Here’s a little trivia for you. Magellan is an explorer yes. But the people behind it are also investors. As you see, explorers need to hire and buy materials needed for exploration and it spans from months to years. Can you imagine how much money they would need to buy things they need to survive those long months in the ocean? When they get back with the spices, it will be sold and the investors will get their money back plus an interest for lending the money. Too bad for Magellan though, but I hope you get the point.

Here are some of the most popular investment vehicles in the Philippines.

Mutual Funds

Are good and safe investments.

Investing in mutual funds is one of the safest way to earn. It is where your money will be invested into different sources such as real estate, forex, stocks and bonds together with other mutual funds investors. The money is handled by a professional financial manager. The good thing is that you can start slow and with little money.

Currency Trading (Investing in Currency)

For people that can tolerate high risks.

Also known as Forex Trading or forex investing. Where you buy different currency such as $ dollar in the hopes that it will appreciate in value versus the peso. Remember the time where the dollar was Php30.00 ? You bet a lot of people became millionaires when the peso plummet to Php49.

Stock Investing

For people that can tolerate high risks.

It is where you buy a share of a company or a stock. Being a stock holder allows you to be a part owner of the company. Part owner of its profits and its liabilities as well.

Real Estate Investing

More for the long term investor.

I’m sure that many people would claim that this is the best investment vehicle as land and properties will always appreciate in value. This is also a good investment if let’s say you own an apartment or condominium. Those are passive income and you don’t have to work once the building is done.

Doing Business

The good ol’ fashion way of making money.

Sell a product and put on the price tag. Sell a service and charge for it. This is the old fashioned way of making money. It’s fun and can be really lucrative.

The most important part here is to never stop learning. Investing is not taught in school. Nor the richest people in the Philippines was not taught by their professor how to be rich. Therefore, never stop learning and thinking of ways where your money will grow. Once you think of it that way, you’ll see opportunities so clearly.

Did I missed something? Let me hear your thoughts by commenting below.

With my research, I found out that most banks will give you 1.75% - 3.00% interest depending on how long you intend to place the money in time deposits.

Basing from our given. I already have money on my mutual funds for 1 year which is Php200,000 initial deposit worth of mutual funds. In 1 year, it gained Php15,000 of completely passive income.

Now, if we do some math for the computation of earnings for the time deposit account.

1 Year Time Deposit (3%)

Php200,000 x 0.03 = Php6,000 profit

1 Year Mutual Funds

Php200,000 I earned P15,124.39 (based from the post Mutual Funds vs Savings Account)

Almost 50% difference in profit.

As you can see, Mutual funds still beat Time deposit accounts. But the advantages are even  better. You see, when you invest, you want it to be liquid. Meaning, if you need the money, you’ll be able to pull it out whenever you need it. In time deposits, you won’t be able to touch the money until the time is over. With mutual funds, there is only 90 day holding. And after that, you may take the money or decide to keep it.

I’m not suggesting to place your money in mutual funds if you’re already decided to time deposit. Time deposits are also good as a more diversified way to invest. But of course, there is no risk in time deposits compare to mutual funds. The important thing to note that, investing in mutual funds involves a little risk that is why there is a bigger return.

If you’re young with money to invest, those that have volatile markets are a way to go in investing high risk and high reward investments. Investments like forex trading philippines stock trading. But that’s a different topic. Right now, we want a good and safe investment with little risk and decent rewards - mutual funds.

And also, most people who come to this site and send us an email asking how mutual funds earn money? To make the story short. I made this post to explain briefly how mutual funds earn money. Mutual funds is a public pool of money from different small time investors. A seasoned manager will invest the money to different vehicles such as bonds, real estate, stocks and forex. The money earned will be divided to the whole investors. That is why, when we buy funds, they are called NAVPS or NAV per share. As in any kind of investment, there are potential losses and gains. Make sure you spend the money that you are willing to risk.

But keep in mind that mutual funds is not the end all of investing. Mutual funds is just the beginning. While you learn what affects your earnings, be it goverment stability and news. You will see a decline or gain in your profit. Once you know these elements that affect your profit, you might want to learn forex currency trading systems then stock market. There different ways to skin a cat and different ways to earn money WITHOUT LIFTING A FINGER. You just have to be eager to learn and risk a little bit of money.

