Mutual Fund: 7 questions you should ask


Now that the Philipine election was over, ano naman kaya ang susunod?  

Motoo Konishi, World Bank country director, once told in an economic forum that the Philippines is no longer the sick man of East Asia, but the rising tiger. However, despite of genuine effort from Aquino’s administration para sa isang inclusive growth, marami pa rin sa mga Pilipino ang nananatili sa below poverty level.

Isa sa mga dahilan ay ang tinatawag na oligarchy. Meaning, a small group of people having control of a country, organization, or institution which has too much control of the country’s resources.

According to the Forbes 2012 annual rich list, the two wealthiest people in the Philippines, ethnic Chinese magnates Henry Sy and Lucio Tan, were worth a combined $13.6 billion.

This equated to six percent of the entire Philippine economy.  Prominent Spanish names, such as Ayala and Aboitiz, continue to control large chunks of the economy and members of the families are consistent high placers on Forbes’ annual top-40 wealth list. Their business interests range from utilities to property development to banking, telecommunications and the booming business process outsourcing industry.

Ang tanong ay kung paano tayo makakasabay sa takbo ng ekonomiya na iilan lamang ang nakikinabang?  Well, again, this is an issue of financial literacy. There are two ways: to invest in stock market and mutual funds. However, this article will talk about mutual funds as one way to diversify your financial investment.

Pero ano ba ang mutual funds?  Paano ba ako kikita sa mutual funds?  Is mutual funds only for financial expert? This blog will help you how to avoid mutual-fund-is-for-expert syndrome and explain the basic of investing in mutual fund in order to achieve your financial goal.

1. What is mutual fund?

Mutual funds are professionally managed investment products that pool together the assets of various investors. The pooled funds are invested in different asset classes such as money market instruments, fixed income securities, and equities.

Meaning, yung pera mo ay hahawakan ng isang fund manager kasama ang pera ng ibang maliliit na investor para palaguin depende sa financial goal mo. Participation in mutual funds is done by buying shares issued by the funds. These funds are purchased through licensed distributors and salespersons. As an investor, you can buy shares of a mutual fund based on its prevailing Net Asset Value per Share (NAVPS).

Likewise, redemption is done by selling the shares back to the fund using the latest NAVPS. Most mutual funds require a modest minimum initial investment of as low as P5,000 and minimum additional placements of only P1,000. Kung hindi mo kaya ang 5,000 pesos every month, pwede kahit 2,000-3,000 pesos lang.

2. What are the advantages of mutual fund?

One of the many advantages of mutual fund is that it is managed by a full time professional manager whose job is to analyze the various investment products available in the market. Meaning to say, sila na bahala kung san nila ilalagay ang pera mo at kung paano palaguin over time. Ang tawag dito ay diversification ng portfolio since it is invested in variety of assets which minimizes volatility. Shareholders of mutual funds, particularly those with small amounts of capital, instantly achieve this benefit of diversification as mutual funds are invested in a wide range of securities.

Another advantage of mutual fund is that it is easy to liquidate. Ang ibig sabihin madali lang i-convert ang paper asset mo into cash.  

While the law provides that redemption proceeds must be given within seven (7) banking days from the date of the redemption request, most funds are able to pay the redemption proceeds within the next days. Here is a saying that goes, “Do not put all your eggs in one basket. In mutual funds, investors achieve instant diversification because the fund is required by law to be invested in a wide array of securities.

3. What are the types of mutual funds?

The table above illustrates different types of mutual funds which determines your investment horizon. Let say you want to invest your money in a short time and redeem the fund in 1-3 years to down payment for a house or car, bond funds ang nababagay sa iyo.  However, if your financial goal is to accumulate fund for college education of your children, equity is the best option for you.

4. What is your risk profile

Bago ka mag open ng account sa isang mutual fund, the broker will normally assess your risk profile para malaman kung anong klaseng investor ka whether conservative, aggressive, or balance lang. They will give you sets of questions para dito depende kung short-term goal or long-term goal ang gusto mo. Money market funds are ideal for your short-term needs and for emergency funds.

Equity funds are investments that you can have for long-term goals. The rule of thumb is that the short term you invest  mas less ang risk, less din ang return. On the other hand, kung long term naman (5-10 years) mas mataas ang naman ang potential earnings. Tingnan mo sa taas ang Investment Risk Profile ko para may idea ka.

5. Is it safe to invest in mutual fund?

There are no guaranteed returns in mutual funds. It is very important that you know where your money is invested. Mutual funds are highly regulated by the Securities and Exchange Commission (SEC) under the implementing rules and regulation of the Investment Company Act (RA 2629).

These funds are prohibited from investing in particular investment products and engaging in certain transactions that may jeopardize the welfare of the investors.

Only distributors and salespersons that are registered with the SEC are allowed to redeem these funds. Mutual fund houses are also required to submit regular reports to the SEC as well as to their shareholders. In addition, all of the assets of a mutual fund must be held by a custodian bank for safekeeping.

In my case, investing is quite easier since my mentor, The TrulyRichClub, is guiding me in investing in mutual fund.

6. Are gains in mutual funds taxable? How do I earn from mutual funds? 

No, mutual fund “gains” are exempted from taxes. According to Republic Act No. 8424 Tax Reform Act of 1997, Section 32 (B) (h) effective January 1, 1998.

This was done to promote long-term savings in the country. You earn in mutual funds through price appreciation. Tumataas o bumababa ang NAVPS depende kung lumalago o hindi ang pera kung saan nag-invest ang fund manager. If the NAVPS of the mutual fund where you invested appreciates, pwde mo na syang ibenta. 

7. What is the maturity period of mutual funds?

Mutual funds do not have a specific maturity period. As a rule of thumb, a longer holding period usually favors investors who are seeking higher returns. To know the daily performance of legitimate mutual fund companies in the Philippines, go to the official website of the Philippine Investment Funds Association (PIFA).

Note: This post first appeared on May 10, 2016 at, the author’s personal blog.

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Jun Amparo

Jun Amparo

JUN AMPARO is the author of two inspirational books about personal finance and marriage.  He is nominated as Huwarang OFW 2019 organized by The 700 Club Asia and is pursuing his doctoral study in education. Presently, he is working as a university counselor and lecturer at Asia-Pacific International University in Thailand.