According to Wikipedia, Financial Freedom is generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income that is greater than their expenses.
At this point of my life where I reached past the quarter of a man's lifetime, I am really anxious why I don't still have my own house? a car? (that's coming! God at least!) an earning business? and a lot more that makes the becoming of an accomplished man or what I want to say a wealthy man. Fortunately, I am not blinded to know the answers it is more on when is it the time I can win my battles over these struggles of mine? In the early years of my career (scary... it sounded like a success story), I already have had a list of goals to take effect in an unknown time. And I strongly believe that is the Commanding General of the major major problem -I don't set target dates to my goals to bail its freedom from the imaginary world. What I just learned in making things happen, are the convictions to desire a goal and religiously be an iron-fist to say pens up! finished or not finished pass your papers! Metaphorically speaking aside - the deadline!
Another year will come, and I will become a year older then. I really wanted to dig deep in financial literacy this late. And at the moment, I find Mutual Fund a good start to make your money at sleep while generating instead of having it laid on the banks. Of course, there are risks but awareness will protect you from it. What is good news is that you can open or invest in a mutual fund account to a minimum of P5000.00 now without obliging yourself to program it on a monthly basis. It is an invest when able sort of thing.
Below is a compilation of my study to briefly summarize the FAQ's a beginner like me could understand better. I want this blog of mine translates my quest from scratch to a reality starting next year and will claim the glory and success it will take in the coming years. For now, my plan is to get an Equity and Balanced Fund accounts. (Information courtesy of Pinoymoneytalk.com)
Try to look at the Returns and Performance Reports of the Mutual Fund Companies for the last 5 years. In my case, I kept a keen eye on 2 companies --- Philequity Management Inc. (PEMI) and First Metro Asset Management Inc. (FAMI). They are by far the best performers.
What is a Mutual Fund?
A mutual fund collectively pools money from individual and corporate investors. These funds are managed by a professional fund manager who invests the money in stocks, bonds, money market instruments, and/or other securities. The mutual fund earns in two ways: from the capital gain (increase in value) of the security and dividend or interest income. These proceeds, net of whatever charges and expenses, are passed on to the shareholders. The value of a share of the mutual fund, called the Net Asset Value (NAV), is calculated daily based on the fund’s total value divided by the total number of outstanding shares.
Types of Mutual Funds
There are mainly four types of mutual funds in the Philippines: stock (or equity), bond, balanced, and money market.
STOCK OR EQUITY FUNDS
invest in shares of stock of Philippine corporations listed in the Philippine Stock Exchange. Equity funds offer the highest possibility of growth among all mutual fund types, but they also have a corresponding high amount or risk.
BOND FUNDS
invest primarily in fixed income securities such as bonds or treasury notes issued by the Philippine government and commercial papers issued by reputable Philippine companies. Because these bonds are normally guaranteed, the possibility of loss is very low. Investing in bond funds provide capital preservation while maintaining conservative asset growth.
BALANCED FUNDS
is a mixture of equity and bond funds. The high potential growth ofequity investments is tempered by the conservative growth of fixed-income securities. Obviously, the return of a balanced fund is normally somewhere between the return of an equity fund and a bond fund.
MONEY MARKET FUNDS
are similar to bond funds because they also invest in fixed-income securities and the growth of the fund is conservative. The main difference lies, however, in the term of money market fund investments, which is usually short-term such as one year or less.
How to choose a good mutual fund?
Choosing which mutual funds to invest in ultimately depends on the investor’s growth goal and risk tolerance. If the purpose is capital growth, equity funds are the way to go. Bond funds are chosen, on the other hand, if the investor prefers capital preservation over risky capital growth. For those who want medium risk and medium growth, balanced funds are the best option. Money market funds are for those who wish to earn a conservative amount of return in the short-term.
According to the Investment Company Association of the Philippines, a duly recognized association of investment companies in the country, there are currently a total of 22 mutual funds. Six (6) of these are bond funds, five (5) are equity funds, ten (10) are balanced funds, while one (1) is a money market fund.
