Mutual Funds

Now, I'm not a professional investor (yet) nor a successful one (yet). But I know some things about it (at least theoretically) that may help you in your dilemma. I always compare investing to a card game. Part luck, part diskarte. But again, you are fortunate as you have one of the aces of the game-which is TIME.

You are young, and because of that you can attempt to make risks. Because even if you lose money-which is unavoidable (but as much as possible must be prevented)-you can still earn it through your job, other ventures or still through investments-because any investment, in time, will profit.

Again we know that in investment, no pain no gain, and that the riskier the investment, the higher the return. Now, stocks, stock mutual funds (aka, equities), balanced fund (mixed equitiy and bond), bond and money market differ in risk and yield, the first one carrying the greatest risk and profit, and the last one, much like putting your money into time deposit.

For a young investor like you, financial growth is the name of the game. Because again, you can gamble to be aggressive, most financial gurus would agree that stocks and stock mutual fund (aka equity) are the ones more appropriate. However between buying individual stocks or stock mutual fund, the latter is better as playing stocks requires experience. Stock mutual fund, on the other hand, is handled by a fund manager, who pools money from different individuals , then use that into buying different stocks. In effect, this is much safer because it is handled by an experienced person.

Compared to bonds and money market, stock mutual fund will give you a higher yield as this is stock investment. In fact, in terms of revenue and capital preservation, it can even be better than buying individual stocks. Because in a stock mutual fund, there is already diversification (the money is into a variety of stock products that give different yields)-one which you may not be able to do with just your money to invest. The risk of losing money is lesser as lost of one stock may be offset by the gain of another.

So, take your pick.

Investing in Mutual Funds

Is it wise to invest while still in debt?
Nov 7, 2008

One, I think it's not wise to save and invest when you are still in debt. I think it's more prudent if you clear yourself off of any liability first. Baka kasi yung interest ng investment mo e katumbas lang ng interest ng utang mo, nagwoworry ka pa. Or worse, mas mababa pa ang interest ng investment mo, nadagdagan pa utang mo.

Second, again it’s more sensible to have some bank savings that would cover at least a few months of your needs. Just in case you lose your job hehe. Besides a bank account is a form of investment, easily accessible (in case of immediate money need), low risk with a predictable return. This should form the foundation of your money-making strategy. But if your question is if you can buy shares from banks offering MFs or UITFs even if you don't have an account with them yet, the answer is yes (at least with some banks, not really sure though, just ask). But better if you have, so you can buy and redeem by simply transfering funds from and to your account.

Third, aside from checking and savings account, there are other forms of investment products, such as what you mentioned – bonds, balanced funds, stocks, real estate etc. But before you go into that, do 1 and 2 first. Then read (books, this forum) to learn more about these other products while doing just that.

I understand the excitement. But don't succumb to it just yet. It's not as easy as you think it is.
It's never too late. As to why financial literacy not included in curriculum, well, personally because I think there are other important things to learn aside from money matters. Not to mention, the latter would need some discipline and a lot of maturity.

Mutual Funds: What's the worst thing that would happen should a Mutual Fund Company Fold up?

Sept 17, 2008

Hi sardonyx. Though I can not completely answer your question, I would like to share some things that I know and hope might help. Which probably you and many others have already realized, but I'm sharing it anyway.

Usually mutual fund companies like PhilamLife, Sunlife Financial, Investment sections of commercial banks and many others are engaged in many other investment forms – stock market/equities, insurance, real estate, credit/loans etc . That’s why technically, they are investments firms rather than mutual fund companies only. Thus, for these companies to “fold up”, it has to lose some huge amount of money from one or more forms. However, because of the diversity of investments, losses may be balanced by gains. Actually, what’s important is that a company’s asset must be more than it’s liability, if not at least equal. Or that it must always have some capital to invest in, to try to earn income again, to try to regain stability.

Again because of the diversity of investments, initially net loss loss is usually less than net income. Unless of course, the company is purely or mostly engaged in one form which is in bad shape like mortgage, which exactly is what’s happening in some companies in the US. Or unless, many of the company’s business is losing , which may be brought about by a bad economy or manager. Or in the long term, it fails to earn income again, which is usually because of a bad strategy.

However, there is another factor that may speed up the fall of these investment firms. And that is the loss of the investor’s confidence. You see these firms’ capital come from the owners (major investors) and minor investors (us). When there is loss of confidence, as what happens when people learns of a huge loss in a company, they stop putting in money and worse, withdraws whatever it is that they have invested in. It must be remembered that the assets of these companies are not all in cash or “liquid”. When “liquidation” overwhelms the amount of available cash, this leads to a vicious cycle of more people getting their money out, less cash, more withdrawals, eventually less available capital for the company, less income for the company. And finally bankcruptcy when the company would have to let go of all its assets only to pay back all its investors – that is if will still be able to.

