What are Mutual Funds?

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I know you noticed I deviated from the stock investing from my last post. Remember this blog is about investing in the Philippines so I am including some alternative investment channels that is available in the Philippines.

First of all lets define mutual fund. In simple terms it is the combined funds of several investor handed over to a fund manager who wisely invest and manage it for a minimum fee and gives back any gains or return to the investors. If this is not so clear let me say it this way,  you join several investors chipping in money and you share in the profits based on your share. Or did I complicate it more?

If you look at the PSE website you can see a link Mutual Funds

Mutual funds are categorized based on the instrument they are invested in. I got this excerpt form ICAP and I believe it says it all.

Different Funds, Different Features

In the Philippines , there are currently four basic types of mutual funds—stock (also called equity), balanced, bond and money market funds.  Bond funds invest primarily in bonds such as treasury notes issued by the Philippine government and commercial papers issued by reputable companies in the Philippines .  Having a full basket of only fixed-income securities, bond funds provide capital preservation while maintaining a conservative stance in terms of asset allocation.   Like bond funds, money market funds also have a conservative stance since they have a full basket of fixed income funds.  The main difference lies in the term of investments of money market fund investments, which is one year or less.  Equity funds invest primarily in shares of stock issued by Philippine corporations.   The dominance of stock issues within the portfolio positions the fund to attain a more aggressive rate of growth.   Balanced funds invest in both shares of stocks and bonds, thereby accessing the growth potential of stocks tempered with the presence of secure fixed-income instruments.   Professional fund managers create value for shareholders by providing superior yields within controlled risk exposures.   Certainly, expective in both security selection and asset allocation go a long way in ensuring better long-term rewards for mutual fund investors.
At present, there are a total of 22 mutual funds in the country.  Six (6) of these are bond funds, five (5) are equity funds, while the remaining ten (10) are balanced funds while one is a money market fund.

 To learn more about mutual funds you can visit this sites:

Investment Company of the Philippines
Mutual Fund Philippines
Pinoy Money Talk
The Mutual Fund Management Company of the Philippines, Inc.
Philippine Stock Exchange

About the blogger

Louis Delos Angeles is a Certified Public Accountant, blogger behind Investing in Philippines, and author of Investing in Stocks: Preparing for the future small amount at a time. Check him out in Google+ Learn more about Louis and his financial freedom advocacy here.

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