How to compute your earnings in Mutual Funds
When you invest in mutual funds, you are actually buying “shares” of the mutual fund company. The price you pay is the NAVPS or the Net Asset Value per Share, a figure that changes every day since it represents the market values of the investment assets the mutual fund company owns.
Let’s assume you want to invest P100,000. When you checked with the mutual fund, the NAVPS price is
P1.75. The number of shares you will then get is:
· P100,000 divided by P1.75 = 57,142 shares
Your total fund value that day is:
· 57,142 shares x P1.75 NAVPS = P99,998.50
Since you paid P100,000 but the amount of the shares you bought is only P99,998.50, the company would actually return P1.50 to you.
Step 2: Determine the current NAVPS
At any day, you can compute the value of your mutual fund investment. The only two things relevant to you are:
1 Number of shares you own
2 NAVPS price on that day
Let’s assume that at the end of 1 year, the NAVPS of your mutual fund is P2.50. Your profit is simply the
difference between the current NAVPS and the NAVPS when you bought your shares. Multiply this with
the number of shares you own and you’ll get the amount of your profit.
Mathematically:
1 Current NAVPS = P2.50
2 Original NAVPS = P1.75
3 Difference in NAVPS prices = P2.50 – P1.75 = P0.75
4 Number of Shares Owned = 57,142
5 Profit = P0.75 x 57,142 = P42,856.50
This same amount can also be computed by comparing the current total fund value and initial fund value.:
6 Beginning fund value = 57,142 shares x P1.75 NAVPS = P99,998.50
7 Current fund value = 57,142 shares x P2.50 NAVPS = P142,855.00
Let’s assume you want to invest P100,000. When you checked with the mutual fund, the NAVPS price is
P1.75. The number of shares you will then get is:
· P100,000 divided by P1.75 = 57,142 shares
Your total fund value that day is:
· 57,142 shares x P1.75 NAVPS = P99,998.50
Since you paid P100,000 but the amount of the shares you bought is only P99,998.50, the company would actually return P1.50 to you.
For simplicity purposes, we did not consider any fees or sales loads charged by the fund. Do note, though,
that most funds will charge a fee either upon investment (entry fee) or when redeeming your mutual fund
shares (exit fee). We’ll defer computations including fees in a succeeding article.
At any day, you can compute the value of your mutual fund investment. The only two things relevant to you are:
1 Number of shares you own
2 NAVPS price on that day
Let’s assume that at the end of 1 year, the NAVPS of your mutual fund is P2.50. Your profit is simply the
difference between the current NAVPS and the NAVPS when you bought your shares. Multiply this with
the number of shares you own and you’ll get the amount of your profit.
Mathematically:
1 Current NAVPS = P2.50
2 Original NAVPS = P1.75
3 Difference in NAVPS prices = P2.50 – P1.75 = P0.75
4 Number of Shares Owned = 57,142
5 Profit = P0.75 x 57,142 = P42,856.50
This same amount can also be computed by comparing the current total fund value and initial fund value.:
6 Beginning fund value = 57,142 shares x P1.75 NAVPS = P99,998.50
7 Current fund value = 57,142 shares x P2.50 NAVPS = P142,855.00
8 Difference in fund values = Profit = P42,856.50
One major point to remember, though. This profit is still “paper profit” or“unrealized income.” That's
because you have not redeemed the shares yet. Any day afterwards, the NAVPS will still change which
means your fund value and profit will also change. We’ll show this in the next example.
Step 3: Calculate actual profit at time of redemption
Let's assume you wanted to encash and redeem your shares at the end of the 2nd year. Before we proceed, you need to know that the fund value and NAVPS price at the end of Year 1 are now irrelevant. Whatever “profit” you gained before was not realized since you did not redeem the shares.
Assume that at the end of Year 2, the NAVPS price is P2.00. As in Step 2, we can compute the profit by
comparing the current and original NAVPS:
9 Current NAVPS = P2.00
10 Original NAVPS = P1.75
11 Difference in NAVPS prices = P2.00 – P1.75 = P0.25
12 Number of Shares Owned = 57,142
13 Profit = P0.25 x 57,142 = P14,285.50
At the end of Year 2, your total investment earned P14,285.50. If you redeemed all 57,142 shares, you can now actually earn and get P14,285.50 cash as profit.
