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6 advantages of a mutual fund investment

Why should you consider investing in mutual funds? Here are six logical reasons.
By MJ Dinglasan and MJ Dinglasan |

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Gone are the days where having enough savings is enough for one to be financially secured. As you retire, your savings could be gone in just a few years or less and you'll be left only with nothing. To prevent this from happening, financially responsible individuals turn into investing as they see a potential growth of money in here that is based on a long-term goal. This is what mutual funds are basically about.

According to the Philippine Investment Funds Association (PIFA), a mutual fund is an investment company that pools investments of many individual and institutional investors to form a massive asset base, which are then entrusted to a full time professional fund manager who develops and maintains a diversified portfolio of security investments. The Colayco Foundation for Education, Inc. recently conducted a seminar about mutual funds and we are sharing with you some insights about this investment instrument. Here the advantages of a mutual fund investment.

Professional management

Full time professional fund managers are responsible for analyzing and identifying which equities or funds are best to grow your money with. With this, you don't have to worry about making time to check updates for yourself. They provide you with information you need to know about your investment.

Low capital requirement

Unlike any other investments requiring very large amounts of money, mutual funds only require at least P5,000 as an initial investment and P1, 000 minimum for every additional investment.  This is suitable for anyone for as long as you have a steady income, you can invest.

Diversification

Mutual funds aren't a fixed investment. The adage, "do not put all your eggs in one basket" is especially true in mutual funds as you can put your money anywhere in its diverse field of equities, bonds, and funds that will best grow your investment.

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Liquidity

In case you need to withdraw the amount you invested in mutual funds, you can always pull it out anytime you want as it always has a buyer in waiting. Redemption processes can just take up to 7 days (as required by the law) or even within the day, if you really urgently need it.

Security

No one else can pull out your money. When you invest in mutual funds, your investment is directed to a custodian bank for safekeeping. No one is allowed to withdraw or even touch it without the fund manager's order upon your request. Daily reports are submitted and are highly monitored by Securities and Exchange Commission and PIFA.

Optimized returns

According to the Colayco Foundation, 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 can negotiate for lower stockbrokerage fees or command higher interest rates on fixed-income investments.

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