What Are Mutual Funds?

When it comes to investments, the first thing that comes to a lot of Filipino’s minds is Stock Market Investment. Although this is a very smart investment, not everyone is able to find the time to study extensively and watch their own stocks.

Good news to those who feel that they don’t have time to control their individual stocks, maybe Mutual Funds Investment is for you.

According to Forbes, mutual funds provide you with an “auto-pilot” with regards to your investments. You can invest it and forget about it until it is ripe or ready.

Investment
PHOTO CREDIT: Pixabay

What are mutual funds?

In simple terms, Mutual Funds is a type of investments where you join other investors in putting money in a basket. All your investments will be pooled and managed by expert fund managers. They are the ones who make sure your money grows by joining diversified portfolios of stocks, securities, bonds, money market or even other mutual funds.

What’s there to know before you invest?

  • Just because it is an “auto-pilot” investment type, it doesn’t mean that it has no risks. – ask yourself how much risk you are willing to take.
  • You have to have a target or a goal. – ask yourself how long you plan to save and what you are investing for.
  • You have to understand that because the funds are going to be handled by fund managers, you will have to pay front-end fees and back-end fees.
  • When you invest in mutual funds, you buy shares, these are based on Net Asset Value Per Share (NAVPS)
  • There are different kinds of Mutual Funds. You have to know which one suits your goals and risk tolerance.

What are the kinds of Mutual Funds?

Equity Funds. The funds are primarily invested in the Philippine stock market and are chosen by the fund manager.

Bond Funds. The funds are invested in government and other private companies’ fixed income securities.

Balanced Funds. The funds are invested in both equity and bonds.

Money Market Funds. This is just like balanced funds but the investments are short-term, usually a year or even less.

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