Sharing a guest post by a fellow finance advocate Mon Lao! I hope this helps you invest more!
Investing in mutual funds is relatively simple, there are factors that have to be considered. A lot of this has got to do with the objective of the investor, the timeline of the objective and the risk profile of the investor.
Among the 3, the risk profile of the investor is the most common factor. This is because a lot of people attach emotions to their investment. They seem to be married to their money. They forget that money is just a tool that they use.
Catch me in my live training events! (quick plug)
The heart of why I do this seminars is I want to build a generation of Filipinos with the right foundation in stock investing. I want to bring smart investing to every Filipino around the world! If you would like to know more on how you could time the market checkout the trainings below. We are doing Qatar this November and Davao this October!
Stock Smarts General Santos — August 25 – August 27, 2017
Stock Smarts Manila — September 9,10, 16 & 17, 2017
Stock Smarts Cebu — September 30 – October 1, 2017
Stock Smarts Davao — October 20 – October 22, 2017
Stock Smarts Malaysia — November 4 – November 5, 2017
Stock Smarts Sydney, Australia — November 11 – November 12, 2017
Stock Smarts Qatar — November 16 – November 19, 2017
Stock Smarts Singapore — November 25 – November 26, 2017
There are 4 major types of mutual funds, Money Market, Bond or fixed-income funds, balanced funds and equity (stock market) funds.
1. Money Market fund –
The Fund is suitable for individual investors with low risk appetite and who are comfortable with safe and liquid investments with yields relatively higher than those of savings and time deposit accounts. Although there are holding period, in order to minimize risks and maximize earning potential, investors are recommended to stay invested in the Fund for at least six (6) months.
2. Bond fund –
is a short term investment fund invested in low risk instruments such as corporate or government bonds, time deposits, and cash. This is ideal for people who are afraid of the fluctuation of the market. Ideally, bond funds are suited for people who are nearing their retirement as this can help preserve their capital. Although this type of fund has a higher risk compared to money market fund, it suits people who want to have a higher rate of return with longer term of at least 3 years.
3. Balanced fund –
is a medium term investment fund which is a combination of bonds and stocks. This is good for people with moderate risk appetite who want capital appreciation as well as preservation. The Fund is suitable for individual investors with balanced risk appetite and who are aware of the opportunity for high yields from the stock market may provide but are also knowledgeable of the possibility of capital losses that may happen . It is recommended that investors stay in the fund for more than three (3) years.
4. Equity fund –
is a long term investment fund which is invested mainly in stocks found in the PSEI. This is the most exciting type of fund because of its volatility and its riskiness, Realistically, the risk in this type can be minimized in two ways, understanding how stock market investing works and investing for the long haul. Since the time horizon is long, the investor wouldn’t mind what is happening in between. Whatever happens in between will only reflect paper gain or loss. The Fund is suitable for individual investors with aggressive risk appetite and who seek potentially higher returns through stock market investments. It is recommended that the investor stay for more than 5 years.
Why invest in mutual funds?
Mutual funds investing is safe since there are laws that govern its operations. Mutual funds have proven to have given superb return over the past years. Although past performance is not a guarantee of future performance, mutual funds have outpaced the PSEI. As a proof, a certain mutual fund has been able to give an average of 20% per annum for the past 20 years. Data of different mutual funds can be found in www.pifa.com.ph
The earlier you invest, the better the chance for your money to grow as time is the real money. Let mutual funds compound your money. Albert Einstein once said “Compound interest is the most powerful force in the world. He who understands it earns it, and he who does not, pays for it”.
Do you want to earn it or pay for it?