Mutual funds have been one of the favorite places of newbie investors where they place their money for investment with a minimum capital of just 5,000 pesos. With your current busy schedule at work and active lifestyle, you probably don’t have enough time to study what are bonds, stocks, money market, etc. This is where you can resort to investing in mutual funds as there will be a fund manager who will do the investing for you.
What is a Mutual Fund?
A mutual fund is a company that gathers a large pool of money from individual and corporate investors and invests it in a broad range of investment products according to a specific set of rules. Each investor owns shares according to how much money they put into the fund.
The money is managed by an expert fund manager elected by the shareholders of the company. As a shareholder, they have the right to elect the fund manager responsible in overseeing the fund’s investment activities. As the portfolio gains or loses value, so does the value of each individual share.
What are the Types of Mutual Funds?
Each type of investment involves risks and holding period. Before you invest your money into it, you must first assess yourself on your risk appetite and investment objective. There are four main types of mutual funds:
For investors who are risk averse, Money Market Funds and Bond Funds are suitable for them. These types of funds are very safe as the fund manager invests solely in fixed income securities such as time deposits, corporate and sovereign bonds, retail treasury bills, and the like. The only difference between the two is that Money Market Funds invest in short-term while Bond Funds invest in long-term fixed income securities that earn regular income. The only risk associated here is a bankruptcy filed by a bank, a company, or worst a country itself.
For investors who are risk takers, Equity Funds are perfect for capital growth. A huge chunk of the fund is poured into stocks of Philippine companies. The risk associated here is connected with the movement of the stock market particularly with the changes in stock prices where the fund is invested.
For investors who have moderate risk appetite, Balanced Funds provide the ‘balance’ needed between capital appreciation and capital preservation as the fund invests both in fixed income securities and stocks. When the stock market is performing well, the fund manager can adjust the fund to be overweight on stocks for capital appreciation. Consequently, when stocks are down, he can be overweight on fixed-income securities to avoid capital loss.
What is Management Fee?
Fund management fee is the fee paid to the investment company for managing the fund. This includes payment for the fund manager’s time and expertise, as well as administrative costs. This fee is already included in the computation of the fund’s daily NAVPS and is not charged separately.
What are Sales Loads and Exit Fees?
Unlike fund management fee, sales loads and exit fees are charged separately. Also known as front-end fee, sales load is a fee charged each time an investor makes an initial investment, whether initial or additional. This fee is charged as a percentage of the total investment and is deducted up-front.
In contrast, exit fees are built to encourage investors to invest long-term. Also known as early redemption or back-end fees, these are charges made on redemptions before the specified holding period of the fund.
Philam Asset Management, Inc. or PAMI is among the leading companies that administers, distributes, and provides investment advisory to mutual funds in the Philippines. It is a subsidiary of Philam Life, one of the leading insurance companies in the country.
PAMI offers nine mutual funds for every investor, each with different features and risk profiles catering to both peso and US dollar denominated investments. Investing in PAMI requires due diligence. As always, you should choose one that fits your personality and financial objectives.
For investors who are risk averse, PAMI offers Philam Managed Income Fund, Philam Bond Fund, Philam Dollar Bond Fund, and PAMI Global Bond Fund.
For investors who are risk takers, PAMI offers PAMI Equity Index Fund, and Philam Strategic Growth Fund.
For investors who have moderate risk appetite, PAMI offers Philam Fund, PAMI Horizon Fund Inc. and PAMI Asia Balanced Fund.
Interested investors may reach PAMI for inquiries via [email protected].