The newbie’s guide to mutual funds

Have you ever heard of mutual funds? A mutual fund is an investment program funded by shareholders that trades in diversified holdings and is managed by a professional fund manager. It pools together a group of individuals and invests their money in stocks, bonds, and other securities and get them on their way to financial wellbeing. With the economy of scales and experts managing the fund, investments grow faster than in a traditional savings account.

Globally, mutual funds amounted to around USD26.96 trillion in total net assets in 2021, with the US accounting for more than 40% of the global mutual fund market and 25% of the number of mutual funds.

In the Philippines, mutual funds can be categorized into four basic types: stock/equity, balanced, bond, and money market funds. What makes mutual funds suitable to young professionals or investment newbies is that you don’t have to be a millionaire to start investing. Some funds only require P5,000 as initial investment. Here are four reasons why you should invest in mutual funds.

1. Invest like pro

If you’re a newbie investor, you may not have the skills and knowledge needed to grow your money. And not everyone has the time to learn or be updated on the performance and risks of different investment options. Mutual funds are managed by expert fund managers who will choose which investment options would best suit your financial goals. It’s like having a professional financial advisor on your payroll.

2. Reduced risks

One advantage of a mutual fund is that it pools all the investors’ money and puts it in diverse products to minimize exposure to potential losses. We know all investments involve risks but these risks are reduced when you invest in mutual funds. Consider them in your financial planning.

3. Buying and selling is easy 

Some investments like real estate are expensive and cumbersome to buy. You need to accomplish lots of paperwork to buy a house, not to mention money above a million pesos. It’s also hard to liquidate. Plus you must wait for a buyer to convert your investment into cash. With mutual funds, however, you can purchase shares on different channels. You can even buy shares online. It’s also easy to liquidate—you can sell on any given business day.

4. Different funds for different folks

There are different mutual funds for different investment styles and appetite risks. Some investors prefer to go slow and steady; others want to grow their assets as fast as possible even if the risks are higher. Some are attracted to fixed-income investments, while others invest heavily in the stock market, which can yield higher returns in a short period of time. Whatever type of investor you are, putting your hard-earned money in mutual funds is a surefire way of stepping up your investing game.

You can also consider putting your savings in investment-linked insurance. FWD Life Insurance offers a way to financial wellbeing with Manifest and Set for Life, both of which are managed by fund managers who can help grow your money while protecting you against untoward incidents that may derail your dreams or cut your ability to earn a living. Or you may want to invest in global markets, in which case All Set Higher is for you; it also lets you invest in peso or US dollar. Talk to an FWD financial advisor to find the right investment-linked plan for your lifestyle and appetite risk.