The total money you would get from the mutual fund is this profit plus the original investment (P14,285.50 + P99,998.50), which can also be computed this way:
15 Current NAVPS = P2.00
16 Number of Shares Owned = 57,142
17 Total Fund Value = P2.00 x 57,142 = P114,284.00
Again, be reminded that this computation does not consider any fees charged by the fund. Your fund value
will be reduced by those fees.
In any case, we hope this gives you an idea how to compute your mutual fund income.
means your fund value and profit will also change. We’ll show this in the next example.
Step 3: Calculate actual profit at time of redemption
Let's assume you wanted to encash and redeem your shares at the end of the 2nd year. Before we proceed, you need to know that the fund value and NAVPS price at the end of Year 1 are now irrelevant. Whatever “profit” you gained before was not realized since you did not redeem the shares.
Assume that at the end of Year 2, the NAVPS price is P2.00. As in Step 2, we can compute the profit by
comparing the current and original NAVPS:
9 Current NAVPS = P2.00
10 Original NAVPS = P1.75
11 Difference in NAVPS prices = P2.00 – P1.75 = P0.25
12 Number of Shares Owned = 57,142
13 Profit = P0.25 x 57,142 = P14,285.50
At the end of Year 2, your total investment earned P14,285.50. If you redeemed all 57,142 shares, you can now actually earn and get P14,285.50 cash as profit.
The total money you would get from the mutual fund is this profit plus the original investment (P14,285.50 + P99,998.50), which can also be computed this way:
15 Current NAVPS = P2.00
16 Number of Shares Owned = 57,142
17 Total Fund Value = P2.00 x 57,142 = P114,284.00
Again, be reminded that this computation does not consider any fees charged by the fund. Your fund value
will be reduced by those fees.
In any case, we hope this gives you an idea how to compute your mutual fund income.
This is a question we usually get from our readers. First, we advise anyone who wants to make an investment to learn more about the investment opportunity. In the case of mutual funds, we suggest investors to take time to read and study our Mutual Funds Philippines Primer.
Assuming the investor has understood all risks and has decided to go ahead, here are the steps to invest in
mutual funds in the Philippines.
1. Choose a fund you want to invest in. We have provided here a list of companies offering mutual funds
in the Philippines and you can also check their historical performance here.
2. Find an authorized agent selling the fund or contact the company using their contact details. You may also visit their office where an agent will be assigned to you.
3. Fill out the application documents. You will normally be asked to complete three forms: the Personal
Information Sheet, the Investor Profile Questionnaire, and the Order Ticket. The forms may vary depending on the mutual fund company but they usually have forms to get your personal details (Personal Information Sheet); identify your risk tolerance and investment goal (Investor Profile Questionnaire); and determine the shares of the fund you want to purchase (Order Ticket).
4. Make the payment only in authorized payment centers. This can be the office of the company or a
bank branch in partnership with the mutual fund. Make sure you get a copy of the payment receipt and
the Order Ticket.
5. Ask the agent how you can monitor your funds. Some funds give you online access where you can
track your portfolio while some funds just give you NAVPS updates which means you’ll have to compute
your own mutual fund income.
Mutual Fund Companies in the Philippines?
