Kuya Danny or Aticus,do we have Mutual Fund firms in the Philippines? Plus, who is the Philippine's Alan Greenspan? Do we have such a person? I've been wanting to ask that for the longest time.
...Most companies have a family of funds-- separate funds with different objectives under the same roof. For each fund, there is a manager or group of managers who take charge of that funds portfolio.
Funds have expenses and fees--fully disclosed in the prospectus. They need to pay those stockbrokers and financial managers you know. Funds who charge their clients are called "load funds". There are front end and back end loads. Front end loads, we buy in at the offering price. This offering price however is higher than the funds net asset value per share (NAV). So for example, with front end load, it'll say that the price of the fund is..maybe 15 and the NAV is 14.50 but because of that 'load', you get to buy it for 15. Some funds have a redemption fee that last for a specified time period --these are the back end load funds. Redemption fee discourages investors from buying into a fund and selling after a short hold. On the other hand,there are companies who doesn't charge you at all. Just call the company, get an application, send a check and invest. Performances between loads and no loads funds shows no distinction whatsoever...so these load funds, they are in some ways a rip off....kinda. It's like choosing between two apples. One cost a dollar, the other 1.05. You buy the 1.05 one because the 'vendor' charged you a 5-cent "handing-out-the-apple-fee". With no load funds though, you have to do your own research to monitor the funds performance. What load funds pay their brokers and reps, no load funds spends their profits in advertising.
Mutual funds past performance have to be looked up before we invest--as far as 10 years back. Although MF infos can be found in publications like Money,Business week, Wall Street Journal etc..most of them are biased in printing their articles and studies because they recieve huge adverstising revenues from many fund companies.
Most mutual fund families have Money Market Funds, Income funds, Growth and Income funds and Growth funds. Many have Global funds that invest worldwide and there are also Specialty funds.
Money Market funds(Liquidity with highest personal yield)-> buy short term investments such as treasury bills, certificates or deposits...commercial paper issued by corporations. Their interest rate changes daily.
Income funds buy blue chips stocks, bonds and money market investments..
Growth Funds buy common growth stocks...balanced funds buy common stock, preferred stocks and bonds.
They say that the best time to invest is when the share price is "low". But with the markets fluctuating nature,it's hard to determine when a price is "low". If the market took a dive after a purchase, the value of your investments will drop. If you buy at a low price, you get to buy more shares. Some reduce the risk of buying high by a method called Dollar Cost averaging--that is buying shares at various market prices.
While some MF are 'managed funds', meaning, the funds money is invested according to the tastes, intuitions and analysis of the manager, index funds (another type of mutual fund) are generally done by computer programs designed to mimic a performance of a given stock market index.Stock market indices is a measurement of a funds performance...kinda like your GPA to measure your academic performance. Analyst then based their decisions in this measurement. If we want to have a good representative sample of how the market is performing on the average, Standard and Poors 500 Index is the benchmark of stock market performance. S&P Index are the 500 largest companies in the market. Another 'brainless' and respectable choice would be The Vanguard Index Trust 500 Portfolio. It's a mutual fund that just mimicks the market performance, software-driven therefore the management fees are very low. There is a minimum fee for a Vanguard Fund though....I don't remember how much...I think it's around $4000)?), I'm not sure.
SHOW ME THE MONEY!!!!