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.

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Tyrone is a passionate financial literacy advocate. He started this blog on November 2008 when he watched The Secret which talked about Law of Attraction because he wanted to become a millionaire and wanted to know how a millionaire acts. At the age of 26, he achieved his first million. To find out more about him, click here or follow him at Instagram

54 responses on “How to Invest in Mutual Funds?

  1. Aside from the entry or exit fee (in the the case of SunLife), what other fees will be deducted? No doc stamps, etc.?

    Pls have a computation illustration.

    Thanks so much!

  2. Hi Marie, there are no other fees that will be deducted to your investment aside from the entry and exit fees. The doc stamps, fund manager fees, and other such expenses will all imputed in the fund’s Net Asset Value Per Share (NAVPS). So before they compute the NAVPS of the fund, they will deduct those expenses first. This move distributes the expenses to all the investors of the fund so each investor won’t feel it.

  3. No problem Abet. You will earn from the rise of the value of your investments that will be reflected from the rise of the Net Asset Value Per Share (NAVPS). However, this is not a guaranteed income as the investment may also incur loss.

  4. hi, thanks for this informative blog you have tyrone.

    i’m currently working in dubai and thinking of investing some of my savings in mutual funds.

    as a newbie, where do you think, as per your experience, is the best mutual funds to invest to? kasi if ako ang tatanungin, gagayahin muna kita and “pagpa-practice-an” ko ang sun life and maybe i’d know where to go next. but where do you think is the best to invest to as of now and for a newbie?

    PS- also, i’m still trying to absorb some of the info for stocks and bonds. but for now, mutual funds muna ang pag-aaralan ko. 🙂

  5. Hi Dexter, for your question, I would refer you to the Investment Company Association of the Philippines. The link was mentioned above. There are a lot of companies whose performance as of now is better than that of Sun Life. But Sun Life is pretty good. They are very professional I would say. They deliver you a glossy annual report of the fund and every quarter they send you updates of how much is the current worth of your investment.

    • Hi Tyrone,

      I read that mutual fund is good investment for OFW like me. Do we need to monitor the rates or NAV of the stocks from time to time? Like in our case OFW, I think it is not possible to do it. Is it ok to make the investment once in a year?and get the results during our vacation.

    • Most mutual funds have a minimum investment requirement of 10K depending on the kind of fund. The lowest minimum investment requirement I think is 5K.

  6. Hello Tyrone,

    If I am going to invest in mutual fund would i’d be able to monitor my account online? would it be possible din ba to add more amount after the initial investment? let say i will invest 20k as initial investment then if i want to add another 20k if i see that the market is doing good does the other 20k amount will be subject for another entry fee?

    • Hi Jerone, yes you can definitely add more money in your mutual fund account. I would suggest to do “cost averaging”. That’s to put more investment when the market is down and if you see prospects that the market will be better in the near future.

      For mutual funds, yes, it would be subject again for another entry fee.

  7. Hi Tyrone!

    Nice blog. I’m into uitf with BDO and planning to invest on FAMI’s Save & Learn Equity Fund. Is it good to invest now on Mutual Funds?


  8. Hi Sir,

    i would like to know, paano kung ayaw ko na, pwede ko ba makuha ang investment at profits ko kaagad? may time ba na contract ito? halimbawa, lumaki na ang value ng shares ko, at gusto ko na ipull-out, ok lang ba iyon? i would like to know. convertible ba ng madali sa cash ang mga ito?

    • Hi, mutual funds a very liquid. Yes, you can pull it out anytime you want. However, some mutual funds have minimum holding period which are subject for minimal penalty fees for those cases of early withdrawal. It would be best for you to ask for the mutual fund company you’re interested to invest regarding the amount of the penalty fee.

    • Tyrone, hi.

      I have a question. i recently invested in bpi peso bond. what document should i get from bpi to evidence this investment? because they only gave me a print out. is there a certificate or anything? tia

    • Hi JM,

      I also have some investments with them particularly in the BPI Equity Fund. Before, they just gave me a print out detailing how many units I was able to buy with my investment. That would be sufficient I think.

      They will send you statement of account from time to time with details such as how many units is available in your investment account, what’s the value of it, and the corresponding gain or loss it has.

      If you have a BPI Express Online account, you can also register your UITF investments and see its market value whenever you log in to your account.

  9. hi there this is very enlightening kase it explains the subject in layman’s term.
    id like to invest now, what company do you suggest and how much do i have to invest tnx

    • Hi Mir, first of all, thank you for your feedback. In terms of amount, that entirely depends on you. You need to make sure that the money that you’ll invest is an extra. For as low as 5K, you can start investing in a mutual fund.

      For the company, I would advise you to look on their yields or returns. The old site of ICAP is now down. They transferred to a new domain. You can see the latest returns here.

      Historically, Philequity, Sun Life and First Metro provides the best returns.

  10. hi, i plan to invest my savings in mutual fund.. I have 100k, can you suggest if i should invest it as a whole or better to divide?

  11. hi, i am planning to invest in a plan but is still thinking what is best suited for me.. i am currently working here in saudi and want a fund working in the philippines for investment… can you recommend a plan for me and how it works? i am in saudi, so i can’t check it from time to time… how could that be? thanks

  12. Hi Guys,
    I’m planning to open now a long term investment to apply the “pay yourself first rule” .. the problem is, I’m new with these stuff.. I’m so confused if I’m going to open a mutual fund or an EIP. Mutual fund is good cause there is a fund manager who can manage your money wisely, however, most people suggest me an EIP account. any suggestions? any opinions would be very much appreciated.