I have a personal account at a bank and I placed money on it around P200,000… That time, I also bought mutual funds worth P200,000. This was a year ago… I noticed that every month, my savings account would earn something like 50 - 100 pesos due to its interest. Multiplied that number by 12 and you have your 1 year interest of around P1200 per year. Though P1200 is still money considering that you didn’t do anything.

Now lets move on to the result of my mutual funds. My P200,000 worth of mutual funds actually earned P15,124.39 in 1 year. Which is, I didn’t do anything for that money. And is still earning as we speak. This is just 1 year. I’m 25 years old and I plan to retire at age 60. If that would be around 35 years from now and I still put in extra money on that fund, how much would you think I would make out of just the interest? That interest would most likely be able to help me when I retire and enjoy my life.

Annual Earnings So Far

SAVINGS ACCOUNT - P1200 earned
MUTUAL FUNDS - P15,124.39 earned

This is the goal of mutual funds Philippines. To enlighten you of the benefits of mutual funds. And that it is a good and safe investment. You won’t get rich with it quick but it will certainly help you out when you retire.

Final Thoughts

Final thoughts, if you have money just sitting in the bank, use it and invest it. Start early, Invest early and time will be on your side. Be financially literate and poverty would just be a fantasy. Of course, keep in mind that you must always have money on your savings account just to be on the safe side. This is your money that you might need in case of emergency. Think of mutual funds as business investment.

Did You Know?

• There is no tax for mutual funds earnings?
• You are helping the economy of the Philippines by investing.
• You earn more if you start early because of compound interest.
• Mutual funds are better than savings account.

Suddenly, life insurance has been given a face-lift of sorts, becoming more attractive to more and more consumers. But with mutual fund companies and trust departments vying for your savings, which one should you choose? The main selling point for variable life insurance is that “you get the best of both worlds.” That is, you get protection coverage and capital appreciation through the convenience of just one product. Ironically, this can be a double-edge sword – the advantage can be a disadvantage. There are two arguments to consider:

Argument against VULs: You get the best of both worlds … but your money doesn’t work as hard. If your premiums pay for insurance and investment, this then begs the question of whether you should even bother with the protection element instead of simply putting your money in standalone investment funds.

With mutual funds and uitfs, the entire sum, save for the sales load in front-end transactions, is invested in the fund of choice. With variable universal life insurance, your money is allocated towards paying for the insurance coverage and purchasing shares of the investment fund you wish to participate in. Under this setup, it would appear that investing purely in pure investment funds has an edge, as everything is put in the pot for growth and appreciation.

Argument for VULs: You get the best of both worlds … and can actually produce higher returns. However, there’s another way of looking at this. While VULs may split your resources in two, resulting in a smaller amount being diverted to the investment portion, if for some unforeseen event, you suffer from a disability or accident or – heaven forbid – you lose your life, your insurance benefits will kick in. It may sound morbid and insensitive, but the return on your investment can’t be matched by any other pooled investment.

If you avail of a host of benefits known as riders, such as critical illness or accidental dismemberment, you get sums over and above the basic life insurance coverage for the treatment of dreaded diseases or compensation for a disability resulting from an accident.

In the long run, a dedicated fund for such contingencies may be one of the most economical hedges against unforeseen health-related expenses. Such need-specific riders are only available as add-ons to unit-linked products – something that cannot be done with pure mutual funds. That said, what you stand to earn in a mutual fund placement may only wind up depleted by the very same contingencies the above riders can help provide for.

The bottom line is that there is a place for both unit-linked products and standalone investment funds. We need only to remember one of the basic principles of investing, and that is diversification. Whether you are single, married, with or without dependents, there is merit in investing in life insurance products that offer both protection against various contingencies as well as competitive returns. Beyond that, there is also an argument for investing in pure growth instruments such as mutual funds. One does not necessarily take the place of the other. Instead, both are sound alternatives to take advantage of in the constant fight against uncertainties, inflation, and catastrophic events.

This article is from MoneySense,  www.moneysense.com.ph

MANILA, Philippines – The Sun Life Asset Management Co. Inc. (SLAMC) has re-launched its Sun Life Prosperity Dollar Abundance Fund (SLP DAF) from a dollar-denominated fixed income or bond fund to a balanced fund as more and more domestic mutual funds increase their focus on the foreign-currency funds.

