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Step-by-Step Guide: How to Invest in Mutual Funds in the Philippines

If you are looking for a way to see your money grow without a need of constant monitoring then investing in mutual funds is your way. This type of investment allows you to combine your money with other investors and have it managed by the professionals who look for profitable opportunities on behalf of you. And these professionals are called fund managers. 

One of the biggest benefits of investing in mutual funds is diversification, which means you can spread your money across a number of different funds like stocks, bonds or other securities. This way you can reduce the risk on your investments. Another best thing about mutual funds is that you do not need to have a lot of knowledge about investing to get started, you can just simply choose the best mutual funds to invest in Philippines that align with your financial goals and risk tolerance and watch your money grow in the long run.

So whether you are saving for retirement or major purchase mutual funds is your best choice for investments.

In this article, we will walk you through the process of how to invest in mutual funds in the Philippines. This guide will not only help you make better investment decisions but it will also help you start your investment journey with confidence.

What are Mutual Funds in the Philippines?

In the Philippines, mutual funds are nothing but a type of investment that combines money from multiple investors to invest in a diversified portfolio such as stocks, bonds, and money market instruments. Like we mentioned at the beginning, these funds are usually managed by professional fund managers. Fund managers are the ones who take the strategic investments decisions to maximize the returns for all the investors. 

Unlike stocks mutual funds offer an easy way for the investors/individuals to invest without the need of managing the portfolio and without having a knowledge in investing. 

With various types of mutual funds available for different risk profiles and financial goals, they have become a popular choice for both beginner and seasoned investors looking to grow their wealth over the long term.

In the Philippines, there are four main types of mutual funds available to investors: 

  • Equity funds
  • Balanced funds
  • Bond funds
  • Money market funds

Equity funds

Equity funds are the most popular choice for investment and the reason is because equity funds focus more on buying stocks which have the maximum potential for higher returns in the long run. Equity funds give investors an opportunity to diversify their portfolios by investing in different industries and companies. 

Balanced funds

Balanced funds are a mixture of stocks and bonds to create a perfect balance between growth and stability. Balanced funds allow you to spread your investment through different asset classes because of which you can benefit both the upside potential of stocks and downside protection of bonds. 

Bond funds

Bonds funds are the ones that offer you another great way to diversify your investment portfolio but without taking too much risk. These funds combine money from different investors and invest in either government or corporate bonds. Although returns on the bond funds are less as compared to the equity and balanced funds, it also comes with a lower risk. 

Money market funds 

Another popular type of mutual funds in the Philippines is money market funds. This is the fund for those who are looking for an investment with stability and low risk. These funds mainly invest in securities like Treasury bills which are backed by the government. 

The main goal of money market funds is to preserve capital and provide liquidity, making them ideal for investors who want easy access to their money without sacrificing security. 

Each of these types of mutual fund offers a different combination of risk and return potential, and allows investors to choose the best mutual funds to invest in the Philippines according to their financial goals and risk tolerance levels.

How to Earn Money From Mutual Funds in the Philippines?

If you are thinking about how to invest in mutual funds in the Philippines, it’s good to have an understanding of how you earn your profit from mutual funds. Mainly there are three main ways you can earn money by investing in mutual funds..

Dividends

Dividends are like bonuses that investors receive from their mutual fund investments. It’s nothing but a share of profit that the fund has earned through its investments. The great thing about dividends is that investors can earn that extra little cash without having to sell their shares.

Again not every fund distributes the dividends in the same manner, some funds distribute the dividends on a regular basis while others distribute only when some conditions are met. 

Capital gains

Capital gains is like making money off of your investments. You buy something (like stocks or real estate) for a certain price, and then if the value goes up and you sell it for more than what you paid, that difference is your capital gain. It’s kind of like hitting the jackpot in the investment world. 

But here’s the catch – you gotta pay taxes on those gains. The amount you pay depends on how long you’ve held onto the investment (short-term versus long-term capital gains) and your tax bracket.

Appreciation

Appreciation refers to the increase in value of an investment over time. In the context of mutual funds, appreciation is crucial for investors as it allows them to make money simply by holding onto their investments and watching them grow in value. 

When the prices of the stocks or bonds held within a mutual fund increase, so does the overall value of the fund. This means that investors can profit from their mutual fund investments without selling any shares.

Benefits of Investing in Mutual Funds in Philippines

Diversification

One of the major benefits of investing in mutual funds is you can diversify your investment portfolio which means not putting all the eggs in one basket. By combining the investments from various investors, mutual funds invest in a wide range of securities like stocks, bonds and other assets. 

This helps reduce the overall risk on investments because even if one particular asset performs poorly it won’t affect the overall performance of the fund. Financial planning partner like Peer2gether also help you diversify your portfolio as an investor when you are lending money to a borrower or an investee.

Apart from reducing the risk on investments, diversification also provides an opportunity for potential growth as different assets may perform well at different times. So instead of picking one individual stock or bond, mutual fund investments allow you to put your eggs in a different basket that means different stocks or bonds. 

Professional fund managers

When it comes to mutual funds, one of the big perks is that they’re managed by professional fund managers. These folks have a whole lot of expertise and experience in selecting the right mix of investments for the fund. 

They spend their days researching different companies, industries, and markets to make sure they’re making smart choices for investors. 

The great thing about having a pro is that they can react quickly to market changes and adjust the fund’s holdings as needed. Plus, they often have access to resources and information that individual investors might not have on their own. 

Competitive returns

Many mutual funds offer competitive returns that have the potential to outperform other investment options, making them a popular choice for individual investors. These funds are professionally managed and often include a diverse portfolio of assets such as stocks, bonds, and other securities, which helps mitigate risk.

How to Invest in Mutual Funds in Philippines

Here are the steps to follow if you want to learn how to invest in mutual funds in the Philippines:

Step 1: Identify your goals

The very first step before jumping into investing in mutual funds is to set or define the financial goals.

Is it for retirement, or a saving for the down payment of a new house or simply looking to grow your investments for the future?

By defining your financial goals you can determine the mutual funds that fit your needs and goals. You can consider factors like your timeline, tolerance for volatility, and desired return on investment. This will not only help you set the strong foundation for your investments but will also help you achieve financial success in the long run.

Step 2: Research and choose the right company 

Once you have identified your financial goals and risk ratio, the next step in the investment process is to  choose the right company that fits your goals. 

Why is this step crucial you ask? Well, because not all mutual funds companies are equal. 

You have to explore and find the mutual fund company that delivers a good return on the investments as well as low fees and expenses.

Step 3: Submit the necessary requirements

At this step, you need to fill out an investor questionnaire profile. This questionnaire helps determine your risk tolerance, investment goals, and financial situation, which will ultimately guide the fund manager in selecting the right mutual funds for you. 

You have to be honest and accurate when answering these questions so that the fund manager can tailor their recommendations to suit your individual needs.

Step 4: Track your investments

You will want to regularly review the performance of your mutual funds and see if any changes need to be made based on market conditions or changes in your own financial situation. 

Tracking your investments doesn’t have to be a daunting task either – there are plenty of online tools and resources available that can help simplify the process.

Best Mutual Funds to Invest in Philippines in 2024

Here’s a data from Statista of leading mutual funds companies in Philippines

Conclusion

By following this step-by-step guide on how to invest in mutual funds in the Philippines you can explore the world of mutual funds with confidence and achieve success on the path of financial journey. 

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