Mutual Funds - Thread # 4!

[mameejhy]

Welcome to our new thread!

Old thread:  Mutual Funds - Thread # 3 http://www.femalenetwork.com/girltalk/index.php/topic,270455.580/topicseen.html

Definition of 'Mutual Fund'

An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.

http://www.investopedia.com/terms/m/mutualfund.asp

Comparison of Mutual Funds and Unit Investment Trust Funds - See more at: http://www.pinoymoneytalk.com/mutual-fund-uitf-comparison/#sthash.0C4v2nbt.dpuf

Offerer. Mutual Funds are offered by investment companies independently registered as such. Therefore, when you buy a mutual fund share, you become a stockholder of that company and you acquire the rights of a regular stockholder, including right to vote and right to receive dividends, among others. UITF, on the other hand, is a trust product of banks. When you buy a UITF, you buy investment units, not shares of the company. Therefore, you do not acquire shareholder rights in that bank. A UITF, although a bank product, is not a deposit product which means it is not covered by the Philippine Deposit Insurance Corporation (PDIC).

Frequently Asked Questions

Can I lose money in Mutual funds?
Yes, depending on market conditions. The fund manager’s job is ultimately to minimize risks and losses for the shareholder.

How much interest do I get as an investor?
Mutual funds do not give fixed returns. Returns are based on the difference between your buying price and the current NAVPS. Market conditions play a major role in determining the annual returns of mutual funds.

What if the fund manager performs poorly or goes bankrupt?
The share holders simply need to appoint a new fund manager.

What prevents the fund manager from running away with my money?
Mutual Funds are structured in a manner that protects the interest of its shareholders. The fund manager does not have any control over the physical assets of a mutual fund except to make buying and selling decisions. The assets are held by a custodian bank, appointed by the shareholders, who in turn can not transact for these assets.

What happens to my investment if I die?
Your shares in the mutual fund will form part of your estate and will be distributed to your heirs (usually surviving spouse and children) accordingly. These are tax issues involved in this regard.

Can I tell the fund manager what to buy or sell?
No. The fund managers will follow the investment parameters indicated in the fund’s prospectus.

What’s in it for the fund manager?
Management Fees. The Amount will vary (normally ranging from 1.5% to 3% of the total assets per year).Note that the NAVPS that are published are already net of the management fee that is amortized daily.

Are mutual fund gains taxable?
No. Mutual funds gains are exempted from taxes based on the Comprehensive Tax Reform Program (CTRP). This was done to promote long-term savings in the country.

Where will you invest my money?
Your money will be invested in the shares of the mutual fund of your choice. Mutual funds, on the other hand, are invested in baskets of securities that vary depending on the type of fund. Hence if you choose an equity fund, then you buy shares of a mutual that invests mainly in listed stocks(90% maximum). A bond fund or fixed-income fund, in contrast, invests exclusively on interest bearing instruments. A mutual fund’s investment universe, including restrictions and risks, can be found in the fund’s prospectus.

How long is the maturity period?
Mutual funds do not have maturity periods which means that the shareholders can actually sell their shres in any banking day. Furthermore, mutual funds are required by law to buy back the shares from the shareholders and to release the proceeds of any sale within seven banking days. Most mutual funds however, charge exit fees for short-term investors and this may vary from fund-to-fund. In FAMI’s case, the exit fee is 1% for the investments of less than 6 months. The exit fee is waived after the sixth month.

http://fami.com.ph/mutual-fund/faq/

[chefron]

"yaman" i mean kase diba baka kase mali ang notion ng iba na if they invest in this kind of instrument eh ok na maging complacent.

[mxherr5]

Well, I'm not exactly getting poor by the 1% (to 2%) per year my fund is
charging me but please do tell what kind of investment do you suggest?

[chefron]

wala naman akong sinusuggest, just saying, with all the hype going on, baka lang kase mamisinterpret  lang ng iba.

hindi ka nga naghirap dun sa 1-2% charge pero parang hindi din namaximize yung potential ng pera.

[yena^_^]

^There was this man who puts 300K in a mutual fund 14 or 15 years ago, now it's already around 3-4M. If hindi nya ginawa yun and he spent his 300K back then, he would be 3M poorer now. 

[chefron]

Heard about him too! One lucky guy.

[mameejhy]

hindi ka nga naghirap dun sa 1-2% charge pero parang hindi din namaximize yung potential ng pera.

Ok na rin 1-2% charge compared with savings, time deposit na 1-2% lang ang return. Sa mutual fund you can gain at least 5% return.

[chefron]

parang hindi lang lumipat yung pera noh?

long term investing talaga.

[ikaela]

"yaman" i mean kase diba baka kase mali ang notion ng iba na if they invest in this kind of instrument eh ok na maging complacent.

I agree with you, hindi ka naman talaga yayaman through investing lang. Investing is more of the preservation or the compounding of wealth that you already have. Even Cecilio Castro, the guy who turned 31k to 4M in 10 years through Philequity, had an extra 4k to 10k every one or two weeks to invest in the mutual fund. Any person who has an extra 4-10k each week is considered rich by Filipino standards.

