Mutual funds have become a popular investment vehicle in the Philippines in the past years. The main reason for its popularity is the fact that it has more advantages over other investment options. If you are planning to invest in mutual funds, a basic rundown is given below to guide you with this particular investment option. .
Basically, a mutual fund is an investment option which pools in resources from various investors before investing it into a diversified portfolio of investment. In a mutual fund company, a professional fund manager decides on the kind of investment which will give a maximum gain for their investors to put their money in. Usually, the investments a mutual fund company engages in include stocks, bonds, and money market investments.
The legal owners of the mutual fund company are the investors themselves. The amount of their ownership depends on the number of shares they bought. This is also the determining factor for the income their investment will bring them. A mutual fund can earn income in two ways. The first one is through the dividends and interests earned by the funds investments. The other way is through the capital gains earned when the cost of security increases. Once the fund gains income, it will then be distributed accordingly to its shareholders.
There are two ways a mutual fund can generate income. The first way is through the dividends and interests accrued from the funds investments. The second way is through capital gains, which occurs when value of security investments increase. Once gains are earned, it will then be passed on through the shareholders by distributing it according to the amount of ownership.
Even if a mutual fund is a sound investment, it also has some disadvantages. Despite being considered as a low to medium risk investment, there is a slight possibility of not being able to earn. Another disadvantage of this kind of investment option is that you wont be able to decide on the kind of investments the fund will put your money in. Since the fund will be controlled by a fund manager, all you can do is hope that he will make wise investment decisions.
In contrast, mutual funds also have its disadvantages. One of which is that you wont be part of the decision making process with regards to how your money will be invested. Since a fund manager is the one who makes this decision, you can just hope he chooses the right investments for the mutual fund company. The worst that can happen is that your investment will not gain anything, but the possibility of this is very dim.
Buying mutual funds is as simple as filling out an application form and paying for the number of shares you want. Some companies may charge an entry fee though. Just make sure that you are certain of the mutual fund company you are investing in to avoid any loss of investment later on.
With these basic ideas of what a mutual fund is and how it works, you are now ready to decide on whether or not you should invest in one. If you want to go ahead and invest in one, just fill out an application form to be provided by an authorized broker and youre all set. Just make sure you understand the terms of your investment. And dont stop learning about mutual funds upon investing in it. Make it your responsibility to monitor how your investment is doing.
Basically, a mutual fund is an investment option which pools in resources from various investors before investing it into a diversified portfolio of investment. In a mutual fund company, a professional fund manager decides on the kind of investment which will give a maximum gain for their investors to put their money in. Usually, the investments a mutual fund company engages in include stocks, bonds, and money market investments.
The legal owners of the mutual fund company are the investors themselves. The amount of their ownership depends on the number of shares they bought. This is also the determining factor for the income their investment will bring them. A mutual fund can earn income in two ways. The first one is through the dividends and interests earned by the funds investments. The other way is through the capital gains earned when the cost of security increases. Once the fund gains income, it will then be distributed accordingly to its shareholders.
There are two ways a mutual fund can generate income. The first way is through the dividends and interests accrued from the funds investments. The second way is through capital gains, which occurs when value of security investments increase. Once gains are earned, it will then be passed on through the shareholders by distributing it according to the amount of ownership.
Even if a mutual fund is a sound investment, it also has some disadvantages. Despite being considered as a low to medium risk investment, there is a slight possibility of not being able to earn. Another disadvantage of this kind of investment option is that you wont be able to decide on the kind of investments the fund will put your money in. Since the fund will be controlled by a fund manager, all you can do is hope that he will make wise investment decisions.
In contrast, mutual funds also have its disadvantages. One of which is that you wont be part of the decision making process with regards to how your money will be invested. Since a fund manager is the one who makes this decision, you can just hope he chooses the right investments for the mutual fund company. The worst that can happen is that your investment will not gain anything, but the possibility of this is very dim.
Buying mutual funds is as simple as filling out an application form and paying for the number of shares you want. Some companies may charge an entry fee though. Just make sure that you are certain of the mutual fund company you are investing in to avoid any loss of investment later on.
With these basic ideas of what a mutual fund is and how it works, you are now ready to decide on whether or not you should invest in one. If you want to go ahead and invest in one, just fill out an application form to be provided by an authorized broker and youre all set. Just make sure you understand the terms of your investment. And dont stop learning about mutual funds upon investing in it. Make it your responsibility to monitor how your investment is doing.
About the Author:
The author's website provides information about Philippine Mutual Funds and also guide you on how to buying mutual funds in the Philippines.
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