Investing 101: Will You Say I Do With Mutual Funds?
By MJ Gonzales│ ExecutiveChronicles.com |
As long as you’re working, you are earning money. But what if you like to stop now or retire early? Will you have fund to support your expenses? If you have money, where you are going to put it so you can double your earnings even you are also too busy? Investing in mutual funds is not only an alternative to save but also a good choice so your money works for you overtime.
According to the Philippine Investment Funds Association (PIFA), Mutual Fund (MF) “is an investment company that pools the funds of many individual and institutional investors to form a massive asset base.” It’s the fund handled by reliable fund manager who’s in command where to grow investors’ money like having bonds and stocks. Having a fund manager is also what’s good about this investment as you have someone to take care of your fund.
A mutual fund 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, PIFA added.
In the Philippines, usually major banks and insurance companies are offering this kind of investment. Thus, it is a smart move to find which company you are going to entrust your money in.
However that’s not the only thing you have to know. Most financial experts suggest that it’s better to evaluate your risk-taking persona and how long you can wait for the profit before jumping in. In fact, the first and important note about mutual funds is, it’s not covered by Philippine Deposit Insurance Corporation (PDIC) even it is being offered by a bank.
The types of mutual funds available such as equity funds, balance funds, bonds funds, and money market funds are categorized according to terms and amount of risks. For those wanting to have high yields and are game for high risks, balance funds and equity funds are good to go.
In Philpad’s explanation, equity funds are the riskier among the four because it’s concentrated on investing in the Philippine stock market. Meanwhile, they cite money market funds for those that have less tolerance on risks and long-term investment.
“Money Market Funds – are invested in short-term (one year or less) debt instruments, fixed income securities, special savings and short-term bonds. These types of funds are suitable for low-risk taking investors and individuals who are looking for profit and higher returns than savings and time deposits,” Philpad.
It is good to let your money work for you, but it is also highly advisable to study first the kind of investment that suits to you. Educating yourself about things such as mutual funds, stock market or forex will lower you chances of failure, but will raise the value of your money.
Good luck and keep on researching for the best investments!