Mutual Fund 101 | Why Invest in Mutual Fund?

What is Mutual Fund?
A Mutual Fund is an investment company that pools the funds of many individual and institutional investors to form a massive asset base. The assets are then entrusted to a full time professional fund manager who develops and maintains a diversified portfolio of security investments. People who buy shares of a mutual fund are its owners or shareholders. Their purchases provide the money for a mutual fund to buy securities such as stocks and bonds. A mutual can make money from its securities investments in two ways: a security can pay dividends and interest to the fund or a security can rise in value. The fund passes any dividends, interest or profits on the sale of its portfolio securities, less fund expenses, to shareholders in the form of distributions.
Mutual Fund Investment (photo by

Interest rates can be volatile and passive short-term investing can erode investment values due to inflation. On the other hand, the stock market has historically outperformed both short and long-term bank deposit rates. Unfortunately, not so many people are familiar with active financial management and effective diversification. Through mutual funds, even investors with limited resources can participate in combinations of these high-yielding investment instruments without the headache of personally selecting and monitoring a portfolio.
Mutual funds are ideal vehicles for growing money over time. It can be used as a savings medium for retirement, education for a child, or building up a long-term cash fund for some specific future financial objective. While largely thought of as a retail financial product, mutual funds are also ideal instruments to augment the yields generated by organizational funds and enhance their level of diversification. Mutual funds have been popular investments for pension and trust programs, other employee benefit funding objectives, and institutional asset-liability matching.

Advantages in Investing in a Mutual Fund:

Professional Management 

Mutual fund is managed by experts who accumulate investment from investors and invest it in different stocks or investment. The investors don’t need to study everything before he could invest. He may need to ask several questions on how the investment is going and where to invest but not any small details as it is said you will have to leave it to the expert.

Low Capital Requirement If you invest in stock, you need to invest a big amount of money as will as T-bills and other investment. Mutual fund has a lower initial investment like in the Philippines, you can invest P5000.00 roughly $108.00 as of this writing and P 1000.00 addition every month if you wish to. Indeed it is very affordable to everyone especially to overseas workers if they want to invest.

There is a saying that goes, “Do not put all your eggs in one basket.” This adage is especially true in the world of investments which is full of uncertainties. There is no such thing as a “sure” thing. An important investment principle that requires holding several securities to reduce the risks associated with investing in individual securities is called diversification. When people invest in a mutual fund, they achieve instant diversification because the fund is usually invested in a wide array of securities.

Liquidity is the ability to readily convert investments into cash. Investment like real estate needs a buyer to turn it into cash. Though it needs 7 days to liquidate the mutual fund but most them can do it in a day.

Safety is a very important consideration for most investors. Sometimes even more important than potential returns (well… on second thought, maybe not). Nevertheless, mutual funds are highly regulated by the Securities and Exchange Commission under the Investment Company Act and its implementing rules. They are prohibited from investing in particular investment products and engaging in certain transactions (this is discussed in greater detail in a latter section). They also have to submit regular reports to the SEC as well as to their shareholders. As mentioned earlier, all of the fund's assets must be held by a custodian bank for safekeeping.

Potential Higher Returns

Because a mutual fund is managed as a single portfolio, it is able to take advantage of certain economies of scale. For instance, with its millions under management, it can negotiate for lower stock brokerage fees or command higher interest rates on fixed-income investments. In the end, however, it is still the investment adviser who really makes the big difference between making direct investments and investing in mutual funds because very few individual investors can match the experience and skill of full-time professional fund managers.


In other countries, mutual funds can be purchased directly from funds or through a broker, financial planner, bank or insurance agent, by mail, over the phone and increasingly over the internet. The popularity of mutual funds in the Philippines is fast catching up. It may be a matter of time for this level of convenience to be a reality in the country. 

Funds also offer a variety of other services, including monthly or quarterly account statements, tax information, and 24-hour phone and computer access to fund and account information.

PESO EQUITY FUNDSJanuary-March 2015 YTD Gain (Loss) %1-year Gain (Loss) %3-year Gain (Loss) %5-year Gain (Loss) %
ALFM Growth Fund10.84%20.61%7.72%17.25%
Philippine Stock Index Fund10.74%23.41%16.56%20.5%
Philequity PSE Index Fund9.67%22.16%16.19%20.69%
United Fund8.93%16.87%6.56%8.02%
Philam Strategic Growth Fund7.79%16.65%7.34%16.64%
Sun Life Prosperity Philippine Equity Fund7.76%18.37%12.48%17.68%
Philequity Dividend Yield Fund7.12%30.40%No dataNo data
First Metro Save and Learn Equity Fund7.02%18.65%10.67%21.15%
Soldivo Strategic Growth Fund6.79%No dataNo dataNo data
Philequity Fund6.11%24.07%15.99%22.74%
ATRKE Equity Opportunity Fund0.83%13.59%11.86%16.81%
ATRKE Alpha Opportunity Fund-8.38%19.84%No dataNo data


Hi hello I am happy to share my ideas about gadgets and other topic that interest me.

Facebook Comment