Type of Investment

Type of Investment

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Mutual Fund Investment Part 2

EVERYTHING YOU WANT TO KNOW ABOUT MUTUAL FUNDS
(but were afraid to ask)

1. IS MY PRINCIPAL SECURE IN MUTUAL FUNDS? CAN I LOSE MONEY?

Any investment involves risk. It means that you may lose some of your original capital. However, a mutual fund does several things to control, and contain that risk. (Professional Fund Managers & Diversification.

2. HOW MUCH IS THE INTEREST RATE? IS THIS GUARANTEED?

Mutual funds are not fixed- income investments and therefore do not pay out a fixed rate of return. The net asset value of a mutual fund fluctuates on a daily basis. Your individual rate of return depends on many factors. It is illegal to guarantee mutual fund returns.

3. WHY SHOULD I INVEST IN A MUTUAL FUND, IF EARNINGS FLUCTUATE ANYWAY?

There are many benefits from investing in mutual funds: Diversification, Affordability, Tax-Exempt, Professional Fund Management, Liquidity, Potentially Higher Returns etc...

4. THEY SAY MUTUAL FUNDS ARE NOT COVERED BY PDIC, DOES THIS MEAN IT IS SAFER TO INVEST IN A BANK.

Define: “safety”. Mutual Funds are investment companies registered with the SEC. They are not bank products and therefore are not covered by PDIC (P250K, DOSRI, NPLs issues)

5. WHAT HAPPENS IF THE FUND MANAGER/ RSA PERFORM POORLY OR GOES BANKRUPT?

The fund management company is separate from the mutual fund company (investments are diversified) the shareholders simply need to appoint a new fund manager.

6. WHAT PREVENTS THE FUND MANAGER/RSA FROM RUNNING AWAY WITH MY MONEY?

Mutual funds structure. The fund manager does not have any control over the physical assets except to make buying or selling decisions. Assets are held by a custodian bank and a transfer agent keeps records. RSA is just an intermediary.

7. WHAT HAPPENS TO MY INVESTMENT IF I DIE? WILL THERE BE TAXES?

Your shares in the mutual fund will form part of your estate and will be distributed to your heirs (immediate family members) accordingly. We encourage joint accounts.

8. HOW DO MUTUAL FUNDS EARN? DOES THIS AFFECT INVESTOR EARNINGS?

Management fees. Ranging from 1.5 – 3% of total assets. Amortized daily.

9. ARE MUTUAL FUND GAINS TAXABLE?

No. Mutual fund gains are exempted from taxes based on CTRP. This was done to promote long-term savings in the country. PERA Bill.

10. HOW COME MUTUAL FUNDS CHARGE ENTRY/EXIT FEES, UNLIKE IN THE BANKS?

Entry fees are fixed fees for commissions and some transaction fees. Exit fees are there to discourage “short-term” investors from joining the fund.

11. KNOWING THAT COMMISSIONS ARE LOW, WHY DO WE STILL NEED TO INCLUDE MUTUAL FUNDS IN OUR PORTFOLIO?

You earn not just with outright commissions but with trail commissions as well. The bigger the base, the bigger your trail. Door opener, expand your product line & market plus added credibility.

12. WHAT IS THE BEST MUTUAL FUND PRODUCT?

Always ask client’s objectives, risk appetite and time horizon.
RSA recommends:
FIRST METRO SAVE & LEARN FIXED-INCOME FUND (for peso bond), PHILAM DOLLAR BOND FUND (for dollar bond) & PHILEQUITY FUND (for equity fund)

13. IS THERE A STRATEGY FOR MUTUAL FUND INVESTING?

You can never exactly time the market. Peso Cost Averaging. Post dated checks.

14. KNOWING THE DEMISE OF AIG, IS IT STILL OK TO SELL PHILAM MUTUAL FUNDS?

Philamlife remains to be the largest insurance co. with the strongest balance sheet in the industry. Consolidated assets of P170B and Rev = P36.7B Total consolidated investments are concentrated in Phil GS, corp. bonds, and blue chips. We do not have CDS in the country.

15. IF MUTUAL FUND GAINS CANNOT BE GUARANTEED, WHAT IS THE ASSURANCE THAT INVESTMENTS IN MUTUAL FUNDS WILL EARN?

Track record. Assurance lies in the investment instruments inside the portfolio (government securities, blue chip companies) Market cycles. Long-term nature. NAVPS.

Mutual Fund Investment Part 1

Our IMG company gives free seminar which tackles mutual fund investment once or twice every month. Last February 25, its my first time to attend about mutual fund investment seminar. The mutual fund seminar was split into two parts. Feb, 25 mutual fund investment topic was all about basic informations about mutual fund.


I learned that Mutual Fund Investment is a long term investment, who are responsible and how it is being managed, the mutual fund structure and its three types, Bond fund, Balanced Fund and Stock/Equity fund.

The fund manager from RSA (Rampver Strategic Advisor) presented the three mutual fund investment products available in our company, Philequity, FAMI (First Metro Asset Management Inc.) and Phila Asset Management Inc.

After that, I got excited and willing to invest right away, I'd like to grab this oppurtunity to practice how to be a long term investor with an affordable amount to shell out. Minimum of Five thousand pesos (5,000) and additional One thousand pesos for subsequent month or as often as you want.

I feel glad about my small invesment, for now I can manage my own money I make, not squandering it for trivial expenses that won't give interest in the long run. I believe that from this constant saving, little by little, I shall achieve my early retirement eventually.

MUTUAL FUND

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

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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