Understanding Managed Funds as an Investment Vehicle in the Philippines

An office mate of mine once asked where to primarily invest since there are even more types of Managed Funds available. It took me a long time to answer for I wanted to gather as much information as possible regarding the topic.

You see the worst problem other than committing to a budget and saving is choosing where to invest your money. There are just a lot of choices to choose from. As a duty of a smart investor, one should not just attain a portfolio income in one investment vehicle but try as much as possible to keep the flow as diverse as possible.

Currently I introduced the following Investment Vehicles in my blog just like FAMI- Mutual Fund and UITF. It is also good to take note how easier and more affordable investing is nowadays. A lot of investment vehicles available can be tried for as low as 5000pesos opening (there are even lower) with monthly investment not less than 1000pesos. This is because the government supports the desire for every Juan dela Cruz to invest. So kick-start your way to investment NOW!

What are Managed Funds?!

Managed Funds is a type of investment wherein a professional financial institution will make the investment decisions for you.

How Managed Funds Work?!

Managed Funds work for the convenience of the investor. Your investments are pooled together with the other investors. Then the trusted financial institution will buy and sell the shares or other assets on your behalf. They also set where your money will be going and how the percentage of shares you own will be.

Examples of Managed Funds

- Mutual Fund

Click here: 7 Advantages of Mutual Fund

-UITF

Click here:UITF vs. Mutual Fund (Beginner's ALERT!)

-ETF (Just recently launched in the Philippines)

Advantages and Disadvantages of Managed Funds

As said for a thousand times investing in reality is a risk. Every investment whether small and big may come with a risk factor.

Below are the happy thoughts in managed funds investments (Mutual Fund, UITF and/or ETF)

1. Low Initial Investment

2. Diversification

3. Convenience and Cost Efficiency

4. Principle of Compounding

5. No more Tax

6. Regulated by SEC

7. Liquid Statement

Below are the sad facts:

1. You depend most on other people rather than learning the process by your own

2. Conversion to cash such as redeeming may take a while if you don't want to pay for charge.

3. May be charged higher compared to direct stock investment since you are working with a private financial institution.

Types of Managed Funds

Managed Funds are divided to four main types namely Money Market Funds, Balanced funds, Bond Funds and Equity Funds.

Money Market Funds are short-term fixed income securities investment such as time deposits and t-bills.

Balanced Funds is an investment with combination of equities and bonds.

Bond Funds are managed funds set to invest in long term bonds

Equity Funds are the common managed funds that invests in stocks.

Let's differentiate the four

Out of the four, Equity Funds are the most risky for stocks are moving almost every second.

Bond Funds has moderate risk and considered as a safer investment from equity funds.

Money Market Funds are the least risky but the growth of your investment is really low.

Balanced Funds have low risk factor too since its a combination of equities and bonds but you need to be prepared in case one will depreciate in value.

Preparation Tip: Have an emergency fund of 3-6 months of your expenses before investing.  Aside from an emergency fund research will be one of the best readiness trick before investing.

Recovery Fact: It may take 2-3 years before one can fully recover from an investment failure

Conclusion: Highly recommended for young professionals who have the right money and the right attitude in financial investment. For first-timers try an equity fund if you have the money and the luxury to invest. My FAMI-SALEF is a type of Equity Fund and so far so good as of my recent FAMI update.

So Ms. Izza where should I invest?

The choice is yours primarily when it comes to where you'll spend. You may not even like the idea of managed funds and opt for a direct stock investment, right? But for added information please see the following:

1. Know your investment appetite. You may talk to a financial advisor or go to a bank near you instead.

2. Have some solid financial goals. Objectives and visions about your finances will help a lot to know which type is the right for you.

3. Money Market Funds may not be a worth it investment to choose for the very low return.

4. Equities are a go to specially if you can truly invest for it give higher return of investments though the risk is present.

5. There's no harm in trying. A managed fund is a good start if you want to be financially able in the future. As young as you are now, INVEST.

Hope you find this post helpful :)