Don’t have time to explore and invest in the stock market? Then, a mutual fund is another option when you want to grow your extra money. But let me define what mutual fund is. Basically, it is a type of investment wherein you and other investors pool or put their money together to be invested by a professional fund manager into different financial securities such as stocks, bonds, or money market instruments. In order to profit from it, you should invest your hard-earned money every month for 5-10 years. Why did I say that is because there is no safe investment. So in order to cut losses you should acquire more NAV or Net Asset Value (equivalent to number of shares in stocks) regardless if you bought it higher or lower because at the end of your investing (let’s say your target year to withdraw your money is on the 5th year) is still based on what will be the price of your NAV at that time multiply by the number of shares you’ve accumulated. It’s the same as stock market. The higher the price of a share, the fewer you can buy and the lower the price, the more you buy. Think of that concept at all times. Or you can read a definition of it from this site:
“The value of a share of the mutual fund, called the Net Asset Value (NAV), is calculated daily based on the fund’s total value divided by the total number of outstanding shares.”
Where can you buy units or invest your money in a mutual fund? There are companies who offer this type of investment, but you can actually ask your banks if they have this. I’m sure most of them have this because I actually have mine in BPI. There is actually an investment that almost the same as this and that is called UITF (Unit Investment Trust Fund). I will discuss this in a separate blog post so stay tuned of it.
How much is the initial investment to start mutual fund investing? Here in the Philippines, you can start for as small as 5,000 pesos and 1,000 or more for the succeeding months.
Before you go and ask your bank, you should know first your risk profile. What is it? It is a test provided by mutual fund company that you need to take in order to know how much is the acceptable level of risk an individual or corporation is prepared to accept. After that, you’ll get to know whether you are a conservative, moderate or aggressive investor. Basically, we can refer to it as a level of difficulty. In a conservative level, a large percent of the pooled money will be invested in bonds and government securities, less in stocks to avoid high risk. As for moderate level, it is neutral or 50:50. And in aggressive level, based on the word itself, most of the money will be invested in stocks. The returns are higher, but the risk is higher as well. So take all of these in mind.
But just like what I said, if you don’t have enough time to attend your investing, then the mutual fund is the right vehicle to grow your money. There is a trusted person who will handle and invest your money while you are living your own life. But if you have extra time, then study how the stock market works.
Again, I hope you find this post helpful. If you have any question, just leave a comment below and I will do my best to answer it.
Thanks and start growing your money.