Hop In
I think I first heard about Mutual Funds from Bo Sanchez. He likens it to a vehicle that almost anyone, with some funds to invest, can jump into, and that it should be a staple in the portfolio of any smart investor.
I was not entirely convinced (I did not really understand).
To further dispel the mystery of this so-called staple – Mutual Funds – I did some further reading and some interviews. It is simpler than I thought.
Mutual Funds, turns out, is an investment vehicle where people can pool their resources to take advantage of the magic of larger numbers, that is, because a lot of people invest into “the fund”, they have a large number, and thus, the mutual fund manager – a professional who will manage the investment – can get better rates of return for them. The mutual fund manager trades the “pooled” money on a regular basis and the net proceeds or losses are then typically distributed to the investors annually. As my friend Salve Duplito said in one of her articles in MoneySmarts, with as little as USD$100, the regular John or Juans can get their feet wet in an instantly diversified portfolio of stocks, bonds, or both.
A sort of safe haven for the cautious investor.
But do not think it is that easy.
The game of mutual funds is played long term, that is about 7 years or more, so that investors can take advantage of the so-called dollar-cost averaging, which is a strategy which guarantees that an investor will buy less shares of a mutual fund when they are expensive, and more shares when they are cheap. And usually the strategy is investing an amount regularly (like what I do – USD$100 per month). The funds you should invest should also be funds that you can forget about or you won’t need because you will only revisit it again after 7 years. Mutual fund companies also send you a report every month so you can monitor your investment’s growth (hopefully, it will be growth).
I have mutual fund investments with one of the more established fund managers. The return is about 17%. I know that it is not much. I have heard of returns as huge as 37% but those require about an investment of a minimum of USD$20,0000. Here’s an excerpt from the New Year letter of my fund manager:
The performance of global markets upholds what we said before. This new bull market will be an opportunity of a lifetime. In fact, many stocks have gone up 400 percent to 500 percent during this period. One of the reasons why markets have rebounded strongly is because they came from the worst level of market confidence, not actual dismal operational performance. Because of this, the recent recovery has been strong and swift.
Now that the holidays are over, it is time to get back in the game and take a look at what lies ahead in the year 2010. The year of the Tiger.
Local stocks rebounded with the PSE Index gaining 64% to 3,099.19. And despite the combination of the various tragedies, calamities and atrocities that have taken place in the Philippines last 2009, most Filipinos approach the New Year with a sigh of relief and with a more optimistic mindset.
We believe that 2010 will definitely be an even better year for equities. Elections are near and historically right after upon a smooth transition stocks gain 30% at the very least in the following 3 to 5 months. Given the quality of the leading candidate, it can be surmised that the market can be more buoyant for the 2nd half.
Although, nobody really knows exactly as to when typhoons will return, how much rainfall it may bring and what fate lies ahead for the giants and other huge international financial institutions that are still in precarious situations. Similarly, there is also no telling when market corrections will come, how deep they will be and how long they will take.
That is why we have always advocated peso cost averaging, diversification of assets and proper allocation. Holding the right amount of equities lets you participate in their high returns in case the damage from the calamities or the correction in the market are not that bad. At the same time, having the proper emergency fund or cash and fixed income allocation will protect you in case the damage from the calamities or normal market corrections are worse than expected or the market pulls back substantially.
Another Mutual Fund company I am looking into is the Motley Fool Fund. I have been receiving their free reports for almost a year now and have been more than happy with the depth of their research.
As proclaimed by their website:
We seek out value.
We will seek out companies that we believe are solid, whether small or large … companies we’ve identified as having top-notch managements, durable business models, and rock-solid balance sheets … companies working in important industries we understand.
And although the market offers no guarantees, it is our mission to buy these companies for you at meaningful discounts to what we consider to be their fair values.
We leave market-timing to others. We invest in companies, not stocks, and we don’t claim to have particular insight into the short-term movement of stocks or markets. In short, ours is a process of deep fundamental analysis.
That process is grounded in the belief that eventually, the market always wakes up to true value, and that our ownership stakes in the world’s best companies offer us the best opportunity to increase our wealth for years to come.
I like it. Here is their fund description:
The Independence Fund seeks great companies at value prices.
We look for well-managed companies, both in America and abroad, that boast strong financial positions and operate in industries that our management team truly understands. Performing rigorous, fundamental analysis, we dissect each company’s strategy, competitive position, operations, and performance, and we review all pertinent public documents and official communications about the company.
Although we will invest with an intention to hold for the long term, we will also insist on keeping a solid margin of safety on all Fund holdings. As a result, we will sell any holding that we believe has appreciated beyond its intrinsic value.
Minimum investment is USD$3,000, minimum subsequent investment is USD$100 (monthly, I think).
But of course, you have to remember that any investment comes with risks.
It is truly an exciting time, a time to make money, lots.
So, where will you put your money this 2010?
Be rich,
Issa
Article by Issa. Art by D. Copyright 2009.
