, and repurchase agreements carry a lower risk for beginners but returns are quite small.
This is a hybrid fund with a cocktail mix of securities, stocks, and bonds. To make a profit the investment is done with a combination of various mutual fund types. Balanced funds are ideal for investors who want low to moderate risk levels but want to earn more than what bond funds come out with. The normal profit window for this type of mutual fund is 3 to 5 years.
How to Invest in Mutual Funds Philippines
Evaluate your objectives
Before investing your money, analyze what your financial objectives are and look forward to why you want to invest in mutual funds. What risk level are you willing to take? How much are you going to invest? This will help you evaluate what type of mutual funds is best for you.
Choose the company that fits your needs
When you have decided what mutual fund to invest in, do your research on mutual fund companies in the Philippines. Be sure to check out if these companies are registered and regulated by the Securities and Exchange Commission (SEC). Companies affiliated with major insurance firms or banks have a proven track record and are legit. They usually have branches in major cities so it’s best to visit their offices to inquire about investments and compare their offerings. You can also research the website of the Philippine Investment Funds Association (PIFA) and find companies based on performance.
Talk to an agent
When you have narrowed down your selection to two or three companies, talk to an agent assigned to answer inquiries. It’s best to list down your questions before meeting with the agent. You can assess how each agent tries to help you find the best mutual fund for your needs and how they will monitor your investment.
Picking the best type of mutual fund
When you have listened to and considered all factors like financial goals, risk levels, and investment timeframe, you can now pick the best type of mutual fund for your needs.
Submit the requirements
As an investor, you will be requested to fill out a personal information sheet, submit valid IDs, and an Order Ticket to determine how many shares you plan to purchase. You will also be asked to fill out an Investor Profile Questionnaire to determine what type of investor you are and your risk tolerance.
Tracking your investment
Now that you’ve invested, it’s time to constantly monitor your investment. Always remember to make payments for mutual funds only at the company’s office or a partnered bank.
Best Mutual Funds in the Philippines (As of 2022)
Here is a list of the top-performing mutual funds Philippines as of 2022. To check on each company’s Net Asset Value Per Share (NAVPS) and year-to-date returns, visit the Philippine Investment Funds Association (PIFA) website.
Top-performing bond funds
- ALFM Peso Bond Fund, Inc.
- ATRAM Corporate Bond Fund, Inc.
- Cocolife Fixed Income Fund, Inc.
- Ekklesia Mutual Fund Inc.
- First Metro Save and Learn Fixed Income Fund, Inc.
Top-performing equity funds
- ALFM Growth Fund, Inc.
- ATRAM Alpha Opportunity Fund, Inc.
- ATRAM Philippine Equity Opportunity Fund, Inc.
- Climbs Share Capital Equity Investment Fund Corp.
- First Metro Consumer Fund, Inc.
Top-performing money market funds
- ALFM Money Market Fund, Inc.
- First Metro Save and Learn Money Market Fund, Inc.
- Sun Life Prosperity Peso Starter Fund, Inc.
Top-performing balanced funds in peso securities
- ATRAM Dynamic Allocation Fund, Inc.
- ATRAM Philippine Balanced Fund, Inc.
- First Metro Save and Learn Balanced Fund, Inc.
- First Metro Save and Learn FOCCUS Dynamic Fund, Inc.
- NCM Mutual Fund of the Phils., Inc.
Pros and Cons of Mutual Funds Investment
Mutual funds are viable even for rookie investors, especially if you want to start investing with just small amounts. However, like everything that involves money, there are pros and cons of mutual funds investment that you need to know about.
You can invest in mutual funds either by going to a company office or over the internet. Some type of mutual fund will always fit your needs. And being passive income, you don’t have to participate actively in the investment. Since you trust the mutual fund company you invested in, they will do all the managing legwork.
- Low Minimum Investment
Mutual funds investments can start as low as P1,000 and up to P5,000. Some initial or succeeding investments can start as low as P500. This makes mutual fund investing affordable and accessible even for medium-income earners.
- Professional Money Management
As mentioned earlier, once your money is invested, professional fund managers take over with their full-time service and expertise to create investment strategies and decisions for your investment. They attempt to ensure maximized gains with minimum risks.
- High Liquidity
Mutual funds have high liquidity, so this means that you can buy or sell shares within a business day.
- Good Diversification
Your invested cash is within a variety of assets so this helps minimize the risk of losing all your investments.
Legitimate and legal mutual fund companies in the Philippines are registered and regulated by the SEC. They must also comply with all the provisions of Republic Act 2629 or The Investment Company Act. This law protects investors against financial institutions that may invest or offer certain assets or transactions that are illegal and other unfair investment practices.
- Fees and Charges
Since other people are managing your mutual funds for you, they will charge some fees no matter how the fund is performing. You may also have to pay an annual fee for fund management based on a small percentage of your fund’s total value.
- You Have Less Control
When you invest in mutual funds Philippines, all control is passed to the professional fund manager who makes all investment decisions. You cannot step in even as an investor to make fund strategies.
- Potential Risks
Mutual funds may not be adequate for some conservative investors. Even low-risk investments have only minimum returns, and these returns are not guaranteed. You may experience losses from time to time. You need a long-term investing mindset if you want to give your investments more time to increase in value.
Investing your money can be a smart move towards financial security but the key is to ensure you invest in the right place. Mutual Funds Philippines offers a wide assortment of funds from different industries and regions that can help you reach your investment goals. With an understanding of what mutual funds are, why they’re a great option for beginners, as well as how to choose the right one for you, investing with Mutual Funds Philippines can provide peace of mind and may open up possibilities for further investments in your future. No matter how much or how little money you have – start small and aim big by investing in Mutual Funds Philippines today!
Recommended: Where to Invest Money in the Philippines