Overseas Filipino Workers (OFWs) need to realize that they cannot work abroad forever.
While it’s great to experience working in a greener pasture, time will come he need to retire and won’t be earning as much as he used to. Therefore, an investment instrument like mutual fund is a great alternative for most OFW who want to diversify his investment portfolio to achieve financial independence.
But what is mutual fund? A mutual fund is an investment vehicle made up of a pool of moneys collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other investment assets.
There are mainly four types of mutual funds in the Philippines: stock (or equity), bond, balanced, and money market. However, choosing which mutual funds to invest depends on the investor’s growth goal and risk tolerance.
If you think mutual funds are for you, let me share with you these six advantages of investing in mutual funds?
1. Mutual funds offer professional management
Having a fund manager is certainly a great move to consider if you are a newbie investor who wants to lessen the risks. The job of a professional fund manager is to allocate the fund investments in order to produce a capital gain for investor like you.
In addition, there are different types of mutual funds that match the investor’s financial goals and risk profile. If you already have a COL Financial account, then you can also buy investment products like mutual funds.
2. Instant diversification
What is diversification in investing? It simply means investing in a variety of assets in order to lessen the potential risks of losing your investment capital. “Don’t put all your eggs in one basket” is the basic principle behind asset allocation.
Mutual funds in the Philippines are designed to spread and manage risks by holding several investment types or companies. If your priority is to minimize loss through instant diversification, then investing in mutual fund is a great option for you.
3. Affordable low initial fund
Most people think they need to have a lot of money before they can start investing. However, one good thing about investing in mutual fund is that it is affordable for many ordinary Filipinos.
In other words, for as low as Php5, 000, you don’t need to have a bigger capital to start investing in mutual funds. In addition, if you want to add to your mutual funds regularly, you can do so with a minimum of Pph1, 000 only.
4. Regulated by Securities and Exchange Commission
Most investors take safety as a very important consideration as no one wants to lose his hard-earned money. The good news is mutual funds are highly regulated by the Securities and Exchange Commission (SEC) under the Investment Company Act and its implementing rules.
They are treated as corporations with the fund investors as their shareholders and are required to submit regular reports to SEC and to their shareholders like you.
5. Potential higher returns
Returns are determined by the movement in Net Asset Value Per Share (NAVPS). An increase in NAVPS means that investors can redeem the shares of a mutual fund for a higher value. Redemption of shares simply means selling a fractions or whole shares of his mutual funds.
As a rule of thumb, a longer holding period usually favors investors who are seeking higher returns. The data about best performing mutual funds can be accessed at Philippine Investment Fund Association (PIFA) website.
6. Easy to liquidate
Mutual funds are considered very liquid investments. When I say liquid, it is the ability to readily convert investments into cash. Other investment assets such as real estate require investor to find a buyer so that he can liquidate his investment. That is not the case with mutual fund shares because the fund itself stands ready to buy back these shares at the prevailing Net Asset Value Per Share.
Mutual funds are ideal vehicles for growing your hard-earned money over time. It can be used as a savings medium for buying a property, retirement, building college fund of your children, buying a car, or building up any long-term cash fund depending on your investment objective.
What you need to do is to contact any financial institutions that are authorized or licensed to sell mutual funds. Lastly, never invest on something that you don’t fully understand in order to avoid any fraudulent investment schemes that is being offered to you.
The Lord will open the heavens, the storehouse of his bounty, to send rain on your land in season and to bless all the work of your hands. You will lend to many nations but will borrow from none. – Deuteronomy 28:12
JUN AMPARO is the author of OMG! OFW’s Money is Gone: Practical Tips on How to Be Wise with Your Hard-earned Money which was featured at GMA News Online. Being an OFW for over a decade, he’s aware about the common financial challenges of many Overseas Filipino Workers.