Top Mutual Funds in the Philippines for 2016

Last year was a hell of a ride in our Philippine market. Now let's look at the top performing mutual funds in the Philippines for the year 2016.

Before that, here are related articles about mutual funds:

1. What is a mutual fund?
2. Nine advantages of mutual funds
3. How to compute your earnings in mutual funds
4. Three types of mutual funds
5. How to lose and not lose money in mutual funds
6. Money cost averaging strategy in mutual funds

Now we understand about mutual funds, let's look at the performance for 2016 in the Philippine market. 

Is it a bull or bear performance with Philippine mutual funds? 

The performance for 2016 will be based on the YTD or year-to-date performance. Meaning the performance will be based on the percent growth for investments in January 1, 2016 up to Dec. 29, 2016 (last trading day of the year).

Equity or stock funds

Top performing equity or stock funds in the Philippines 2016 (source: pifa.com.ph)

Based on the YTD, here are the top 5 performing mutual funds for equity or stock funds:

1. ATRAM Alpha Opportunity Fund, Inc: (+) 11.71%
2. ATRAM Philippine Equity Opportunity Fund, Inc.: (+) 4.86%
3. Philequity Dividend Yield Fund, Inc.: (-) 1.05%
4. United Fund, Inc.: (-) 1.2%
5. Philequity Fund, Inc.: (-) 1.39%

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Mutual Funds: Money Cost Averaging Strategy

One thing is guaranteed in the market: it goes up and down. Thus in investing in mutual funds it is very important to know the risks involved. Yes we can lose money in mutual funds, but to minimize and manage the risk, one must constantly do additional investments and invest with a long-term horizon. 

Related Content: How to lose and not lose money in mutual funds.

This strategy is often called: Money cost averaging. How does this strategy work?

Money cost averaging in mutual funds

Money cost averaging is a strategy to systematically purchase shares of mutual funds (can also be applicable in stocks) to minimize investment risk in a fluctuating market. 

This strategy is very simple. A constant amount should be invested at a specific time interval (e.g. monthly) regardless of market condition. 

However, this strategy does not guarantee (as all other strategies) a profit or prevent loss thus it is important to consider one's ability to continue and stick with one's financial plan. 

For example, given the following details: 

Monthly Investment of 5,000
Investment Horizon: 6 months
And price per share fluctuating as shown in the table below: 

Example of money cost averaging simplified

Looking at the table above, the total amount invested for 6 months is P30,000 and was able to accumulate a total of 900 shares. Now to get the current market value, we need to multiply the total number of shares and the current market price at month 6 which is P50.

Thus:

900 shares x P50.00 per share = P45,000!

So the total growth for the past 6 months is 50% of the total investment. 

If the person invested one-time, big-time on the first month: 

Total investment on month 1: P30,000
Number of shares bought: P30,000 / 100 = 300 shares
Current market value at month 6: 300 shares x P50.00 per share = P15,000!

The investor could have lost 50% of the total investment.

Now blowing this up: 

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How to lose and not lose money in mutual funds

Is mutual funds risky? Yes it is. 

Can you lose money in mutual funds? Yes you can.

Can you also gain big time? Absolutely.

Can you then manage or minimize the risk? Ofcourse, you can! 

The answer to all these questions is basically financial education. Being financially educated does not only mean having investments or financial products. But by knowing when, how, and why you invest, at the same time understanding how to manage or minimize the risks involve. 

After understanding about mutual funds: What is a mutual fund?

Understanding its advantages: 9 advantages of mutual funds.

And why it is important to invest in mutual funds: In-depth understanding of mutual funds

Today, let us learn how to manage and minimize the risks involved in investing in mutual funds.

Anything in life, there will always be risks. Example: driving is very risky. You hear a lot of car accidents causing property damages or even death. But it does not mean that everybody should avoid or stop driving. We just need to "learn" and "apply" basic guidelines and strategies to keep us safe. Same with investing in mutual funds. 

