What Happens to my Investment if Something Happens to me?

Your shares in the mutual fund will form a part of your estate and will be distributed to your heirs (usually surviving spouse and childred) accordingly. Rest assured, your investment will not disappear, or be "taken back". To ease the transfer of the fund shares you may want to consider opening a joint account or trust account.

How to Make Your Investment

• A Mutual Fund Investment is considered to be one of the best long run investments that one can make.
• It is a great mechanism to save and to let your money work for you.
• It is a means to have your hard-earned savings, managed by professional investment managers.
• It is a way for you to make investments in sophisticated equity or fixed income securities huge investments to quality.

There are two ways by which you can make an investment in a mutual fund:
1. You can make a single investment in any mutual fund of your choice, or
2. You may either participate in a "Monthly Investment Program", and have your salary deduction invested in a m utual fund of your choice.

Here are simply procedures in making a single investment in mutual funds:
1. Make sure you get and read a copy of the prospectus of the mutual fund that you have chosen.
2. Fill out an Investment application form.
3. If you are investing on behalf of a corporation/company, please submit a copy of the following:
- Articles of Incorporation and By-Laws
- SEC certificate of registration
- Secretary's certificate / Board resolution authorizing the investment
- Secretary's certificate on the percentage of ownership / capital stock held by non-Filipino shareholders.

You may make your investment either in Cash or Cheque payable to the fund of you choice.

Thanks to Metro Asset Management.

This article intends only to educate and enlighten readers about investments.

How do we Invest in Mutual Fund?

You can join by buying shares of the mutual fund. The price of these shares, also known as the Net Asset Value per share, changes daily depending on the performance of the underlying investment portfolio. As the Net Asset Value increases, the value of your investment also increases. The mechanics of investing in a mutual fund are very similar to buying shares in the stock market.

Standard Procedure on Investing in Mutual Fund will be posted in the Next Article.

What is Diversification? Why is it important?

Diversification simply means "not putting all your eggs in one basket". This is especially important in investing. In a well-diversified portfolio, losses from some investments can be off-set by gains in other investments. This reduces the overall fluctuations or volatility of the value of the portfolio. By putting money in a mutual fund, you gain instant access to a diversified portfolio of investments. It is, however, also important to realize that not all risk can be diversified away. There are certain economic, market and political factors which may affect all investments adversely.

Is my Principal Secure or Can I Lose Money in Mutual Fund? any Risk?

As all other investments ways, investing in a mutual funds includes an average amount of risk. Stock and bond prices go up and down every day. So as the value of the underlying instruments which pool of funds was invested is adjusting, so does the valueof your mutual fund money invested. Depending on the market conditions, there may be periods in which you may lose money. However, until you actually liquidate or withdraw you money invested from the mutual fund, these will simply remain, "paper losses" which can be recovered when market conditions stabilize.

In addition, the fund managers of the fund also do many things to control and minimize the risk. First, they analyze all investments thoroughly before including any stock or bond in the portfolio. Second, they ensure that the fund is properly diversified, i.e. invested in many different stocks or bonds. As such, a drop in the price of one investment may be off-set by gains in another. Third, the fund managers are subject to regular and internal investment restrictions that prevent the fund from being invested from certain speculative investments and encourage proper diversification.

While there are risk in mutual fund investing, the returns can also be reqarding in the long-run. There is always a risk return on trading in any investment. What is important is to know how much risk you are willing and able to take and select an investment whose risk provide matches yours.

How Much I Earn If I Invest in Mutual Fund?

Mutual Funds are not time deposits and therefore do not pay out a fixed rate of return. Mutual funds invest in stocks listed on the stock exchange as well as bonds issued by the governement and corporations. As a result, the value of your investment fluctutates daily depending on the performance of the underlying investments. Because of this, your return cannot be guaranteed. Your actual rate of return depends on many factors such as the performance of the underlying investments as well as general market and economic conditions. However, over the long-term, investments in mutual funds outperform traditional time deposits placements.

What Are the Benefits of Investing in a Mutual Fund?