Another good example is the ever famous Warren Buffett. He's made billions in the stock market, but then, he also had at least 10 million dollars to start with.

If you look at the list of the richest people in the world, majority of them made their wealth through business. Investing was how they preserved and snowballed that wealth.

[yena^_^]

^sis I'm just curious about the 10M because when I read The Snowball: Warren Buffett and the Business of Life, he put in only $100, the rest of his share would come from future fees he earned by managing the partnership.

If we backtrack and consider all his investments since childhood he only have around $9,800 when he was 20 and $174,000 ($1.47 million inflation adjusted to 2012 USD) when he was 26, the time his boss Benjamin Graham retire.  So I guess the rest of the 10M if he really started that much (inflation adjusted) was from his partners.

[ikaela]

^Buffett is thought of as this great investor who made his wealth in the stock market, but what I'm just saying is it wasn't actually the stock market that made him wealthy. It was the insurance business that he had. I'm sure you have the facts, having read his book -- he already had millions accumulated from selling insurance, and that is what he put into the stock market and snowballed into a billion-dollar fortune.

[yena^_^]

^He invested by buying shares of companies usually in trouble (cigar butt) through his many partnership. Later na yung insurance (1967) when he purchased National Indemnity. Though I agree insurance provide him a lot of cash to invest but he was already buying shares and he even sold shares from American Express to buy National Indemnity.

Eto sis, I copied from Wikepedia...

In 1962, Buffett became a millionaire because of his partnerships, which in January 1962 had an excess of $7,178,500, of which over $1,025,000 belonged to Buffett. Buffett merged all partnerships into one partnership. Buffett invested in and eventually took control of a textile manufacturing firm, Berkshire Hathaway. In 1962, Warren Buffett began buying shares in Berkshire from Seabury Stanton, the owner, whom he later fired. Buffett's partnerships began purchasing shares at $7.60 per share. In 1965, when Buffett's partnerships began purchasing Berkshire aggressively, they paid $14.86 per share while the company had working capital of $19 per share. This did not include the value of fixed assets (factory and equipment). Buffett took control of Berkshire Hathaway at the board meeting and named a new president, Ken Chace, to run the company. In 1966, Buffett closed the partnership to new money. He would go on to claim that the textile business had been his worst trade.[30] He then moved the business into the insurance sector, and, in 1985, the last of the mills that had been the core business of Berkshire Hathaway was sold.

[yena^_^]

Gieco stock can be considered his first investment in insurance companies but when he bought it in 1950s he was just a mere shareholder. It was only in 1996 that Gieco became a subsidiary of BRK.

[ikaela]

^That is good to know, I should really get a hold of one of Buffett's books soon. Anyway, the Wiki entry still reads that he made his money through his holding company, and not through passively investing -- "buying and holding" -- in the stock market. All I'm saying is, in connection with what chefron said, Buffett became a billionaire because he was already a millionaire. He made billions in the stock market, he made it to the world's billionaires list, because he already had millions to invest.

Ultimately, it's just a way to put out a sort of warning to those who are new to mutual funds/investing: don't expect to become rich just by passively investing in a mutual fund, in UITFs, the stock market, or etc. If you look closely at the stories of the people who made millions in investing, more often that not, it's because they had already had money in the first place.

[yena^_^]

^He also made millions through investing in the market. The guy is always against speculative investment, two of his greatest regrets are buying the cigar butts which gave him lots of problem later on and selling his share of Cities with small profit when he was 11 and then the price shoot up after that. Imagine how long he holds his GIECO share? Remember he already had it in 1950.  He also regretted his earlier investment style because he did not have time for his family he was there lock-up in his office for hours analyzing moody's, hinahatiran lang siya ng food ng wife nya. His children grew up na salat sa attention niya, kaya siguro walang sumunod sa apak nya. That's why he changed his strategy later in life. Read mo yung book sis, it's entertaining, sometimes funny and you learn about his two wives.   

Although the guy also advises against hedge fund because of high management cost, instead he advised on buying low cost ETFs. Of course we can't do that here in the Philippines because our ETF market is not yet mature, so mutual fund is the next best option for busy working people to get richer and the management pay is way cheaper than mutual funds in the US. Keep your day job, invest regularly and forget.

Of course a lot of people are against his advise on being passive kasi pagsinusunod yung advice nya maraming fund managers and brokers ang hindi kikita. 

STAY PASSIVE, KEEP COSTS LOW
http://www.reuters.com/article/2014/03/03/us-buffett-letter-advice-idUSBREA221YY20140303

[caramelli]

interested ako dito, kaso newbie pa.. backread muna ako.

[oreo08]

I invested before in stocks but I stopped before migrating to Australia... ngayon lang ako nagkalakas ng loob maginvest dito at mas gusto MFs muna kasi medyo conservative

starting investment here is $600 sa online broker namin and may fee na $19.95 if selling ng shares worth up to 10,000$

[aNgelofThEMorning]

May nakapag-try na ba sa inyo mag top-up sa FAMI thru metrobank direct? Kailangan ko pa ba email sa kanila yung confirmation receipt?

[tinapay]

anyone familiar with mutual funds offered by BPI? di ko kasi maintindihan...

[chefron]

UITF lang meron ako from BPI