  13. I recently inquired at Sun Life Financial about the different kinds of investment that they offer. I am 21 by the way and I am really curious about investing because I have been saving since I was in grade school and I want to learn how can I make profits through my savings because putting it in the bank doesn’t make profit at all. The financial advisor that explained me about investing was informative but I am searching for more reason and explanations why I should actually invest or not and now I just read this informative post of yours. I am wondering if you could help me more because I really want to know more about investing and I hope you could help me. If it would be fine to you, please reply in my email as soon as you read this. Thanks a lot!

  14. Ano.po ang mga requirements para mg invest sa sun life equity fund.may idea po ba kau.tnx
    Kahit hindi ka employed pwde bug invest sa sunlife mutual fund.
    May naipon kc ako gusto ko lumago ito..

  15. Hi sir. Asa Abu Dhabi poh ako interested poh ako invest. Ano poh fund ang suggest nio????? Madmi n kasi ako napanood n video ni Mr. Colayco.. Paano??? Ano requirment???? Plan ko kasi every salary?? 5k peso poh..I want a more information regarding to your suggest fund..

  16. Hi,

    Just want to clarify. Nag-invest ako sa Forex and bought currency. From time to time kailangan mong bantayan bago mo i-close yung transaction pag naka-profit na. Sa Mutual fund ba pag bumili ako ng share within the day kailangan ko din ibenta agad-agad kahit mag-incur ako ng loss? Or pwede ko i-hold hanggang sa time na maabot ko na yung NAVP na mas mataas sa pagkakabili ko.

    • Hi, in mutual funds, especially if it’s an equity fund, you need to invest for the long-term to realize capital gains. Hence, you don’t need to sell it immediately.

  17. Katulad ng tanong nya, posible kaya ito sa mga unemployed pero may budget naman para makapag invest? Baka kasi hanapan pa kame ng kung ano anong requirement tulad ng payslip o company id. O baka may maliit na negosyo at hanapan pa kame ng bir/dti/ business permit etc? Salamat po.

  18. hi,im an ofw from middle east & much interested to invest in mutual-equity fund. i dont want to spend my rest of my life working hard & away from my family to give them good life. now my question is, is it possible to register n be a member even im not in philippines? just want to start early.
    hope to hear from?

  19. Hello. medyo naguguluhan pa ako sa mga ganito. im 22 years old and business owner. gusto ko po sana mag invest sa sunlife. ano po mapapayo niyo sa akin sa pagiinvest?ano ba pinakamagandang gawin sa pagiinvest?maganda ba sa sunlife or sa manulife? san ba mabilis na lalago ang pera ko? please help me. newbie sa ganito

  20. Hi Sir Tyrone,

    Saan po ba mas maganda maginvest ng equity funds, through the mutual fund company po ba or though online brokers like COL Financial? According to other sources na nabasa ko wala na daw entry fee kung through COL magiinvest, pero hindi pa din clear sakin kung babayaran pa ba yung mga usual fees nila (COL) for executing stock trades (0.25% commission, 12% VAT, 0.005% PSE trans fee, 0.01% SCCP fee) when it comes to mutual funds.

    Please advise, thank you.

    • Hi Alvin,

      Personally, I am bias towards investing on UITFs, particularly BPI. And I am geared towards investing on UITFs over mutual funds. Why? Because mutual funds have sales load which will either be deducted upfront or back end to your investment. The sales load will reduce your potential gain. UITFs do not have sales loads.

    • Thanks for the reply sir tyrone. Maganda nga sa UITFs kc mas convenient sila because banks are everywhere in the country, kaso ang minimum invesment amount nila ay doble kumpara sa MFs so marami ang hindi nakakapaghintay (katulad ko). Anyway thanks for your insight.

  21. Saan po ba mas maganda mag invest, sa mutual fund o unit investment trust fund? Balak ko po kc mag invest sa bpi family bank. Meron po silang MF and UITF. Salamat po.

    • Hi Bernie, UITFs and Mutual Funds are almost exactly the same. However, between the two, I am biased towards UITF because they don’t have sales loads.

  22. Hello,

    Ano po bank mas okay ang uitf invesment. Im considering for bdo, maganda ba ung EIP nila for long term investment?


    • I am solid with BPI because of the following reasons:

      1. Their UITF has no holding period. You can subscribe anytime and you can redeem anytime without having penalty.
      2. You can subscribe and redeem through their mobile app.
      3. You can check the market value of your UITF investments through the mobile app.

  23. Hello Tyrone, first of all I would like to thank you for this very informative blog you created. Since I got you in this topic, I would like to know if what would be my first step after I have decided to do the ” Equity Funds” ? Am I going to go directly to the company where I want to invest to or I need to coordinate with someone who is knowledgeable about this matter like you, to guide me through all the process first and to discuss things in person?

    • Hi Abegail,

      You can directly go to the company but it would be best if you could go to someone knowledgeable first. I can guide you on this in person if you want.
      Other option for you is the equity funds of a Unit Investment Trust Funds (UITF).
      UITF are also open-ended funds but they differ in some aspects.

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