The net asset of the SLP DAF stood at $17.2 million (approximately P846 million) yesterday. It is targeted to grow to $30 million or roughly P1.5 billion end 2009.

“The value of dollar savings in the Philippines reportedly amounts to some $20 billion, and it is fair to say that we want a piece of that,” Ben Thomas P. Pañares, chief operating officer of SLAMC said.

Total value of all foreign-currency denominated mutual funds managed by various fund managers as of April 2009 was P10.2 billion. Total value of all assets under management (AUM) within the mutual fund industry stood at P61.8 billion end April.

Presently, six fund managers operate 10 foreign currency-denominated mutual funds. Of the 10 funds, two are euro-denominated funds and the rest in US dollars.

All foreign currency-denominated funds are bond funds except SLF DAF.

Fixed income or bond funds are low-risk, lower-return investments while balanced funds are a mix of bond funds and equity funds (high returns, high risk investments).

Foreign-currency mutual funds, managed by domestic asset management firms like SLAMC, are invested mostly in dollar-denominated ROPs.

The SLF DAF is the first local foreign currency mutual fund that is a balanced fund. That means at any given time, 60 percent of the fund is invested in dollar-denominated bond funds and 40 percent in dollar-denominated equity funds.

“The US dollar is expected ultimately to perform better than the peso,” Pañares said.

All forecasts point to an exchange rate of between P51 to P53 versus the dollar by yearend. Historically, the peso has fallen to a low P56 to the dollar.

Pañares added that the SLF DAF is likewise an option for local investors to diversify their dollar-denominated portfolios from ROPs to dollar-denominated investments from foreign mutual funds.

Fund managers revealed that majority of the investors of foreign currency-denominated funds are corporates. They likewise admitted that they are targeting the high networth individuals that withdrew their investments overseas, and are looking for opportunities domestically.

The SLF DAF will be invested in overseas mutual funds that are rated five-star by Morningstar, a Chicago-based research firm.

SLAMC is ranked third largest fund manager in the country’s mutual fund industry. Its AUMs stood at P13.7 billion end May this year. – TPT

A stockbroker is a person or a corporation authorized and licensed by the Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE) to trade securities.

The stockbroker can be a live person or an online system. A discussion of the pros and cons of each is in the forum thread Do you prefer live or online stockbrokers?.

List of Online Stockbrokers in the Philippines

Here is a list of registered online stock brokers in the country. Normally with an online broker, you are not assigned a live trader. Instead, you do trading all by yourself using the broker’s online system.

Visit each online broker to compare their fees, support and service, and quality of their trading system.

AB Capital Securities, Inc.
Website: www.abcapitalonline.com

Accord Capital Equities Corporation
Website: www.philstocks.ph

BPI Securities Corporation
Website: www.bpitrade.com

CitiSecurities, Inc.
Website: www.citiseconline.com

Diversified Securities, Inc.
Website: www.dfnn.com

F. Yap Securities, Inc.
Website: www.2tradeasia.com

First Metro Securities Brokerage Corporation
Website: www.firstmetrosec.com.ph

RCBC Securities, Inc.
Website: www.rcbcsec.com

But what are mutual funds and why do a lot of Filipinos consider it a sound investment? And how do you go choosing the best mutual fund for you? Let’s try to answer these questions by taking a closer look at the mutual fund industry in the Philippines.

Mutual Funds Defined

Although it may seem rather complicated, mutual funds can be defined in very simple terms. Simply put, a mutual fund is an investment company that puts together the resources of individual and institutional investors to accumulate a substantial asset base and then invest it in a diversified portfolio of security investments such as stocks and bonds for maximum gain. The professional fund manager may also decide to invest in some short term money market investments, other securities or assets, or a combination of some or all of these to achieve its goals.

Legally speaking, the investors are the rightful owners of the mutual fund company. The shares they purchased represent how big or how small their ownership is. Their shares likewise determine how much income they will ultimately generate from their investments.

So how do mutual funds generate income for its shareholders? Well, they do so in two ways. The first one is through the form of dividends and interests from its investments, and the other one is through capital gains (this happens when the value of the security increases). In any case, the mutual fund company will pass all net dividends, interests and profits to its shareholders in the form of distributions.

