May 18, 2011

How to invest in Mutual Funds

Understanding what mutual funds are is essential in learning how to invest in it.  Investments don't always guarantee returns, so its best to understand first what you are going in to and how does it work exactly.  It's quite a known fact that investing in stocks, mutual funds, bonds, etc. can gain you profit but still it's not like you decide to invest your hard earned money because your neighbor told you so but because you understand what it is and the risk that goes along. 

As described in the article "What is a Mutual fund", it is a kind of investment driven by investment companies that pool money from several different investors and investing it as a whole to buy securities.  It also described there the four basic types of mutual funds where the fund manager of the investment company invests your money.  He could either take your money to invest it in stock/equity funds, bond funds, balanced funds, and money market funds depending on what type of fund you want.  Investing on each of them requires understanding because each of these has its own level of risk as oppose to its return.

The riskiest among the four is stock/equity funds but this oftenly give you the highest return depending on the stock market's performance.  It can normally give you a fairly significant return of 10%-15% of your investment per annum if the stock market does well.

The next in terms of risk intensity is balanced funds.  This is normally where medium risk investors put their money.  The fund manager put it in conservative and high risk investments at the same time where he balances them for the investor's best gain.  He could either put it in conservative investments if the stock market is down and put them in high risk investment if the stock market is up.

The next two, bond funds and money market funds shares the same level of risk and these are where low risk investors put their money.  The difference of the two is just the length of time.  bond funds can work on either conservative long term investment or short term investment while money market funds works only on conservative short term investment.  Money market funds is by far the safest investment among the rest but high returns are unlikely.

So with that, for you to be able to invest in mutual funds, You will need to decide what level of risk you are willing to take and choose either of the four types of mutual funds described above.  And to complete, you will then need to choose an investment company as well which was also provided in another article (List of Investment Companies in Philippines) or visit

So what exactly do I do to start investing in mutual funds?
  • Choose an investment company. You might want to research or seek advice from people you know as to which is the best company amongst all.  From records and reports, Philam funds and Sun life funds work well though others are just as good.
  • The Investment company fund agent assists and interviews you to gauge the level of risk you are willing to take.
  • The agent explains and discusses to you the details and the risks involve in the type of investment you are looking into including the fees involved.
  • You invest your money either by cash deposit or check.  Normally each investment has a minimum investment amount and this will be discussed to you by your agent.  The agent will then provide you a certificate as a proof of your investment.
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