Website: www.YouWantToBeRich.com
Email: issa@youwanttoberich.com
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I believe that Dan Kennedy is the best copywriter in the modern world today. I know John Carleton is excellent and so was the late great Gary Halbert but pound for pound I opt for Dan Kennedy. I started using the Magnetic Marketing Toolkit some years ago and it proved to be so effective that I purchased the licensing rights to sell it to my customers and we have never looked back, it is truely superb for small businesses anywhere in the world.
When looking at mutual fund companies, you also have to check the % they tack on the amount you invest (front-end/back-end load), or you might end up just giving away your investment profits on their cost to operate.
I’ve used Vanguard on all my investments and they are quite good, actually they are the best (not sure if they have them in PI). The average yearly expense on almost all their funds is a mere .05, now use that as a comparison with other mutual fund companies and you’ll be surprised how much MORE of them are charging as compared to vanguard.
Correction on the average yearly expense or expense ratio…it is .05% and not .05 and actually it is about .25% on the avg. I’m stingy so i look for the bang for my buck and when i look for the fund, the expense ratio is part of the things that i look for, not just the 1/3/5/10 annual returns.
@Ted I will check out Vanguard. Thanks for the tip. I also hardly play – I mean, I put my stock investments in on the long haul and hardly sell so I save on the commissions – but then, that’s stocks. As for my mutual fund investments, last I looked it is up by some 10%. The entry fee at Rampver (where I have mine) ranges from 1.68% to 2.24% (depends on the amount put in) and the exit fee is 1% (if within a year) and .05% (if more than 2 years).
Good Day!!
I’m inviting u 2 attend our IMG-FREE Wealth Academy Program. Bro. Bo Sanchez is one of our Marketing Directors here.
April 24, 1pm
April 26, 7pm
April 28, 7pm
@ 3rd Flr. King’s Court Bldg. Bldg., Pasong Tamo, Makati City
TOPICS:
Series 1 FINANCIAL SOLUTIONS 2DAY
6 Steps to Financial Independence
How Money Works
The Wealth 4mula
How 2 Build a Solid Financial Foundation
Series 2 FINANCE & INVESTMENT 101
Diff. Investment Vehicles & Strategies
How 2 Bypass the Middleman &
Bcome Your Own Financial Adviser & Broker
Mutual Funds, Diversification, Money Cost Averaging, etc
Series 3 CREATING MULTIPLE PASSIVE INCOME STREAMS
The Diff Sources of Passive Income
How 2 Create Passive Income Streams
New Concepts in Making Good Money
NOTE: CERTIFICATES WILL B GIVEN ON SERIES 4
may series din po for stock market at spiritual side of money…
just email me @ norjie_039@yahoo.com.ph or text me @ 09105013342
@janah hi is there any future schedule of free Wealth Acadamy Program.
@issa what mutual fund in the Philippines do you think is good. I have Philamlife but considering to put some in mutual funds after doing some stock investing lately.
@Louis I have mine in First Metro Save and Learn Equity Fund, year to date performance is 16.10% according to the site. You can check it out – http://www.firstmetrofunds.com.ph/.
May 22, 2pm
May 24, 7pm
May 26, 7pm
@ 3rd Flr. King’s Court Bldg. Bldg., Pasong Tamo, Makati City
just email me @ norjie_039@yahoo.com.ph or text me @ 09105013342
for early reservations. Visit us in http://www.img-corp.com
Thanks and God bless.
I have been looking at Apple and Goldman Sachs primarily. The recent Goldman drop helped me make a lot money with my puts but I kept Apple for the longer term, I think it has longer term prospect. Congratz for your informative articles and keep them coming.
Thank you for your instructive post. I think back the first car buy I ever made. It is like to investments in some ways. You don’t know if the next year’s model will be better but I purchased it any way.Just like the stock marketplace, hard to say where matters will be headed, so you want to take some chance. Looking forward to additional posts. Thanks
I was introduced to sunlife 3 years ago. and i am happy with the earnings of that investment.
I did Flexilink, the one bundled with insurance with it.
@Paul I will check out Flexilink. Thanks!
Motley fool is a good read for investors ,though its coverage is primarily in US Stocks . We can however apply the “foolish” principles and strategies to PSE. Its basically value oriented in the tradition of Graham and Dodd and Warren B.
You are correct. Very useful, and the basic principles are easy to apply, I think.
Invest in what you know, I have started with “businesses in my household” Water(Manila Water),Power (AP),Telecommunication (PLDT,Digitel),Banks (UBP,),beverage,(URC) . The key is to develop your own instincts and know what is selling really well, try to value what is the buisness is worth.. High Power bills? buy AP!,high Tel Bills? Tel, Glo! drink a lot of iced tea?URC! Hig toll fees? MPI and SMC. This is why it is important to keep your gunpowder dry, in case a massive sell off in the market and. If I have a fund manager that buys stocks after 400 to 500% appreciation as described above , he will get fired! do your own diligence and buy your own stocks if it becomes avialable at an attractive price . An investor is neither right nor wrong because the crowd disagrees with him, He is right because his reasoning is right. (from a famous sage). Predicting rain does not count, building the ark does.