Thus the possibility of companies closing down is there. Mutual funds are not insured, thus we might not be able to get our money back. But we must keep in mind that though the US financal crisis might have a seismic impact in the economy of progressive countries like us, it doesn’t mean that we will end up losing big or losing all of our investment. It can’t be denied that our investement firms have exposures to the problematic companies that have fell or are bound to fall down, but we must also consider their exposures to other companies that are up to now and in the future will remain stable. Not to mention that mutual funds and UITFs are managed by more experienced people (than us) who would know when and where to put our money in.

Investment is all about uncertainties in the short term. But gain in the long term. Certainly panic will not help. I am not telling you not to liquidate your investments, but to think twice before redeeming at a loss, much more to contribute to the problem.

Instead, let us use what successful investors here are telling us over and over again, invest in the long term, cost-average, diversify, and SAVE.


I, for one, tries my best not to redeem my investments which have already lost. It's really hard not to be affected, but instead I focus on working and saving. Basta, I will not redeem at a loss. Period.

Re: Investing in Mutual Funds

Oct 19, 2007

First, I envy you for your age. Having to start investing at such a young age will take you to great distance. Ironically, it's only now, (when I reached this age), that I realized what the adage "Time is gold" really means. Akala sinasabi lang yun ng mga walang maisip na motto (lol). You are lucky to be in the right company at this early point of your life.

Now, I'm not a professional investor (yet) nor a successful one (yet). But I know some things about it (at least theoretically) that may help you in your dilemma. I always compare investing to a card game. Part luck, part diskarte. But again, you are fortunate as you have one of the aces of the game-which is TIME.

You are young, and because of that you can attempt to make risks. Because even if you lose money-which is unavoidable (but as much as possible must be prevented)-you can still earn it through your job, other ventures or still through investments-because any investment, in time, will profit.

Again we know that in investment, no pain no gain, and that the riskier the investment, the higher the return. Now, stocks, stock mutual funds (aka, equities), balanced fund (mixed equitiy and bond), bond and money market differ in risk and yield, the first one carrying the greatest risk and profit, and the last one, much like putting your money into time deposit.

For a young investor like you, financial growth is the name of the game. Because again, you can gamble to be aggressive, most financial gurus would agree that stocks and stock mutual fund (aka equity) are the ones more appropriate. However between buying individual stocks or stock mutual fund, the latter is better as playing stocks requires experience. Stock mutual fund, on the other hand, is handled by a fund manager, who pools money from different individuals , then use that into buying different stocks. In effect, this is much safer because it is handled by an experienced person.

Compared to bonds and money market, stock mutual fund will give you a higher yield as this is stock investment. In fact, in terms of revenue and capital preservation, it can even be better than buying individual stocks. Because in a stock mutual fund, there is already diversification (the money is into a variety of stock products that give different yields)-one which you may not be able to do with just your money to invest. The risk of losing money is lesser as lost of one stock may be offset by the gain of another.

So, take your pick.

Will a US Recession Affect Philippine Mutual Fund/UITFS/Bond Fund?

Sept 23, 2007

In my previous post, I compared the market to a card game. That is the market is way way far more unpredictable unlike a deck of 52 cards.

In my effort to find what lies ahead, I read the opinions of some financial analysts. Though, I had a tough time grasping economic concepts, I came up with a few points.

1. Definitely there will be a US economic slowdown. --Nobody could commit as to whether a US recession is coming or not, but the odds are more on the grim side which is a recession. Some would even say, that the best case scenario for US, if not a recession, is a subpar economic growth.

2. Whether global expansion continues despite US economic slowdown depends on whether China's growth engine continues to move ahead --Clearly, the effect of US economic depression will be global as markets are interrelated. But the fate of global economy (especially Asia) which used to rely on US (contribution to global economy they say is down to 30%) is actually now dependent on yet another economic superpower--China. But since the US is the major importer of Chinese products and raw materials, when US economy weakens, so is China, so is the world. An implication here, the full effect, we have yet to know.

3. The best part -- if ever recession can not be prevented (despite efforts) is that most agree that we will outlive this problem. Now this one is based on past market trends and faith on man's abilities. In fact, according to Alan Greenspan (dubbed as the best economist), it is in man's ability to adapt that leads him to be optimistic about the future. Still, according to him, it is not by accident that we persevere and advance in time of adversity. Instability is needed for growth, since it's when, that man works for the better.

Now this isn't in any way telling us to be completely complacent about investing. You see, one analyst views this turbulence as one that is brought about by prosperity itself (for which I totally agree). Paradoxical growth of the US economy (despite obstacles such as 9/11, corporate scandals, and high oil prices) has given false confidence to businessmen, investors and consumers alike to embark on risky acts. In a way, they were blinded by the seeming guaranteed economic growth that they completely shrugged off the risk and acted in ways that raised it, like the subprime housing mortgage.

The morale of this all,

If there is one certain thing about the market - it's uncertainty

So:

Acknowledge the risk
Take calculated ones

Most importantly, accept the consequence of your decisions.