If you’ve been searching for ways to grow your money beyond a regular savings account, you’ve probably come across mutual funds. They’re one of the most common investment vehicles offered by banks and financial institutions in the Philippines.
But what exactly are mutual funds, and are they worth it for beginner investors? Let’s break it down in simple terms.
What is a Mutual Fund?
A mutual fund is a type of investment where money from multiple investors is pooled together and managed by professional fund managers. This pooled money is then invested in different financial assets such as:
- Stocks
- Bonds
- Money market instruments
- Other securities
In short: you’re not buying stocks or bonds directly; instead, you’re investing in a basket of investments handled by experts.
Types of Mutual Funds in the Philippines
There are different types of mutual funds depending on your risk appetite and goals:
- Equity Funds – Invest mostly in stocks. High risk, but with potential for high returns.
- Bond Funds – Invest in government and corporate bonds. Lower risk, steady income.
- Balanced Funds – A mix of stocks and bonds. Good for moderate risk-takers.
- Money Market Funds – Invest in short-term securities. Very low risk, but also low returns.
How Do You Earn from a Mutual Fund?
You can earn in two main ways:
- Net Asset Value (NAV) Growth – If the value of the fund’s assets increases, the value of your shares goes up. You can redeem your shares at a higher price later.
- Dividends/Income – Some funds distribute income from bonds or dividends of the stocks they hold.
How Much Do You Need to Start?
Good news: most mutual funds in the Philippines are beginner-friendly. Some providers allow you to start with as little as ₱1,000 to ₱5,000, while others require ₱10,000 for an initial investment. Additional contributions can be as low as ₱1,000.
Pros of Investing in Mutual Funds
- Affordable entry point – You don’t need huge capital to start.
- Diversification – Your money is spread across many investments, reducing risk.
- Professional management – Experts handle the buying and selling for you.
- Highly regulated – Mutual funds in the Philippines are supervised by the SEC.
Cons of Mutual Funds
- Management fees – Since fund managers handle the investment, fees are deducted annually.
- Not guaranteed – Your returns depend on market performance.
- Possible underperformance – Some actively managed funds don’t beat the market.
Mutual Funds vs. Other Investments
- Compared to Pag-IBIG MP2 – MP2 is safer, government-backed, and tax-free, but returns are usually lower than equity funds.
- Compared to Time Deposits – Time deposits are low-risk but earn less than most mutual funds.
- Compared to Stocks – Stocks can give higher returns but require active management; mutual funds are passive and managed for you.
Where to Invest in Mutual Funds in the Philippines
Some of the top providers include:
- ATRAM (via Seedbox or GCash)
- Philam Asset Management (now AIA Philam)
- Sun Life Asset Management
- BDO, BPI, Metrobank (via their trust companies)
Nowadays, you can even invest in mutual funds through apps like GCash (via GInvest) for convenience.
Blogger’s Corner
If you’re a beginner, mutual funds can be a great starting point since you don’t need to study the stock market daily. You just need to pick the type of fund that matches your risk tolerance and let the professionals handle the rest.
But always remember: mutual funds are not guaranteed. If you want higher returns, equity funds are the way to go, but if you’re after stability, bond or balanced funds might be better.
The best advice? Start small, learn as you go, and treat mutual funds as part of your bigger financial plan.