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Making sense of mutual funds

In times of uncertainty, is the mutual fund worth looking at?
By Entrepreneur Staff |

In the world of finance, mutual funds are considered one of the more reliable investment tools through which individual or institutional investors can expand their assets. Some finance-savvy Filipinos, however, are not aware of the rate of return of this kind of investment, while a larger number remain unfamiliar with the tool itself.

Ben Thomas Panares, chief operating officer of Sun Life Asset Management Co. Inc., sheds some light on what mutual funds are and how they can be a better investment venture for long-term investors in an exclusive interview with Entrepreneur Philippines:

Entrepreneur: What is a mutual fund?
Ben Thomas Panares: A mutual fund is a professionally managed fund where money of a group of investors is pooled and invested in several securities. Depending on the mutual fund’s investment objective, the fund manager invests in different types of assets (like stocks and bonds) to provide investors with optimum returns. In the Philippines, mutual funds are incorporated as “corporations” and are governed by mutual fund regulations issued by the Securities and Exchange Commission (SEC).

E: In the Philippines, how popular are mutual funds?
BTP: Mutual funds are still fairly unfamiliar to most Filipinos, who keep a large amount of their money parked in banks. However, we have seen more Filipinos becoming interested in alternative investment instruments that could provide better returns for their money. We owe this growing interest in mutual fund investments to more accessible information on the Internet, mass media, personal finance books, investment seminars and asset management companies educating the market about mutual funds.

E: What type of investors do you usually get for your mutual funds?
BTP: Most of Sun Life’s investors come from the AB market, where awareness of investment is stronger. But as more information about mutual funds becomes available, we hope to attract more Filipinos since almost anyone can invest in a mutual fund.

In our case, for a minimum initial investment of P5,000 one can already invest in any of the Sun Life Prosperity Funds. Subsequent investments can also be made for as low as P1,000. This is great for making life easier with investments. Regular, small investments are a great way to build up value for the future.

E: How do mutual funds with other investment tools such as savings accounts, treasury bills and stocks?
BTP: Mutual funds provide investors the opportunity to generate stock market and bond market returns. It is also safer for individuals to invest through mutual funds, as qualified professionals with proven expertise and knowledge manage them. Because mutual fund companies invest in a wide array of securities, an individual instantly has a diversified investment portfolio for as little as P5,000. But remember that everyone has a different view on risk, so it’s a case of choosing the right fund for you. The good news is, there is a great choice of funds to suit your needs.

E: To what type of investors would mutual funds be most ideal?
BTP: Mutual funds are an ideal investment vehicle for investors to accumulate and build wealth over the long term. It is a popular vehicle for retirement savings as well as building lump-sum amounts to achieve one’s life goals.   

E: How safe are mutual funds during a financial crisis?
BTP: Just like any investment instrument, mutual funds are subject to risk. Depending on the mutual fund chosen, asset classes have varying risk profiles and are sensitive to market volatility. In times of heightened market volatility, investors should not panic and trust professional fund managers to manage their mutual funds. In the long run, market behavior will revert to fundamentals, hence we advise investors to have a long-term view while investing in risky assets like equities.

E: If a person has P50,000 and another has P100,000 in savings, where do you suggest should they invest their money to maximize returns? What percentage should go to mutual funds, savings, or other investment tools?

BTP: A person should first accumulate (wealth) and set aside monthly expenses for 6 to 9 months in an emergency fund that is liquid, such as a savings account or a money-market fund. The rest can be invested in more diversified mutual funds, such as the Sun Life Prosperity Funds, depending on your needs.

For more information about mutual funds, you can visit Sun Life of Canada (Philippines), Inc. at 12F, Tower 2, Enterprise Center, 6766 Ayala Ave. Corner Paseo de Roxas, Makati City 1226 or you may call (02) 849-9888. You can also log on their website,  
www.sunlife.com.ph.

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This article was published in the August 2010 issue of Entrepreneur Philippines.

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