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What is a Mutual Fund?


It is a company where it pools funds from many investors and professionally managed by fund managers investing the funds in a diversified portfolio of investments such as stocks and bonds. Defining it simply in the IMG way, it is a vehicle where a person is able to invest in solid businesses being able to have the opportunity to earn what the wealthy people are earning. So how do mutual funds work? 

Investing made easy through mutual funds
Investing made easy through mutual funds
1. Mutual fund is about ownership

When you invest in mutual funds, you own shares in proportion to your investments. When the mutual fund companies earn due to their investments, you receive proportionate share of any earnings on the investments of the funds.

Typically mutual funds invest their funds in the stockmarket and in corporate or government bonds. In the stockmarket, a person can invest or buy shares of big and stable companies like Jollibee, SM or Ayala thus making a person a shareholder or a part-owner of those companies. Investing in mutual funds is like indirectly investing in the stockmarket, instead of you doing the hard work of research, buying and selling of stocks; the mutual fund companies do it for you. 

2. Mutual fund is about accumulation of shares

When you invest in mutual funds, you will receive a number of shares directly related with the invested amount. Example a mutual fund having a price per share of 1php, then your 100,000 pesos can buy 100,000 shares of the mutual funds. Just like buying rice, the price is per kilo and for gasoline; its pricing is based on price per liter. The goal is to accumulate more shares; so that by the time we need our investments (example: retirement), we can sell or redeem our shares without getting depleted right away.

3. Mutual fund is about investing for the long-term.

Investing should be long-term as the longer you stay invested, the higher the growth in value your investments will be.

Example:
Philequity Fund, Inc. (one of the mutual fund partners of IMG)
The price per share last November 23, 2010 is: 19.8651 pesos per share
Today (November 23, 2015): 34.0847 pesos per share

If you invested 100,000 five years ago:
100,000php/19.8651php per share = 5,033.95 shares 

Today:
5,033.95 shares x 34.0847php per shares = 171,580.81 pesos
Your 100,000 grew 71.58% in 5 years or simple average of 14.31% per year growth!!!

To know the list of legal mutual fund companies you can visit: Philippine Investment Funds Association or pifa.com.ph

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