For an affordable initial investment amount, you gain access to various potentially higher yielding investments normally available to investors with much larger funds to invest. A mutual fund makes this possible because it pools together the funds of hundreds or even thousands of small investors. The pool of funds is therefore large enough to access these potentially higher yielding investments.

Mutual fund investors also benefit from the investment management expertise and market knowledge of the team of professional fund managers that manages the pool of funds. These fund managers ensure, that the funds are optimally invested and diversified at all times. Therefore, you do not need to watch the markets yourself since there is a team that is already doing if for you.

Mutual Fund Currency Risk and Management Risk

Currency Risk also known as foreign exhange risk is the risk that fulctuations in the exchange rates may negatively effect the value of the funds investment. This applies to mutual funds that are denominated in one currency but invest in instruments denominated in another.

Management Risk is the type of risk associated with all actively managed forms of investments. Investment decisions are made by portfolio managers who can and do make mistakes from time to time by selecting wrong issues or misallocating the assets of the fund. These errors in judgement can result in a fund's underperformance, decline in value of even losses.

Mutual Fund Credit and Purchasing Power Risk

The credit worthiness of the bond issuer and its expected ability to pay interest and to repay its debt. A mutual fund can manage this risk by investing only in investment grade bonds.

Purchasing power risk is rate of return on an investmetn will not be greater than the rate of inflation thus diminishing the value of your money, i.e. , the value of your money in real terms will be less than the purchasing power of your original investment.

Liquidity and Interest Rate Risk

Liquidity Risk is the risk that an investment may not find a ready buyer and, as such, may have to be disposed at a substantial loss. To reduce this risk, mutual funds try to stay away from securities which do not have a ready buyer, are not listed, are listed but are not actively traded and are very volatile.

Interest Rate Risk is volatility of bond prices that results from changes in interest rates. Bond prices are inversely related to interest rates. When interest rates rise, bond prices fall and vice versa. Interest rates are affected by various factors such as the expected direction of inflation, monetary policy, political risk and other economic factors.

Market Risk - Mutual Fund Risk

Depending on the kinds of securities it is allowed to invest in, a mutual fund is subject to one or more of the following types of risk.

Market Risk
The risk that the valueof an investment will be adversely affected by the fluctuations in its market prices. These fluctuations may be the result of two other kinds of risk.

1. Unsystematic Risk - the variability in the stocks price due to factors associated with the company. This type of risk can be minimized through proper diversification.

2. Systematic Risk - the variability in price related to factors that affect the economy and the financial markets as a whole.

Sector Risk

The risk which affects stocks in a particular industry or sector sector. Market or economic factors affecting that industry sector, could have an effect on the value of a funds investments.

Liquidity and Safety on Mutual Fund

Liquidity means that you may have shares in a mutual fund redeemed at any time and just need to wait a maximum of 7 banking days to gain access to your funds.

Safety of mutual fund are governed by the Investment Company Act whose implementing rules and regulations specify particular limits and constraints in the investment activities of all mutual funds. The securities and exchange commission (SEC) sees to it that all mutual funds comply with these statutory regulations. Moreover, mutual fund companies are regularly audited by an independent auditor. The assets of the mutual fund are held by a third-party custodian bank.

Mutual Fund Diversification

Simply put, diversification means not putting all your eggs in one basket. This is especially important in investing. Through porper diversification, losses in one investment can be off-set by gains in another. In the process, overall risk is minimized. Investing in a mutual fund provides you with immediate access to a diversified portfolio of funds. By virtue of the size of the pool of funds, the mutual fund is able to purchase many different investment securities and diversify.

Mutual Fund Potential Higher Returns

By Pooling together the funds of thousands of investors, a mutual fund is able to access potentially higher yielding investments that required large minimum investment amounts. This, investors are able to access potentially higher yields that may not normally be available to them due to the size of their individual funds. Moreover, the fund manager ensures that the mutual fund generates the best possible returns for the given level of risk of the mutual fund.

Mutual Fund Professional Management

A mutual fund is managed by an experienced, full-time fund manager whi is focused solely on analyzing the financial markets and seizing market opportunities as they present themselves. By investing in a mutual fund, you benefit from the fund manager's experience and market insight.