Here are few examples how to lose money and more importantly how not to lose money in mutual funds:

1. How to lose money: Thinking short-term. 

We jump into investments because we see the potential returns. However, when the market goes down, a lot of investors panic. So instead of investing in the long-term they withdraw their funds too soon. 

Losing money in mutual funds by withdrawing too soon (source: Philam Asset Management, Inc.)

Taking Philam Strategic Growth Fund as an example, looking at the graph above, the person invested last April 10, 2015 and withdrew his money on July 1, 2016. 

Related Content: How to compute your earnings in mutual funds?

Percent loss from 595.58 to 561.37 NAVPS = 5.74%

Assuming he invested 100,000: 

His 100,000 becomes: 94,256

Minus early redemption fee of 1 year to less than 2 years: 0.5% 

Actual Value: 93,784!

Therefore, how to not lose: Invest for the long-term

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How to buy a car for FREE using mutual funds

The top three dreams of most Filipinos are buying their own house and lot, buying a car and have an amazing vacation and travel with their families. 

Today, let us look at different ways to buy a car. 

Different ways to buy a car

1. Take a car loan.

This is the usual approach. Since buying a car is expensive, the most practical way is to take a car loan. And with the trending decrease in the down-payment, almost everyone can now afford to drive home a car. 9k and you get a Kia Picanto or with 5k, hello Hyundai Eon! (this maybe the reason why the roads are getting high traffic) 

But by doing math, buying a brand new car is often the biggest expense that loses its value very fast. A new car loses 50 to 70% of its value in the first four years.

Example:

Car: Model X

Unit Price: 735,000

Down-payment: 147,000 (not including insurance + LTO + chattel fee)

Monthly Payment: 14,877

Payment Period: 5 years

Total Spent: 1,039,620

Car Value after 5 years: ~ 300,000 only!

In buying a 735K worth of car, you spent around 1M but after 5 years its value is now 300K! That doesn't look practical to me especially if right now we are not yet financially stable. 

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In-depth Understanding on the Three Types of Mutual Funds

There are three common types of mutual funds. These are:

- Bond Fund

- Balanced Fund

- Equity Fund

These different types of mutual funds have diversified portfolio depending on the risk appetite of the client. Typically, the portfolio of each type are as follows:

Bond Fund ~ 90% bonds | 10% stocks

Balanced Fund ~ 50% bonds | 50% stocks

Equity Fund ~ 90% stocks | 10% bonds

Grow your money through mutual funds

Bonds can be in the form of government securities or corporate bonds. It is a way of obtaining money from the public (e.g. for government projects) and promising a percentage growth of the money. It is considered low risk especially government bonds as it is almost impossible that the government will default its own debt. The rate of return however, may not be very substantial because of its low risk nature. 

Stocks on the other hand are high risk in nature. Buying stocks is like buying a share of a certain corporation and trading it in the stock market in the hopes of earning a higher return. Therefore it is a high-risk, high-return type of investment. 

Now looking at these risk-reward ratios: the higher the risk, the higher the returns but the lower the risk, the lower the returns, we can then conclude that: 

Bond Fund - low risk, low returns (4 - 8% per year)

Balanced Fund - moderate risk, moderate returns (8 - 12% per year) 

Equity Fund - high risk, high returns (>12% per year)

Now knowing these risk-reward ratios, it can then be tempting to say, "I'd go invest then in equity funds because of its high returns." However, each type of mutual fund have different purposes and it is also important to know why and when to invest on each type. 

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How to be Living on Interest via Mutual Funds

We know that money works through compounding interest. It is one of the secrets of the wealthy: making money work for them. Money is the best employee because:

- Money does not get sick

- It does not sleep

- It works 24/7

- It does not go into vacation leaves

and that is why it is important to let money work for us. The only challenge is to accumulate money. We need the discipline to set aside and invest our money. 

Related Content: Rule Of 72: Understanding The Secret Of The Wealthy

Do you want to live a relaxing retirement?

