Mutual Funds

Please post anything and everything that you know about mutual funds. Seems like it's better to put your money here than in banks? aticus? KuyaDanny? Enlighten me please...
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  • batang uliranbatang uliran Administrator ✭✭
    At this point, the best and safest place to put your money in is in US blue chip companies - either via mutual funds that invest in these companies or by buying the stock directly - these are companies like Ford, GM, Dupont, Alcoa, Eastman Kodak, AT&T, Black and Decker etc. that are very undervalued because of the emphasis on tech stocks during the past few years. Many of these companies are trading at P/E (ratio of a company's price per share to earnings per share - lower numbers better) ratios less than 10. If you have a little bit more appetite for risk, buying mutual funds that invest primarily in the korean and singaporean stock markets is also a good bet since these markets are significantly depressed for the year and are sure to rebound in the next 1 to 2 years.
  • aticusaticus Laker fan for life ✭✭
    * For the benefit of our non-working/non-financially-oriented friends in PEx*

    The principle of mutual funds is that people/groups with limited funds can pool resources and take advantage of some investments that would otherwise be unavailable to them, due to either a lack of funds, or due to preferential rates made available only to larger investments.

    A simplistic analogy might be the following:

    Bank A gives, say, 8% interest per annum for Time-Deposits under 100,000, but 10.5% for those 100,000 and above.

    If you and your brother each had 50,000, it would make sense to pool your money so you can both take advantage of the higher return. Instead of earning 4,000 (8% of P50T), you would each make 5,250 (10.5% of P100T divided by two).
    Not too bad.

    Now obviously real mutual funds involve much larger amounts, have many investors, and are managed full-time by large financial institutions and professional fund managers.
    They are attractive due to the returns they generate (some of the most successful can grow over 100% or even 200% over a span of just a few years, clearly outpacing your bank time-deposit rates.

    What people have to be aware of, though, is that mutual funds DO NOT GUARANTEE returns. While there is a good chance you can make a lot, there is always the possibility you will lose your money, or at least a large chunk of it.
    Please don't take part in mutual funds until you're well aware of the market, where your money is being invested, your risk level, and whether or not you can trust the company or persons managing the fund.

    As in life, no risk, little gain... :)

    Caveat emptor. Buyer beware.












  • CaRaMBaCaRaMBa Administrator PEx Moderator
    Hey thanks you two! :)
  • xyzseamanxyzseaman Loved by Adm!n ~ PExer
    Kung medyo bata-bata ka pa, use high risk (that's what I chose, by the way)...kung di maganda ang kinalabasan, makakarecover ka agad. Pero kung medyo may edad ka na, medium to low level na lang.

    You can use Savings Bonds too..uh, wait. Oops, hehe, wag na lang kasi medyo bumaba ang interest rate ngayon eh....
  • joelsherjoelsher Member PExer
    Thanks
  • insomniacinsomniac Member PExer
    Aticus: Thanks for a very informative post :). And for enlightening us "non-financially-oriented friends in PEx" :lol:

    Can I ask your opinion on something about mutual funds? It's something that I've been thinking about for awhile. I've been wondering where to put some of my money, and my mom has been telling me that mutual funds are the way to go. I've made an initial investment already, though I think it's based on the local market. Anyways, she says now is the time to invest more because stocks are down, and the ratios are low. And though there is a risk, there's a bigger chance that the fund's value per share will rise in the long term. Do you agree?

    batang uliran: Given the Philippine market's current significantly depressed state,(especially with ongoing turn of events), does that same principle of rebounding apply?

    Sorry, if I seem so clueless, one thing I never took up in college was Finance, now I kinda wish I took an elective or something :(
  • batang uliranbatang uliran Administrator ✭✭
    The principle of rebounding applies if and when Erap leaves. Much of the recent downturn in Philippine stock prices has been due to political uncertainty and total lack of confidence in Erap. When that changes, expect a more than modest rebound.
  • DogbertoDogberto megalomania PExer
    Well, even if Erap leaves, the chances for a big rebound are still uncertain. We still have to grapple with who the next leader will be and how the change of leadership can be effected. If its through peaceful means, then it will take a long time before that happens (what with all the hearings, investigations, etc.) so your investment will sleep for quite some time :zzz: But if it would be through violent means, expect a real rocky ride! :silly:
  • aticusaticus Laker fan for life ✭✭
    insomniac:

    Mutual funds, by nature, require a long-term commitment to the investment. Because you are investing with a group of other investors, you don't have the flexibility that individual investments or placements would give you. You also have to trust the judgement of the fund managers managing the fund for you. If they decide, for the greater good, that they should limit their exposure or investments in certain areas, and increase in others, then you have to go with the flow. If you don't like how the fund is being managed, then you shouldn't have joined it in the first place.

    So to answer your question, yes, stocks are down and P/E ratios are almost ridiculously low, so if you're in it for the long-haul, then you stand a good chance of making a lot more money. Imagine, for instance, being able to buy San Miguel shares at the trading level right after the EDSA revolution. You would have made quite a bit by now... :)

    But that said, I wouldn't invest in stocks here. There's too much danger and uncertainty. At the rate the economy is going, some companies currently traded could close shop, and then you'd only be left holding pieces of paper which signify your stock in a bankrupt corporation. Even large companies like Smart are heavily in debt. If the peso slips further, you could see some major restructuring. The very least that could happen is they will have problems generating solid profits for the next year or two. Your money could be making more money from Mutual funds based in other nations/regions. It's one thing to say you're looking at the long-term. It's another to see your money being valued less and less because you've invested in Philippine stocks. No serious financial institution in the world wants to have major exposure in the Philippine market, for obvious reasons.

