Advantages in Investing in a Mutual Fund

• Professional Management


  One of the main attractions of mutual funds is that it affords its investors, particularly the small ones, the services of full-time professional managers whose job is to analyze the various investment products available in the market and select those that would give the best possible returns to the fund and its shareholders.
• Direct investments


  • Usually require substantial capital
  • Minimum investment amounts range from Php100,000 to Php1 million
• Stocks


  • Shares are sold in lots of 10 to 1 million shares
  • Investor may be able to buy one lot for as low as Php1,000 to Php5,000
  • Stockbrokers prefer to deal with high net worth individuals or people with substantially more than Php5,000 to invest
• Mutual funds in the Philippines

  • Require a minimum initial investment amount of only Php5,000
  • Require minimum additional investments of Php1,000
• Low capital requirement is a key feature of mutual funds compared to direct investments
• Diversification


  There is a saying that goes, “Do not put all your eggs in one basket.” This adage is especially true in the world of investments which is full of uncertainties. There is no such thing as a “sure” thing. An important investment principle that requires holding several securities to reduce the risks associated with investing in individual securities is called diversification. When people invest in a mutual fund, they achieve instant diversification because the fund is usually invested in a wide array of securities.
• Liquidity


  Liquidity is the ability to readily convert investments into cash. Other investment products require investors to find a buyer so that he can liquidate his investment. That is not the case with mutual fund shares because the fund itself stands ready to buy back these shares at the prevailing Net Asset Value Per Share. While the law provides that redemption proceeds must be given within seven (7) banking days from the date of the redemption request, most funds are able to pay the redemption proceeds within a day. Mutual funds are, therefore, considered very liquid investments.
• Safety


  Safety is a very important consideration for most investors. Mutual funds are highly regulated by the Securities and Exchange Commission under the Investment Company Act and its implementing rules. They are prohibited from investing in particular investment products and engaging in certain transactions (this is discussed in greater detail in a latter section). They also have to submit regular reports to the SEC as well as to their shareholders. As mentioned earlier, all of the fund's assets must be held by a custodian bank for a safekeeping.
• Potential Higher Returns

  Because a mutual fund is managed as a single portfolio, it is able to take advantage of certain economies of scale. For instance, with its millions under management, it cannegotiate for lower stockbrokerage fees or command higher interest rates on fixedincome investments. In the end, however, it is still the investment adviser who really makes the big difference between making direct investments and investing in mutual funds because very few individual investors can match the experience and skill of fulltime professional fund managers.
• Convenience 


  In other countries, mutual funds can be purchased directly from a funds or through a broker, financial planner, bank or insurance agent, by mail, over the phone and increasingly over the internet. The popularity of mutual funds in the Philippines is fast catching up. It may be a matter of time for this level of convenience to be a reality in the country. Funds also offer a variety of other services, including monthly or quarterly account statements, tax information, and 24-hour phone and computer access to fund and account information