Mutual Funds

CEBU, Philippines - The inevitable inflation slowly makes the value and purchasing power of people’s money lower and eroded as prices of commodities go up.

Even if people are religiously saving in their piggy banks, the money’s value still gets threatened in most cases mainly because of inflation or price increases.

So, to gain the most out of their money, people should instead try looking at investing in the financial market to take advantage of the promising economic outlook, advised Maria Goretti Jimenez of Sun Life Asset Management Company, Inc. 

Jimenez, head of the firm’s Agency Sales, said the key intact and assured returns in traditional bank products “do not always guarantee” the preservation of the value or purchasing power of money after inflation.

People should realize that saving is far different from investing, she emphasized.

So, for investors who like to make the most of their money through stocks and bonds but do not have enough time to do so, Fuentes advised that investing in mutual fund is right for them.

But, what exactly is mutual fund and how does one invest in it?

Pooled money

Mutual fund pools money from different shareholders and the collective funds is invested by an investment company to make a portfolio of bonds, stocks, short-term money-market instruments, real estate, or other securities.

A portfolio is simply the pooled assets that the mutual fund owns. Each shareholder or investor in the fund gets a slice of the total pie.

Unlike other investment choices, Jimenez said mutual fund can shift from a more conservative fixed income fund to a more aggressive equity fund. But this depends on the current market conditions so to make better returns.

Mutual fund investment companies, also called open-end investment firms, identify the investors’ objectives that will direct the investment of funds being managed.

“It is invested whatever mandates the fund has in terms of investment philosophies and strategies. The company hires professional fund managers who take care of the investment.”

During a recent press conference in Cebu, the Sun Life official explained the investors buy shares of the pool of funds that are being managed by the mutual fund company.

Mutual funds aim to create long-term capital appreciation through investing in equities (stocks) market or in government and corporate debt securities (bonds).

Bonds are financial obligations of a private company or government that repays the principal money and interest to bond owners -- the investors -- who lend money to fund the daily operations of these entities.

On the other hand, stocks represent a share in ownership of a publicly listed company. In this investment, investors are not guaranteed a payment of fixed principal and interest because they share in the profits -- and losses -- of the corporation. Although the risk is high, the potential for capital appreciation is huge. 

“The most important thing of investing in mutual fund is that it is managed by professional fund managers. We always want to maximize our returns but we do not know how to do it,” Jimenez noted.

Fund managers who take the time to study, monitor and research the market’s condition can help a lot in identifying the best place where to invest the funds.  

The net asset value determines the cost for a share of a mutual fund, explained Ma. Charina Fuentes, the company’s head of Strategic Development and Training.

NAV is the total price of the securities that the fund owns and divided by the number of fund shares.

The company’s Prosperity Dynamic Fund help long-term investors to maximize their earning potential through an aggressive fund but flexible during bearish market conditions, Fuentes explained.

She said this is especially intended for people who have moderate and high risk tolerance and those who would like to invest for wealth increase, education funding and retirement.

A lot of investment choices are available out there for prospective investors to choose from but experts say investing in this particular asset management -- the mutual fund -- is a matter of time and good decision. (FREEMAN)