MUTUAL FUNDS
Investment companies
It pools the money of investors, with the same investment objectives.
Registered with the SEC with P50M capital
In the business of investing, reinvesting and trading of securities
They have specific investment objectives
They have investment restrictions
They cannot invest more than 10% of its assets in any security other than the government.
The resulting size of the fund allows it to invest in a basket of securities.
Shareholders are entitled to a proportionate share in investment income and risk exposure.
They contract a fund manager.
Operating cost should not exceed 10% of the previous year’s NAV.
They cannot borrow without 300% cover.
They are managed by full-time professionals.
4 TYPES OF MUTUAL FUNDS
I. STOCK FUNDS
Also known as Equity Funds
Invests in shares of stocks
Aggressive, growth-oriented
3-5 years beyond
Projected returns: 15-18% net
II. BALANCED FUNDS
Invests in stocks and fixed income securities
Moderate type of investment
3 – 5 years beyond
Projected returns :12-15% net
III. BOND FUNDS
Invests in fixed-income instruments
Conservative type of investment
Stability plus reasonable growth
2 years beyond
Projected returns: 5% net fund
IV. MONEY MARKET FUNDS
Invests in short-term fixed-income securities
Very conservative type of investment
Stability plus minimal growth
1 year beyond
Projected returns: 3.5%net
Structure of Mutual Funds
BENEFITS OF MUTUAL FUND INVESTING
Professional Fund Management
Diversification
Affordability
Liquidity
Tax-Exempt
Safety (Regulation and Disclosure)
Convenience (Shareholder Services)
Daily Pricing
VARIOUS USES OF MUTUAL FUNDS
Individuals
1. Funding for education
2. Funding for retirement
3. Hospitalization / Health
4. Lifestyle Planning
5. Estate Planning / Wealth Transfer
Institutions
1. Employee Retirement Funding
2. Employee Retention Program
3. Diversification of existing investment portfolio
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