Nothing is certain, especially if you are an OFW. One day, you’re earning in dollars and living the life of a millionaire and the next day, you’re back home because you were among those workers who were retrenched. This is why it is imperative that you invest your money to make it grow.
One of the ways to grow your money is by investing in mutual funds. Here’s what you need to know about it:
What is a mutual fund?
Mutual fund is a type of investment fund that collectively pools money from various investors, both individual and corporate. This pooled money will be managed by a professional fund manager, who will then invest the fund in stocks, money market instruments, bonds, and other forms of securities.
The value of each share of the mutual fund is called Net Asset Value or NAV. It is computed daily based on the total asset value of the fund divided by total number of outstanding shares of the fund. If NAV is increasing, then that means you are earning.
You can earn from mutual funds in two ways, which is already net of charges and expenses:
- When the securities held and owned by the fund increased in value
- Through dividends or interest income received from the assets held by the pooled fund
What are the different types of mutual funds?
- Stock or Equity Fund – This type of mutual fund is invested in stocks listed in the Philippine Stock Exchange. Among all types of mutual fund, stock or equity fund yields the highest returns. Apparently, this type comes with highest risk as well.
- Bonds Fund – This type of mutual fund is invested in fixed income securities like government securities (T-bills, treasury notes, bonds) issued by the government or commercial papers (LTNCD, corporate bonds) issued by Philippine companies. Possibility of loss is lower compared to stocks because bonds are usually guaranteed.
- Balanced Fund – This is a mixture of equity and bonds fund, thereby creating “balance” between high-growth-high-risk investment and conservative growth of fixed income securities. If you want to be on the “safe side,” this is highly recommended.
- Money Market Fund – This is the same as Bonds Fund because the pooled money is invested in fixed income securities. Unlike Bonds, money market fund is good for one year or less.
Tips in choosing mutual fund
- Identify your investment goal. Are you willing to take a risk to grow your money? Or do you prefer to stay on the safe side? It is important that you establish your investment goal first to help you decide what kind of mutual fund you will get. This way, you are more comfortable in putting money for investment.
- Know the risk you are willing to take. Are you a risk taker? Then stock or equity fund is your best option. If you are not willing to take a risk, then bonds are recommended. Otherwise, balanced fund is ideal if you prefer medium growth with medium risk.
- Explore and then choose. There are many banks and financial situations that offer mutual fund. Make sure to look into them first, compare what they have to offer, ask recommendations, and then decide who to give your money to. Trust your gut and find someone you can trust.
Still, don’t limit yourself with mutual funds since this is just one of the many ways to make your money grow. In case you need extra funds to, say open up your own business, Balikbayad is here to help. Submit your application form online for pre-approval and we will get back to you as soon as we can.