How to Invest in Mutual Funds?

This post educates my readers regarding investing in mutual funds. I myself started investing in a mutual fund when I was 22 years old. Back then I used my performance-based bonus in our company and invested it in a Bond Fund in Sun Life.

What are mutual funds? Mutual funds are open-ended pooled funds. People invest their money in the fund and a leader called the fund manager invest it in behalf of its investors. Usually, mutual funds enable the possiblity of small time investors to invest in huge investments by pooling money and investing it as a whole.

How’s this possible?

Just imagine. Some corporate bonds have a minimum investment of P100K. In a mutual fund, a lot of people invested their 10K as minimum capital. When those contributions accumulated to P100K, then the fund manager can now invest it in a corporate bond. Of course, the profits will also be distributed in behalf of the investors who each contributed their money. So you don’t have to be rich or wealthy in order for you to invest in a mutual fund.

Now, depending on the risk appetite of the investor, there are usually four main types of funds and these are called money market funds, bond funds, balanced funds, and equity funds. There might be several other types of funds but basically these were just hybrids of these four main types of funds and can be availed in either peso or dollar denominated types.

Let’s first start with Money Market Funds. Money Market Funds are for conservative investors. The fund invests solely in conservative short term investments like bank deposit accounts, time deposits, fixed-income government and corporate instruments, and the like. These are the safest among the four. The risks associated with it is very very minimal. However, don’t expect also to have high gains. Remember, the higher the risks, the higher chances of gains for your money.

Second are called Bond Funds. Bond Funds are the next in line in terms of “conservativeness”. The fund invests in both conservative short-term and long-term investments. The difference with Money Market Funds is that Bond Funds invests BOTH in short-term and long-term investments but they are both conservative. These investments include corporate and government bonds, etc.

If you want to know how bonds work, you can read my article on investing in bonds.

Third are called Balanced Funds. Balanced funds are next in line after bond funds. These are funds for the medium-risk taker investors. The fund invests in both conservative and high risk investments. Conservative investments include a variety of investments such as those mentioned above where both money market funds and bond funds invest while high risk investments include stocks.

It is called a balanced fund since the fund manager balances their investment strategy to provide capital appreciation for the investors. When the stock market is down, then the fund manager will increase its stake for investments in conservative investments. When the stock market is up, then the fund manager will then invest more in stocks.

Fourth and last are called Equity Funds. Equity funds are the riskiest among the four main types of funds. The fund manager invest a large portion of it in stocks or equities, thus called equity funds. This type of fund may provide you with the highest return when the stock market is doing good which can then on average may provide you with at least 10% return per annum.

There are several investment companies offering mutual funds. The list can be found in the Philippine Investment Funds Association (PIFA). Now, how do you start investing in mutual funds?

Here are some of the steps that you should do:

1. Approach any of the investment companies listed in the ICAP website.

2. They will have a mutual fund agent to assist you.

3. The mutual fund agent will have you answer a questionnaire to assess your risk appetite.


4. The mutual fund agent will explain all the risks involved in that particular fund you’re eyeing to invest into together with the entry and exit fees involved in the fund.

5. You may now invest any amount of investment you want thru cash, check, or deposit. Please be guided with the minimum initial investment though. You can add more later on if you want to.

6. They will give you a Certificate of Participation as evidence of your investments indicating how many shares have you bought in the fund.

Let’s cite an example of how to go about this.

Say for example, I invested a minimum of P10K in Sun Life Equity Fund since I am still young and a risk taker.

For Sun Life, they have several entry and exit fee schemes. You can choose to have the entry fee of 2% now to be deducted upon investing or you can also choose the decreasing exit fees when you already redeem your investments.

Say for example, I chose the entry fee of 2%. So my P10K will be automatically deducted 2% and it will now just become P9.8K which will be used to invest in the fund. Say for example again that during the time that I invested, the fund’s Net Asset Value Per Share (NAVPS) is 1.47751

My money, P9.8K can buy 6,633 shares of the fund (Just divide P9.8K by 1.47751). I am now a shareholder of the fund. Now how can you compute for your gains or losses? Simply watch the movement of the Net Asset Value Per Share (NAVPS) in their website. For instance, the NAVPS as of today is 1.52010. Then the value of my investments is 6,633 shares multiplied by 1.52010 equals P10,082. My 10K investments grew to P10,082 gaining P82.

Please take note that their cut-off is usually 12 noon in adding or redeeming your investments. As always, buy low and sell high. Buy when the NAVPS is low and sell your shares when the NAVPS is high. If you invested before 12 noon, then the NAVPS that will be used for your investments is the current NAVPS for that day. However, if you invested after 12 noon, then the NAVPS that will be used for your investment is for the next day. So it is advisable to time the market to maximize profits.

What’s the advantage of Mutual Funds?

The advantage of mutual funds is that it gives way for small time investors. Investments requiring a huge capital is now accessible to small time investors. Another advantage is it eliminates added risks by INDIRECTLY investing since the fund is managed by an expert fund manager and the risks involved is spread all through out all the investors in the fund.

So what are Unit Investment Trust Funds (UITFs)?

Unit Investment Trust Funds are the competitor of Mutual Funds. These are investment products of banks and are subject for holding periods. To know more about the similarities and differences between Mutual Funds and Unit Investment Trust Funds, you can read Mutual Funds vs. UITFs.

To get articles, you can subscribe using your favorite RSS feed reader or have them delivered directly to your email address.

Incoming search terms:

  • bpi mutual funds
  • how to invest in mutual funds in the philippines
  • bpi mutual fund
  • sunlife mutual fund
  • bpi investment
  • bpi mutual fund investment
  • sun life mutual funds
  • sun life mutual fund
  • mutual funds philippines bpi
  • how to invest in mutual funds philippines


Add a Comment