9 Advantages of Mutual Funds

Different industries have innovated except the financial industry. Before, we needed separate gadgets for different uses: camera, walk-man (a music gadget: the younger generation might not know what this is), video camera, t.v. and desktop computer. Now, a smart phone can do it all. 

However, in the financial industry most people are still saving the traditional way – saving in the banks. Retirement savings are deposited in time deposits or special savings account earning very minimal interest rates. Financial vehicles like UITF’s and mutual funds exist as alternative savings vehicle however, the need to financially educate Filipinos still remains a huge task. Today let us learn more of the advantages of mutual funds.
Mutual Funds are alternative ways to grow your money
Mutual Funds are alternative ways to grow your money
Related Article:
9 Concepts and Benefits of Mutual Funds

1. Professional Management
Many people have neither the time nor the training to personally manage their investments. They want the peace of mind that comes from knowing financial and economic specialists are managing their money.

Example: Soldivo Fund (a partner mutual fund company of IMG)

Directors and Executive Officers
(Source: Soldivo Fund Prospectus)

David Leechiu (Chairman, President) – country head of Jones Lang Lasalle
Richard Kho (Director) – Technistock’s Chief Executive Officer and company founder
Jose Emmanuel Jalandoni (Director) – President of Ayala Land Hotels and Resorts Corporation
Randell Tiongson (Independent Director) – Director of Registered Financial Planner Institute Philippines with 25 years of experience in the Financial Services Industry
Henry Ong (Independent Director) – Executive Director of Registered Financial Planner Philippines. President of Business Sense Financial Advisors
Tranquil Salvador (Corporate Secretary) – is a partner, head of the Litigation and Arbitration Department and Chairman of the Environmental Law and Mining Department of Romulo, Mabanta, Buenaventura, Sayoc & de Los Angeles (Romulo) and Head, Legal Assistance Service (LAS) of Romulo to the Asian Development Bank.
Maria Anna Concepcion Mendoza (Treasurer) – Chairman and President of Rampver Financials, Inc. She has 18 years of experience in financial services with forte in service administration, systems and relationship management.
Elizabeth Ison (Compliance Officer) – Head of Compliance and Governance at Rampver Financials, Inc.

2. Diversification
To help reduce the risks inherent in any investment, a mutual fund carefully selects a diversified portfolio. This is a fund share represents an interest in a broad range of securities from various industries.

3. Asset Allocation
A process of developing a diversified portfolio by mixing different asset classes – such as stocks, bonds and cash equivalents – in varying proportions to help reduce risk and maximize potential return.
Sample Portfolio of PhilEquity Mutual Fund
Sample Portfolio of PhilEquity Fund (Partner Mutual Fund Company of IMG)
4. Risk vs. Reward
The greater the risk, the higher the potential rewards. Since mutual funds are also invested in the stockmarket, the results of investment may be worth more or less than their original cost when ultimately redeemed due to the up and downtrends in the market.

Types of Mutual Funds
Types of Mutual Funds and its Risk vs. Reward Ratio
5. Beat Inflation
Inflation is the increase of the prices of commodities thus reducing the buying power of money. In the Philippines, a ten-year average rate of inflation is between 4 to 6% per year. It means that a 100 pesos value meal after a year may increase its cost to 104 or 106 pesos thus your 100 pesos can no longer purchase the same value meal. Through investing in mutual funds, we can beat inflation with an average annual interest of 8 to 12% per year. (These rates are achievable is the person is investing for a period of 3-5 years or more. Actual values may be lower or higher)

6. Liquidity
One of the best advantages of mutual funds is its liquidity. It means your money is always available. No need to find a buyer unlike in real estate. The fund is always ready to buy back its shares from you. Shares can be redeemed and collected within 7 days at the prevailing price per share in the market.

7. Money Cost Averaging
This is a strategy of investing money in a constant amount, regardless of the price of the investment. Over a period of time, this generally results in a lower purchase price per investment than if the total purchase was made at one time. (we will be posting a detailed content about this soon.)

8. Compounding
Compounding takes place when the returns (such as interest, dividends and capital gains) on investment start earning returns of their own. Through investing in mutual funds, one can experience the power of compounding as explained in this article (see link).

9.  Regulation
Mutual funds are closely regulated by the Securities and Exchange Commission. All legal investment companies are also a member of Philippine Investment Funds Association (PIFA) and are listed in their website: where one can monitor the performances (growth of investments) in their website.

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