What Are Mutual Funds? How Can I Benefit From It?

What is a Mutual Fund?

A Mutual Fund is an investment company that pools together money from different investors and invests them in various securities depending on the investment objective of the fund. The mutual fund company issues shares to the public that represents their holdings in the fund.

What are the different types of Mutual Funds available?

There are four basic types of mutual funds currently available in the market categorized according to the investment objective of the fund or the investments that the fund is  primarily invested in.

  1. Money Market Funds invest purely in short-term (one year or less) debt instruments.
  2. Bond Funds invest in long-term debt instruments of governments or corporations.
  3. Balanced Funds invest both in shares of stock and debt instruments.
  4. Stock Funds / Equity Funds invest primarily in shares of stock.

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What is the NAVPS?

NAVPS or the Net Asset Value Per Share represents the price of one share from a mutual fund. All shares in a mutual fund are bought and sold using the NAVPS, which changes every business day depending on the market performance of the fund.

How do I earn from Mutual Funds?

If the NAVPS of the mutual fund you are invested in increases or appreciates, you can sell your mutual fund shares for a profit. In the same way, if the NAVPS of the mutual fund you are invested in decreases or depreciates, you may realize a loss if you redeem.

For example, if I have P10,000 and the price of NAVPS when I invested was P1/share, then I'll have 10,000 shares.

If after a year or 2, the NAVPS with now become P1.50, I'll simply multiply my number of shares with the current NAVPS to check if I earn or not. In the sample scenario, that's 10,000 shares x P1.50/share, then I'll now have P15,000.

Like any other investment instrument, mutual funds are best held long-term especially for mutual funds that have investment objectives of capital growth such as equity funds.

What are the benefits in Investing in Mutual Funds? 

You might want to check this video for an easy to understand, entertaining way to learn.

Living Testimonial of Investing in Mutual Funds

This guy, Alfonso Gonzales has been investing in Mutual Funds since 1998. His investment - the pot money he won from Battle of the Brains. His P300,000 invested in 1998 has grown more than 12x.

As of April 30, 2013, his P300,000 is now around P3.6Million. Imagine that. Altho, you don't need that big amount of capital to start one. For only P5,000 initial investment, you can already open your personal mutual fund account.

Start your own mutual fund investment now. Fill up this form http://www.pinoymutualfunds.com/p/mutual-fund-application-form.html then we can schedule a meet up.

This entry was posted on Monday, April 1, 2013. You can follow any responses to this entry through the RSS 2.0. You can leave a response.

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