The Pros and Cons of Investing in Mutual Funds

Like all other investment options, mutual funds have their own unique pros and cons. On the positive side, mutual funds are managed by an experienced and capable fund manager who does all the heavy work for you – from researching and selecting the most suitable investment options to monitoring your investments. All you need to do is sit down, relax, and hopefully watch your money grow.

Your mutual fund manager will also ensure that your money is well protected from any unforeseen eventualities by spreading them across many different companies and sectors. As the saying goes – never put all your eggs in one basket!

Another attractive feature of mutual funds is their liquidity. Mutual funds are readily convertible to cash, whenever you may need it. Under existing laws, you can get your money within seven days of surrendering it but some companies can give you back your investments within the day!

And the best part is that most mutual funds require minimal investment. Some require as low as P5,000.00 to get you started, so even the average Juan dela Cruz can profit from this rapidly growing industry.

Now, it’s time to tackle some of the disadvantages of investing in mutual funds. Mutual funds may be a low or medium risk investment, but there’s always the possibility that you won’t get a positive return for your investment.

And because the fund manager is the one at the helm of control, you will not be involved in the decision-making process. All you can do is hope that your fund manager will make the best decision for you and the other shareholders of the company. There are also costs and fees involved when you decide to invest in mutual funds, and these can affect your projected returns, too.

You may also need to consider your timeline. Remember that mutual funds are best suited as medium to long term investment.

Taking all these factors into consideration, you can now have an idea whether investing in mutual funds is right for you. If you decide to give it a go, you now need to know the steps in buying a mutual fund.

Buying Mutual Funds

Now that the hard part is over and you have chosen the mutual fund company you are most interested in doing business with, you just need to fill up an application form provided by an authorized broker and you’re done! Depending on the company, you may also need to pay an entry fee.

Just remember, you need to take a proactive approach in monitoring your funds. After buying your shares, take time to learn more about mutual funds.

Let’s admit it. Mutual funds can provide you with more impressive returns on investment (ROI) as compared with Certificates of Deposit and other money market funds that offer a pitifully low interest rate. Now, the stock market offers a more attractive rate but would you consider investing in it if you’re a novice investor? Well, most probably not. The stock market is such a complex matter to deal with if you are not familiar with its comings and goings, and its ups and downs.

That leaves you with the mutual fund. Mutual funds allow you to “test the waters”, so to speak, before you decide to invest a big portion of your money in it. One of its best features is that it spreads your investment over a portfolio of stocks to minimize your risks. In essence, mutual funds let you spread your assets over a number of different investment options and advocate against keeping all your eggs in one basket.

But have you ever wondered how mutual funds evolved? Who could have thought about it, and what could have probably led to its development? Let’s take a closer look.

The Dawn of Mutual Funds

There are many theories as to where and when the evolution of mutual funds originated. Some historians cite the launching of King William I’s closed-end investment companies in the Netherlands in 1822 as the official birthplace of the mutual fund while others give credit to Adriaan van Ketwich, a Dutch merchant who created an investment trust in 1774, as the rightful originator of the concept.

Soon enough, France and Great Britain caught up with the soundness and validity of the idea. By the 1890’s, the mutual fund concept has reached the United States. However, the mutual fund then was very different from the mutual funds we know now.

But with the creation of the Alexander Fund in Philadelphia, Pennsylvania in 1907, the modern version of the mutual fund started to take shape. Several features such as the semi-annual issues and the investors’ ability to make withdrawals on demand had been incorporated to the general concept.

The Evolution of Modern-Day Mutual Funds

The modern mutual fund came into existence with the creation of the Massachusetts Investors Trust on March 21, 1924. Roughly a year later, the Trust already has 200 shareholders and assets amounting to almost $400,000.00.

The fund went public in 1928. During the same year, Wellington Fund, the first mutual fund to include stocks and bonds, was launched. The value of stocks quadrupled in value, prompting investors to invest heavily on the market. As such, 1928 was considered as one of the most glorious years in the history of mutual funds.

Then came the Wall Street Crash of 1929 – the most devastating stock market crash the United States had ever seen. It was also the same event that ultimately led to the Great Depression. The value of stocks reached rock bottom and the demand for goods fell sharply.