Assuming we have already accumulated enough money for retirement. Then we want to be living on interest. Using the simple retirement formula:

Annual Income x 10 = Retirement Goal

Assuming average lifestyle today is 20,000 per month, then retirement goal should be:

20,000 x 12 months x 10 = 2,400,000 ~ 3M retirement goal

To be living on interest, we invest our 3 Million in an investment vehicle like a mutual fund that earns around 10% interest per year. So: 

3,000,000 x 10% = 300,000 gain as interest

300,000 / 12 months = 25,000 per month living on interest

The 3 Million is intact, but you earn 25,000 per month. Money working for you. So even without working, your money is working for you and that is what we call financial freedom.

However, this computation is based on an ideal scenario. Let's blow this up by using actual data from mutual fund performance and let us include inflation in the scenario:

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How to Compute your earnings in Mutual Funds?

Mutual Fund is an alternative investment vehicle to grow your money for your long-term goals. Understanding how it works and knowing its advantages are the first step in investing in mutual funds. Once a person has started his mutual fund account, it is always a basic question, “So, how does one earn in mutual funds?” The answer is simple:

Related Content: What is a Mutual Fund?

Compute your earnings

Every time you invest in mutual funds, you will regularly receive a Statement of Account. Depending on your mutual fund company, you will receive it monthly, quarterly or any other regular intervals may it be in hard copy or through email. The Statement of Account or SOA will show your investment data including your account number, date of investment, investment amount, NAVPS or the price per share when you bought it, and your total number of shares bought.

Statement of Account: FAMI Mutual Funds (edited to hide investor data)

Statement of Account: Soldivo Mutual Funds (edited to hide investor data)

Now, to compute your potential earnings let us refer to the sample Statement of Account of Philequity Mutual Fund below:

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Want to invest in mutual funds with zero entry fee?

People are starting to get financially educated and a handful are already investing in paper assets such as in the stock market and mutual funds.

To further enhance the financial literacy of Filipinos and encourage more people to invest, through IMG's new membership platform and financial education program, one can invest in mutual funds with zero entry fee!

Want to invest in mutual funds with zero entry fee?

What is an entry fee? 

An entry fee or normally called as sales load is a deduction on your investment amount that pays for certain charges such as taxes and agent's commission. 

It ranges from 2 to 5% depending on the fund and the investment amount. 

Example:

If you invest 10,000 at 3.5% sales load.

Then, 350 is the entry fee and the difference of 9,650 is the investment amount. 

Some would say, "350? Oh never mind that!" But mind you, what if you constantly invest 10,000 per month for the next 12 months. Then that would total to 4,200 of sales load! 

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How to achieve your 1st million using mutual funds

There are different ways to achieve your first million. The easiest one is to have a million friends and ask 1 peso from each one! There you have it, 1 million! 

However, it's not as easy as that. One can achieve it through business, buy and selling, real estate, or network marketing but the most doable is saving and investing for it. 

Let's see how and when we can achieve our first million by saving and investing using mutual funds. 

Earn your first million through mutual funds

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9 Advantages of Mutual Funds

Different industries have innovated except the financial industry. Before, we needed separate gadgets for different uses: camera, walk-man (a music gadget: the younger generation might not know what this is), video camera, t.v. and desktop computer. Now, a smart phone can do it all. 

However, in the financial industry most people are still saving the traditional way – saving in the banks. Retirement savings are deposited in time deposits or special savings account earning very minimal interest rates. Financial vehicles like UITF’s and mutual funds exist as alternative savings vehicle however, the need to financially educate Filipinos still remains a huge task. Today let us learn more of the advantages of mutual funds.

Mutual Funds are alternative ways to grow your money

Related Article:

- What is a Mutual Fund?

9 Concepts and Benefits of Mutual Funds

1. Professional Management

Many people have neither the time nor the training to personally manage their investments. They want the peace of mind that comes from knowing financial and economic specialists are managing their money.