1. BPI Asset Management (ALFM Funds)
- Philippine Stock Index Fund (Peso Equity Index Fund)
- ALFM Growth Fund (Peso Balanced Fund)
- Bahay Pari Solidaritas Fund (Peso Balanced Fund)
- ALFM Peso Bond Fund (Peso Bond Fund)
- Ekklesia Mutual Fund (Peso Bond Fund)
- ALFM Dollar Bond Fund (Dollar Bond Fund)
- ALFM Euro Bond Fund (Euro Bond Fund)
- ALFM Money Market Fund (Peso Money Market Fund)
Fund Performance: Philippine Mutual Funds returns and performance
Address: 17/F, BPI Building Ayala Avenue cor. Paseo de Roxas, Makati City
Contact Numbers: 902-7042 / 845-5799 / 816-9252 / 816-9566
Website: www.alfmmutualfunds.com
Address: 17/F, BPI Building Ayala Avenue cor. Paseo de Roxas, Makati City
Contact Numbers: 902-7042 / 845-5799 / 816-9252 / 816-9566
Website: www.alfmmutualfunds.com
2. First Metro Asset Management Inc. (FAMI)
- First Metro Save and Learn Equity Fund (Peso Equity Fund)
- First Metro Save and Learn Balanced Fund (Peso Balanced Fund)
- First Metro Save and Learn Fixed Income Fund (Peso Bond Fund)
- First Metro Save and Learn Money Market Fund (Peso Money Market Fund)
Fund Performance: Philippine Mutual Funds returns and performance
Address: 18th Floor PS Bank Center, 777 Paseo de Roxas Avenue corner Sedeño Street, Salcedo Village, Makati City
Contact Numbers: 891-2860 to 65
Website: www.fami.com.ph
Address: 18th Floor PS Bank Center, 777 Paseo de Roxas Avenue corner Sedeño Street, Salcedo Village, Makati City
Contact Numbers: 891-2860 to 65
Website: www.fami.com.ph
3. Grepalife Asset Management Corp. (Grepalife)
- Grepalife Bond Fund (Peso Bond Fund)
- Grepalife Fixed Income Fund (Peso Bond Fund)
- Grepalife Dollar Bond (Dollar Bond Fund)
Fund Performance: Philippine Mutual Funds returns and performance
Address: 6/F Grepalife Building, 221 Sen. Gil Puyat Ave., Makati City, 1200
Contact Numbers: 845-6408 / 845-6394 / 845-6428
Website: www.grepafunds.com
Address: 6/F Grepalife Building, 221 Sen. Gil Puyat Ave., Makati City, 1200
Contact Numbers: 845-6408 / 845-6394 / 845-6428
Website: www.grepafunds.com
4. MAA Mutualife Philippines, Inc. (MAA Mutualife)
- MAA Privilege Dollar Fixed Income Fund (Dollar Bond Fund)
- MAA Privilege Euro Fixed Income Fund (Euro Bond Fund)
Fund Performance: Philippine Mutual Funds returns and performance
Address: Unit 905 Pearl Bank Centre, 146 Valero Street, Salcedo Village, Makati 1227
Contact Number: 867-2452
Website: www.maa.com.ph (Expired Domain)
Address: Unit 905 Pearl Bank Centre, 146 Valero Street, Salcedo Village, Makati 1227
Contact Number: 867-2452
Website: www.maa.com.ph (Expired Domain)
5. Mutual Fund Management Company of the Philippines (MFMCP)
- ATR KimEng Equity Opportunity Fund (Peso Equity Fund)
- ATR KimEng AsiaPlus Recovery Fund (Dollar Equity Fund)
- MFCP Kabuhayan Fund (Peso Balanced Fund)
- ATR KimEng Total Return Bond Fund (Dollar Bond Fund)
- ATR KimEng Money Market Fund (Peso Money Market Fund)
Fund Performance: Philippine Mutual Funds returns and performance
Address: 17th Flr. Tower One & Exchange Plaza, Ayala Triangle, Ayala Avenue, Makati City 1200
Contact Numbers: 848-1381 / 896-3750
Website: www.mutualfund.com.ph
Address: 17th Flr. Tower One & Exchange Plaza, Ayala Triangle, Ayala Avenue, Makati City 1200
Contact Numbers: 848-1381 / 896-3750
Website: www.mutualfund.com.ph
6. Philam Asset Management Inc. (PAMI)
- Philam Strategic Growth Fund (Peso Equity Fund)
- GSIS Mutual Fund (Peso Balanced Fund)
- NCM Mutual Fund of the Phils. (Peso Balanced Fund)
- Philam Fund (Peso Balanced Fund)
- PAMI Asia Balanced Fund (Dollar Balanced Fund)
- Philam Bond Fund (Peso Bond Fund)
- PAMI Global Bond Fund (Dollar Bond Fund)
- Philam Dollar Bond Fund (Dollar Bond Fund)