Despite all the gloom and doom of those dark years, one good thing resulted from the Great Depression. The government finally took notice of the mutual fund industry and passed two important laws to protect the investors – the Securities Act of 1933 and the Securities Exchange Act of 1934.

Under the new law, mutual funds are required to register with the Securities and Exchange Commission (SEC). It further required mutual fund companies to provide sufficient information about the securities being offered for sale to its potential investors to avoid any deceit or misrepresentation in the process. The final touch was put in place with the enactment of the Investment Company Act of 1940 where additional regulations were imposed to provide greater disclosure and minimize conflict of interest.

These laws renewed the investors’ confidence in the stock market and once again, the mutual fund industry started to flourish. Who would have expected that by the end of the 1960’s there would be about 270 funds with an accumulated assets amounting to $48 billion? And that it will capture much public attention in the 1980’s and all throughout the 1990’s?

But that was just the beginning. The mutual fund industry is now gaining worldwide recognition and is expected to bloom even more in the years to come.

Overall, the mutual funds in the Philippines is starting to get back into shape after the bear market slowdown last year. It proves that investing in mutual funds is a good safe investments and the loss you get on the early years is just temporary and will always get back on track.

YEAR-TO-DATE PERFORMANCE OF MUTUAL FUNDS IN THE PHILIPPINES
As of the 1st Quarter of 2009 (January to March 2009)

EQUITY FUNDS (primarily invested in Peso equity securities)

1. Philequity Fund - 7.99%
2. Philequity PSE Index Fund - 7.40%
3. First Metro Save and Learn Equity Fund - 6.60%
4. Philippine Stock Index Fund - 6.06%
5. Philam Strategic Growth Fund - 5.73%
6. United Fund - 4.67%
7. Sun Life Prosperity Phil. Equity Fund - 4.55%
8. ATR KimEng Equity Opportunity Fund - 4.36%
9. DWS Deutsche Philippine Equity Fund - 2.92%

BALANCED FUNDS (primarily invested in Peso debt and equity securities)

1. ALFM Growth Fund - 5.63%
2. First Metro Save and Learn Balanced Fund Inc. - 5.22%
3. Philam Fund, Inc. - 4.80%
4. GSIS Mutual Fund - 4.79%
5. MFCP Kabuhayan Fund - 3.82%
6. Optima Balanced Fund - 3.68%
7. Sun Life Prosperity Balanced Fund - 2.43%
8. First Galleon Family Fund - 0.28%

FOREIGN CURRENCY-DENOMINATED BALANCED FUNDS

• Sun Life Prosperity Dollar Advantage Fund - 5.70%

BOND FUNDS (primarily invested in Peso debt securities)

1. Prudentialife Fixed Income Fund - 2.61%
2. Cocolife Fixed Income Fund - 2.57%
3. Sun Life Prosperity GS Fund - 2.06%
4. Sun Life Prosperity Bond Fund - 1.60%
5. Philam Bond Fund - 1.45%
6. ALFM Peso Bond Fund - 1.32%
7. First Metro Save and Learn Fixed Income Fund - 0.76%
8. Philequity Peso Bond Fund - 0.47%
9. DWS Deutsche Philippine Fixed Income Fund - 0.38%
10. Ekklesia Mutual Fund - No data

FOREIGN CURRENCY-DENOMINATED BOND FUNDS

1. MAA Privilege Euro Fixed Income Fund - 8.84%
2. Grepalife Dollar Bond Fund - 7.82%
3. Sun Life Prosperity Dollar Abundance Fund - 7.18%
4. Philam Dollar Bond Fund - 6.48%
5. Philequity Dollar Income Fund - 4.78%
6. MAA Privilege Dollar Fixed Income Fund - 2.28%
7. Grepalife Fixed Income Fund Corp. - 2.07%
8. ALFM Euro Bond Fund - 1.20%
9. ALFM Dollar Bond Fund - 1.03%
10. AIG Global Bond Fund Phils. - (4.39%)

MONEY MARKET FUNDS (primarily invested in short-term Peso securities)

1. Sun Life Prosperity Money Market Fund - 0.54%
2. ATR KimEng Money Market Fund - 0.52%
3. Philam Managed Income Fund - 0.35%

Stay tuned for more information and how to prosper using mutual funds in the Philippines.