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7 Benefits of Investing in Mutual Funds

In the Philippines, mutual funds have gained significant popularity among investors who are looking to grow their wealth and achieve their financial goals. Mutual fund is nothing but a  pool of money from various investors to invest in a diversified portfolio of assets, managed by professional fund managers.

In this blog post, we will explore seven key benefits of investing in mutual funds in the Philippines. From the portfolio diversification and the expertise of professional management to the accessibility, liquidity, and tax advantages that mutual funds offer, we will be uncovering the unique advantages that make mutual funds a compelling investment option for individuals at every stage of their financial journey.

How to invest in mutual funds Philippines

So, before we directly jump onto the benefits let’s quickly understand how you can invest in mutual funds. Investing in mutual funds in the Philippines is a straightforward process, here’s a brief overview of how to invest in mutual funds in the Philippines:

  • Research and Select a Mutual Fund: Start by researching different mutual fund companies and their offerings. 
  • Open an Account: Once you’ve selected a mutual fund, you will need to open an account with the fund company. 
  • Determine Investment Amount: Decide how much you want to invest in the mutual fund. 
  • Choose Investment Method: Choose the investment method that best suits your preferences and convenience.
  • Make Your Investment: Once your account is set up and funds are available, you can proceed to make your investment in the chosen mutual fund. 
  • Monitor Your Investment: Keep an eye on fund updates, performance reports, and any changes in market conditions that may affect your investment.

7 benefits of investing in mutual funds 

1. Diversification of investment portfolio

One of the major benefits of investing in mutual funds is portfolio diversification. Diversification is a fundamental principle of investing, and mutual funds excel in this aspect. 

By investing in mutual funds, individuals gain exposure to a wide range of asset classes, including stocks, bonds, and money market instruments. This diversification helps spread risk across different sectors and industries, reducing the impact of market volatility on investment returns. Investment platforms like Peer2gether also help you diversify your portfolio.

2. Professional management

One of the primary benefits of mutual funds is access to professional fund managers who make investment decisions on behalf of investors. 

These experienced professionals have in-depth knowledge of the financial markets and employ sophisticated strategies to maximize returns while managing risk effectively. Investors can benefit from the expertise of these fund managers without needing to actively manage their investments themselves.

3. Accessibility and affordability

Mutual funds offer accessibility and affordability, and that’s the reason it becomes an attractive option for investors of all backgrounds. Unlike investing directly in individual stocks or bonds, mutual funds typically have low initial investment requirements, allowing even beginner investors to get started with ease. 

Additionally, mutual funds offer the flexibility to invest small amounts regularly through systematic investment plans (SIPs), making it convenient for investors to build wealth over time.

4. Liquidity

Liquidity is another advantage of investing in mutual funds. Unlike certain investment options that have lock-in periods or limited liquidity, mutual funds allow investors to buy and sell units easily. 

Investors can redeem their mutual fund units at any time, providing them with the flexibility to access their funds when needed without facing significant penalties or restrictions.

5. Transparency and regulation

Mutual funds in the Philippines operate within a well-regulated framework governed by the Securities and Exchange Commission (SEC). 

This regulatory oversight ensures transparency in reporting and disclosure of fund information, providing investors with confidence and peace of mind. 

Investors can access detailed information about the fund’s holdings, performance, and fees, enabling them to make informed investment decisions.

6. Potential for higher returns

Historically, mutual funds in the Philippines have offered competitive returns compared to traditional savings accounts or fixed deposits. 

While past performance is not indicative of future results, mutual funds have the potential to generate higher returns over the long term, especially for investors with a well-diversified portfolio and a disciplined investment approach.

7. Tax efficiency

Investing in mutual funds can offer tax advantages for investors in the Philippines. Capital gains from mutual fund investments are typically tax-exempt, providing investors with an opportunity to maximize their investment returns. 

Additionally, certain mutual fund products may offer tax benefits under the Philippine tax laws, further enhancing the tax efficiency of these investments.

How to decide the best mutual funds to invest in Philippines

Deciding on the best mutual funds to invest in the Philippines involves careful consideration of several factors to ensure that they align with your investment objectives, risk tolerance, and financial goals. Here are the steps that will help you make informed decisions:

  • Define your investment goals
  • Assess your risk tolerance
  • Research different types of mutual funds
  • Evaluate fund performance
  • Consider fund fees and expenses
  • Assess fund manager expertise
  • Review fund holdings and strategy
  • Check fund ratings and reviews

To make it easier for you we have listed down the top 5 mutual funds till March 2024.

Conclusion

Investing in mutual funds in the Philippines offers various benefits for individuals looking to build wealth and achieve their financial goals. 

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