- Philam Managed Income Fund (Peso Money Market Fund)
Fund Performance: Philippine Mutual Funds returns and performance
Address: 5/F Salustiana D. Ty Tower, 104 Paseo de Roxas corner Perea and Nieva Streets, Legaspi Village, Makati City
Contact Numbers: 867-3912 to 18 / 817-7264
Website: www.philamfunds.com.ph
Address: 5/F Salustiana D. Ty Tower, 104 Paseo de Roxas corner Perea and Nieva Streets, Legaspi Village, Makati City
Contact Numbers: 867-3912 to 18 / 817-7264
Website: www.philamfunds.com.ph
7. Philequity Management Inc. (PEMI)
- Philequity Fund (Peso Equity Fund)
- Philequity PSE Index Fund (Peso Equity Index Fund)
- Philequity Peso Bond Fund (Peso Bond Fund)
- Philequity Dollar Income Fund (Dollar Bond Fund)
Fund Performance: Philippine Mutual Funds returns and performance
Address: Suite 2004-A, East Tower, Philippines Stock Exchange Centre Exchange Road, Ortigas Center, Pasig City
Contact Number: 689-8080
Website: www.philequity.net
Address: Suite 2004-A, East Tower, Philippines Stock Exchange Centre Exchange Road, Ortigas Center, Pasig City
Contact Number: 689-8080
Website: www.philequity.net
8. Prudentialife Optima Funds (Prudentialife)
- Optima Balanced Fund (Peso Balanced Fund)
- Prudentialife Fixed Income Fund (Peso Bond Fund)
Fund Performance: Philippine Mutual Funds returns and performance
Address: 3rd Floor PLPI Building, 118 Gamboa St., Legazpi Village, Makati City
Contact Number: 812-8803
Website: www.myoptimafunds.com
Address: 3rd Floor PLPI Building, 118 Gamboa St., Legazpi Village, Makati City
Contact Number: 812-8803
Website: www.myoptimafunds.com
9. Sun Life Financial Philippines (Sun Life)
- Sun Life Prosperity Phil. Equity Fund (Peso Equity Fund)
- Sun Life Prosperity Balanced Fund (Peso Balanced Fund)
- Sun Life Prosperity Dollar Advantage Fund (Dollar Balanced Fund)
- Sun Life Prosperity Bond Fund (Peso Bond Fund)
- Sun Life Prosperity GS Fund (Peso Bond Fund)
- Sun Life Prosperity Dollar Abundance Fund (Dollar Bond Fund)
- Sun Life Prosperity Money Market Fund (Peso Money Market Fund)
Fund Performance: Philippine Mutual Funds returns and performance
Address: 12/F, Tower 2, Enterprise Center, 6766 Ayala Avenue Corner Paseo de Roxas, Makati City
Contact Number: 886-6188
Website: www.sunlifefunds.com
Address: 12/F, Tower 2, Enterprise Center, 6766 Ayala Avenue Corner Paseo de Roxas, Makati City
Contact Number: 886-6188
Website: www.sunlifefunds.com
10. United Coconut Planters Life Assurance Corp. (CocoLife)
- United Fund (Peso Equity Fund)
- Cocolife Dollar Fund Builder (Dollar Balanced Fund)
- Cocolife Fixed Income Fund (Peso Bond Fund)
Fund Performance: Philippine Mutual Funds returns and performance
Address: 6807 (6774) Ayala Avenue, Makati City
Contact Numbers: 812-9015 to 26
Website: www.cocolifefunds.com
Address: 6807 (6774) Ayala Avenue, Makati City
Contact Numbers: 812-9015 to 26
Website: www.cocolifefunds.com
Hi sir! Read your post and it's very encouraging.
ReplyDeleteI opened an ALFM Peso Bond Fund in bpi last month however, i do not know how it works. I'm confused if I will be the one buying shares or BPI is responsible for that action. DO you have advice and tips to newbies like me who wanted to start investing? thanks!
Thanks for dropping by! It's the BPI who is responsible for buying company shares and that's the job of their fund managers squad to get the best companies to invest in. It's the stocks that you are the sole decision maker where to buy company shares. If you want to do it your own try stocks and open a COL Financial account, that's the leading medium in the Phils. for stock trading.
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