    I'd look at more mature markets like Hong Kong or even Singapore, if you want to stay in the region, or some blue chips on Wall Street, if you want to go global.

    Whatever you decide, I wish you luck!




  • badoodsbadoods Member PExer
    aticus: If i don't intend to continue my participation in MF how much will i get or can they give me the total amount written on my certificate? i know there are fees to be deducted...:confused:
  • aticusaticus Laker fan for life ✭✭
    badoods:

    Different mutual funds each have their own terms and conditions. I suppose now might be too late to tell you to make sure what those are? :) You really must find these things out BEFORE you get into any mutual fund.

    I think, though, that the model you're using is the one banks have for time-deposits, where they would charge particular fees for early termination. Believe it or not, there are mutual funds that wouldn't charge you at all for leaving. This is more in the nature of a stock market, after all, rather than a bank. Kuya Danny can give you more examples...

    But the best thing to do is to be vigilant regarding ALL the terms and conditions of any financial endeavor you get into. Anything that may affect your hard-earned cash should be very carefully assessed.
  • KamatayanKamatayan www.digitalfrap.com PExer
    I agree with BU better stick with blue chips rather than mutual funds, the Dow Jones Average (composed mostly of Blue Chips Stocks) has consistently beaten 80+% of the mutual funds out there (I'm not sure about the statistics here in the Phils though)... With a mutual fund however you could probably double or triple your money, which highly unlikely with Blue Chips...

    Also, I wouldn't recommend that you invest in stocks here in the Phils, growth is just ohh-soo-slow... Now if you're a risk taker then maybe you can invest on those internet stocks (although not in favor right now) or stocks of companies in which sectors are deemed as hot...
  • cianoycianoy Vermicompost Bin Supplier PExer
    A good variant of mutual funds is what is called index funds. In this setup, basically the fund is diversified enough to represent the index. In this way, risks are minimized and costly salaries to fund managers are avoided.

    But I agree, not in the Philippines.
  • BogshotBogshot WebWonker PExer
    Judging by the returns from local Mutual Funds published on BWorld, youre probably better off with a LT Bank Deposit the way the stock market is performing nowadays...
  • eepiseepis Go Sixers PExer
    Vanguard S&P 500 Index fund is a good mutual fund. http://www.vanguard.com

    It invests in the 500 stocks that make up the Standard and Poor's 500 Index Fund. the blue chip stocks.

    The expense fees are really low too compared to other mutual funds that charge a load fee of 3% a year.

    The return is around 24.9% a year. That's off the top of my head, but goto the site and you'll see the numbers.

    If you don't have access to the mutual funds that there are SPDRs (Spiders). They are the same thing as the S&P 500 index but they sell as individual stocks.

  • LightspeedLightspeed Mr. Optimist PExer
    Can Philippine-based investors put some money in international mutual funds using the Internet? I agree that the mutual fund industry in the Philippines is quite small and add to that the unstable nature of the Philippine political and economic situation makes investing in the Philippine stock market quite scary.

    I wonder if some international mutual fund companies accept placements over the internet using credit cards. That way, we can increase and diversify our respective portfolios.

    I am interested in some regional stocks, i.e. Hong Kong and Singapore stocks, and some US blue chips (don't know about clicks-and-mortar stocks, though).

    Not that I have sufficient money to invest, but I want to know my options just in case I need to find places to park my funds.

  • eepiseepis Go Sixers PExer
    I'm pretty sure mutual fund companies in the U.S don't take credit card. My friends in the U.S pretty much deposit their money by sending checks to the mutual fund companies.
  • KuyaDannyKuyaDanny Moderator PEx Moderator
    Figures represent % change in net asset value between 12/31/99 and 12/31/00

    Equity Funds
    Philequity +6.93
    Sun Life Prosperity Phil Equity* -9.33
    Philam Strategic Growth Fund -15.10
    Filipino Fund -17.00
    Abacus Growth Fund -20.23
    United Fund -32.80

    Balanced Funds
    Far East Fund +7.50
    First Galleon +3.48
    ECC Growth & Income Fund +1.43
    Sun Life Prosperity Balanced* -2.46
    Philam Fund -11.50
    All Asia Fund -11.57
    Citisec Growth & Income -17.03
    MFCP Kabuhayan -23.93
    GSIS Kinabukasan -25.93

    Bond Funds
    All Asia Fixed Income +9.38
    Philam Bond Fund +8.91
    Ayala Life Fixed Income +8.64
    Sun Life Prosperity Bond* +6.26

    *Started operations on 04/05/00
  • TriglycerideTriglyceride keep cool my babies! PExer


    hope this'll help somehow..

    Mutual Fund companies are firms which pool deposits by customers to purchase stocks or bonds (or both). These share holders or bond holders are people who own a part of a particular set of stocks or bonds, say a growth fund or bonds issued by state governments such as municipal bond fund. Fidelity, Putnam,Drefus, and Kemper are examples of Mutual Fund companies.
  • TriglycerideTriglyceride keep cool my babies! PExer
    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:D.

    ...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":D. 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:D.

    SHOW ME THE MONEY!!!!:D

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