Example: Soldivo Fund (a partner mutual fund company of IMG)

Directors and Executive Officers

(Source: Soldivo Fund Prospectus)

David Leechiu (Chairman, President) – country head of Jones Lang Lasalle

Richard Kho (Director) – Technistock’s Chief Executive Officer and company founder

Jose Emmanuel Jalandoni (Director) – President of Ayala Land Hotels and Resorts Corporation

Randell Tiongson (Independent Director) – Director of Registered Financial Planner Institute Philippines with 25 years of experience in the Financial Services Industry

Henry Ong (Independent Director) – Executive Director of Registered Financial Planner Philippines. President of Business Sense Financial Advisors

Tranquil Salvador (Corporate Secretary) – is a partner, head of the Litigation and Arbitration Department and Chairman of the Environmental Law and Mining Department of Romulo, Mabanta, Buenaventura, Sayoc & de Los Angeles (Romulo) and Head, Legal Assistance Service (LAS) of Romulo to the Asian Development Bank.

Maria Anna Concepcion Mendoza (Treasurer) – Chairman and President of Rampver Financials, Inc. She has 18 years of experience in financial services with forte in service administration, systems and relationship management.

Elizabeth Ison (Compliance Officer) – Head of Compliance and Governance at Rampver Financials, Inc.

2. Diversification

To help reduce the risks inherent in any investment, a mutual fund carefully selects a diversified portfolio. This is a fund share represents an interest in a broad range of securities from various industries.

3. Asset Allocation

A process of developing a diversified portfolio by mixing different asset classes – such as stocks, bonds and cash equivalents – in varying proportions to help reduce risk and maximize potential return.

Sample Portfolio of PhilEquity Fund (Partner Mutual Fund Company of IMG)

4. Risk vs. Reward

The greater the risk, the higher the potential rewards. Since mutual funds are also invested in the stockmarket, the results of investment may be worth more or less than their original cost when ultimately redeemed due to the up and downtrends in the market.

Types of Mutual Funds and its Risk vs. Reward Ratio

5. Beat Inflation

Inflation is the increase of the prices of commodities thus reducing the buying power of money. In the Philippines, a ten-year average rate of inflation is between 4 to 6% per year. It means that a 100 pesos value meal after a year may increase its cost to 104 or 106 pesos thus your 100 pesos can no longer purchase the same value meal. Through investing in mutual funds, we can beat inflation with an average annual interest of 8 to 12% per year. (These rates are achievable is the person is investing for a period of 3-5 years or more. Actual values may be lower or higher)

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Why we need to save early: time is money

One of the challenges of Filipinos is our habit of procrastination especially when it comes to saving and investing. Our priorities rarely includes saving. Thus for how many years, a lot of Filipinos still haven’t started saving and investing yet. However, let me show you today that the longer we delay saving, the more we are throwing away potential millions later on. Time is truly money. 

Time is money

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What is a Mutual Fund?

It is a company where it pools funds from many investors and professionally managed by fund managers investing the funds in a diversified portfolio of investments such as stocks and bonds. Defining it simply in the IMG way, it is a vehicle where a person is able to invest in solid businesses being able to have the opportunity to earn what the wealthy people are earning. So how do mutual funds work? 

Investing made easy through mutual funds

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Understanding the Basics of Investments

Investing is a scary topic as a lot of Filipinos have been victims of scams. However, IMG believes that the reason why most Filipinos fail in their investment endeavor is because of the lack of financial education. Financial literacy was never taught in school and IMG has been one of the few companies teaching Filipinos globally in a massive scale about financial education. Today, let us understand the basics in investing.

Understanding the basics of investments

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How to do additional investment in your Soldivo Mutual Fund Online

Soldivo Mutual Fund is one of the mutual fund company partner of International Marketing Group. It is the newest mutual fund company in the Philippines as of today with price per share below 1 peso! You can check the lists of all legal mutual fund companies in the Philippines in this website: Philippine Investment Funds Association.

After opening your Soldivo mutual fund may it be its Equity Fund: Soldivo Strategic Growth Fund, Inc. or its Bond Fund: Soldivo Bond Fund, Inc. then, it is expected that you will be continually investing in your mutual fund account. 

Through BPI expressonline you can now add Soldivo in your account so you can now start doing your additional investments online. Here's how:

the convenience of investing online

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