Source: Philequity

Strength in Numbers, Mutual Fund Investing Benefits

The power of a mutual fund lies in its ability to pool together funds from so many different investros. Imagine a thousand investors each with P5,000 to invest who decide to pool their funds together. That is already a pool of P5 million! Now imagin that instead of just investing P5,000 each, someinvestors put in P10,000, P1 Hundred Thousand or even 1 Million Pesos. The size of the collective pool would even be bigger. And when it comes to investing, there is strength in numbers. 5 Million Pesos can gain better access to more diversified investment instruments than P5,000.

A mutual fund is a vehicle that allows investors to combine their resources. Because of this, you do not need a large amount of money to gain access to a well-diversified portfolio of top-performing investments. A mutual fund makes this possible. Here are some of the key benefits of investing mutual funds.

1. Professional Management
2. Potential Higher Returns
3. Diversification
4. Liquidity
5. Safety

Details will be on the next coming articles...
Our Source: Philequity

Determine Your Risk Tolerance

Your Return Objectives. The higher the return you require in order to achieve your financial goals, the greater the amount of risk you will need to take.

Your Age. The younger you are, the greater the amount of risk you can take. Why? Simply because you have more time to recover from any losses that you incur and because you have more income-earning years ahead of you.

Your Total Assets. The larger your total assets, the greater the amount of risk you can take. This is because you have more to draw from for your regular expenses should you  incur losses in some of your other investments.

Your Investment Time Horizon or the Length of Time you are Willing to keep your Money Invested. The longer your time horizon, the greater the risk you can take. The reasoning behind this is similar to the reason behind age: the longer the time horizon, the more time to recover from any losses.

Your Past Investment Experience. the partly determines your attitude to risk. A bad experience from a past investment may make you more gun-shy and risk averse. Or, investment carries and could have made you more willing to take on risk.

Your General attitude to risk. Other factors such as your presonality or the people around you may influence your appetite for risk.

The first five factors determine your ability to take on investment risk. These are the more objective determinants of risk tolerance. The last two determine your attitude towards risk and are obviously a bit more subjective. It's more important to understand the distinction between a person's ability to take on risk andhis attitude towards it. Sometimes, there are people who objectively can take on much more investment risk than they are currently taking but simply refuse to do so because they are jsut not comfortable with the idea of losing money. On the other hande, there are people who are willing to take on more risk even if they literally cannot afford to do so. Neigher is ideal investor behavior. It's always good to achieve a balance.

Understanding your risk tolerance then helps you determine which investments are suitable for you.

Understanding Investment Risk

There is no such thing as free lunch. Nowhere is this truer than in the world of investments. When it comes to investing, gaining access to higher returns comes at a price. And that price is called risk. In investments, risk is commonly defined as the possibility and magnitude of incurring a loss. But actually, risk can be more broadly defined as the possibility of obtaining something other than what you expected. So, risk can actually work in your favor. In terms of investments, you could end up with a return that is higher than what you initially expected because of the riskiness of investment. In fact, in investments, the following relationship holds true: the higher the return, the higher the risk.

All this talk of risk may sound frieghtening. Does it mean that you should avoid risk? Especially when it comes to your hard-earned savings? The answer to that question is resounding..."it depends". The amount of risk that you are willing to take and are capable of taing is called your risk tolerance. Your risk tolerance is a function of several factors that are unique to you and is thus different from the risk tolerance of another person.

Source Philequity Management

Monitor the Performance of Your Investments

Finally, it is important to regularly monitor how your chosen investments are performing. Are they making money? Are they bringing your closer to your investment goals? Are your still comfortable with the risk you are taking? Has your financial situation changed significantly enough to warrant a change in strategy? There are some of the important questions you will need to answer to evaluate your investment strategy.

Benchmark. The final checkpoint for evaluating your mutual fund is to compare it to other similar entities. Every single asset class  has its corresponding index, which you can use to see how the overall asset class is performing, and then see how your individual mutual fund is holding up against that benchmark. Ofthen when you pull up your mutual funds infoation, a benchmark is already provided for comparison. The question they are answering with the below chart is, if you invested 10,000, how has the benchmark and your mutual fund performed over th same timeframe?