Monday, September 14, 2009

Investing in stocks through mutual funds

Imagine being the owner of PLDT, BPI, Globe, SM, ABS-CBN and other top corporations. Well you need not imagine anymore because it is possible to own a small part in these corporations by buying their shares of stock. As owner, you will also receive part of their earnings and as the company grows, the value of your shares also increases. However, for simple investors like me, I would not recommend buying their stocks directly. You will not be able to diversify your investments because of limited capital. If you have 5000 pesos, you could buy shares of a single company but should the value of that company's stock decrease, your investment will also decrease. I would prefer buying shares of a mutual fund company that invests in Philippine stocks. For the same 5000 pesos, you will then indirectly own shares of more than 30 corporations offering instant diversification, thus protecting your investment. Another advantage with using mutual funds is the availability of professional managers who have the time and knowledge in choosing the best stocks to purchase. Lastly, it is not subject to the 20% witholding tax unlike bank deposits. A list of these funds are available from the Investment Company Association of the Philippines website:

Among the 9 listed equity mutual fund companies, I would recommend the following:
1. Sun Life Prosperity Philippine Equity Fund
2. Philequity Fund Inc.
3. Philam Strategic Growth Fund

These mutual fund companies have been around for a long time, have delivered reasonable returns, have great customer service (with regards to service, I can only vouch for Sun Life since I do not yet own shares of the other two) and have low investment requirements.

Make sure you have studied the funds' prospectus carefully before placing your hard earned money with them. I first started with mutual funds when I was 21. The agent was really amazed because I was the youngest he had so far and the one with the smallest investment. I learned later on that their average investment was 200,000 pesos per investor. Anyway, I still received great service from him and the same returns as the other investors. I do plan to invest with the other 2 funds I recommended once I have saved enough.

Start now with 10% rule in saving and place it in a mutual fund. I hope more Filipinos will discover mutual funds as a vehicle to invest in the stock market. You do not need to be very rich to avail of this type of investment.

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