Build Your Mutual Fund

Build Your Wealth
Thru Mutual Funds

Beginners Guide to Mutual Fund Investing
By Laurent Dionisio, CPA, RFP
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Table of Contents
I. Introduction
II. What is Mutual Fund?
III. How Mutual Fund Begins?
IV. How Mutual Fund Works?
V. Types of Mutual Fund?
VI. What are the Companies Available in the Philippines According to
Mutual Fund’s Type?
VII. What are the Advantages and Disadvantages of Investing in Mutual
Fund?
VIII. What are the Requirements in Investing in Mutual Fund?
IX. What are the Required Fees?
X. Are you Require to Pay Taxes from Gain in Mutual Funds Investment?
XI. What are the Similarities and Differences Between Mutual Fund and
Unit Investment Trust Fund?
XII. How do Inflation Affects your Mutual Fund Investment?
XIII. What is Peso-Cost Averaging?
XIV. How to Calculate Mutual Fund’s Shares and Gains?
XV. How to Invest in Mutual Fund?
XVI. What are the Risks in Investing in Mutual Funds?
XVII. Summary
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I. Introduction
There is certain time in our life that we all contemplate on the

decision to invest in different ventures to guarantee financial
stability, whether for retirement or for a certain objective. And one
of the most popular and common investments we Filipinos are
comfortable with is a savings account in a local bank.
It has become a common traditional plan for investing that we take

a part of our monthly income and deposit it into a savings account
to guarantee that in times of need, we have the funds to serve our
needs.
In the Philippines, most people assume that a savings account is

adequate for our future financial stability. Most parents even open
bank accounts for their children in preparation for a time that they
can use it educational or medical expenses, and even for the luxury
of travelling. But in all honesty, a savings account is no longer
enough in a time that the cost of living is continuously increasing
every year, and there are no signs of it going down.
Although it is common that almost every working Pinoy has a

savings account: Yes, they are good for safekeeping our daily funds,
but it is not enough to meet the demands of the future. You can no
longer say that you are financially secured by what you have inside
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your savings account merely because the value of a P1000 bill may
be able to buy a weeks worth of groceries, but it cannot guarantee
the same value in the next 5, 10 or 20 years time. Every day costs
are always rising and your savings may not be enough at the future
time that you’ll need it.
The good thing is, there are many options to grow your savings
faster than what your bank is promising with the current returns
you are getting from your savings account. And one of the
investments you should look into is “mutual fund”. It is one of the
best ways to make the most out of the savings you have now, and
this eBook will be discussing just how to do it with.
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II. What is Mutual Fund?
Investors
Returns Fund
Manager
Securities
A mutual fund is made up of a pool of collected funds. The funds

are coming from different investors. This may be an individual, a
group of people or institutional investors.
A mutual fund is managed and operated professionally by a fund

manager.
A mutual fund is like a corporation that is funded by a group of

people where the money collected will be invested in stocks, bonds
and other forms of securities.
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To help you understand this better, a mutual fund can be compared
to riding a motorcycle. You can often see motorcycle users in the
Philippines who have back riders. The driver serves as the fund
manager and the back rider serves as the investor. The motorcycle
is the mutual fund. Whatever the driver does to his motorcycle, the
back rider will also be affected. Let say, the driver upgraded the
brake system of the motorcycle or he invested in a pair of brand
new wheels then the motorcycle will be benefited and its value will
increase.
However, if the driver will be reluctant in driving, then the

motorcycle will be at risk. For example, the motorcycle had an
accident. There will be some cost for repairs or other incidental
expenses and this means a loss for the “motorcycle” (mutual fund).
Again, whatever the driver does with his motorcycle, the back rider
will be affected and sadly, it will not always be beneficial. But do
not worry, since these drivers (fund managers) are professionals
and are focused 24/7, it is their job to guarantee that every action
they take will benefit the entire mutual fund/the motorcycle.
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How Mutual Fund Begins?
The origin of mutual fund started in Netherlands in the 18 th

century. It was only in the 1890s that it reached the US market, and
only became popular in the States in the 1920s.
However, the stock market crashed in the late 1920s and this has
become the reason why mutual funds in the US has declined. It was
only in the 1950s when the stock market started to rise again and
the mutual funds became popular in the US once more.
In the Philippines, it started way back in the early 1950’s. The

Mutual fund concept is very familiar for the Pinoy market because
it is like the system of “Bayanihan”. With this concept, mutual fund
has been popular with Filipinos ever since.
III. How Mutual Fund Works?
Mutual fund works very simply; you need to follow this guide to
see how it works:
First, there must be a set of investors such as different individuals

or a group of individuals, organizations and even established
companies. The investments of these people will be gathered
together and it will be known as pool money.
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Second, a fund manager is responsible for handling a mutual fund
for a company. A fund manager is a professional with sufficient
training and experience who will manage the money by investing in
securities.
Third, the fund manager will then look for good investment
securities such as stocks and bonds where the fund can be invested
in.
Fourth, the money that is invested will generate returns. The

returns can be a gain or a loss, there is no guarantee that the return
will always be a gain unlike with your savings account that has an
insurance up to P500,000 guaranteed by the PDIC.
Fifth, after the investments generate returns, then it will be passed

back to the investors. The money will be divided accordingly to the
investors with the service fees deducted: fees such as the audit and
management fees, etc.
Here is a simple text illustration to understand the flow better:
INVESTORS
passed entrust the
back money
RETURNS FUND MANAGER
generates invests
SECURITIES
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IV. What are the Types of Mutual Fund?
There are four basic types of Mutual Funds in the Philippines

namely, money market fund, bond or fixed-income fund, balanced
fund and stock or equity fund. Each type of mutual fund is different
from the other in terms of risks, type of investors, investment
compositions, goals, objectives, expected returns, and average
earnings.
Let’s take a look at what mutual fund is suitable for you and your
situation. Everyone lives different lives and have different financial
situations, and not all mutual funds are compatible for everyone.
To have a better understanding, each type of mutual fund is
discussed according to the factors stated above.
Type #1: Money Market Fund
Risks: Low
Type of Investors: Conservative
Investment Composition: Short term fixed income instruments
Goals: 3-6 months only, short term
Objectives: Stability plus minimal growth
Expected Returns: Low
Average Earnings: 1-2%
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Type #2: Bond or Fixed Income Fund
Risks: Moderate
Type of Investors: Moderately Conservative
Investment Composition: Fixed income instruments
Goals: 1 year, long term
Objectives: Stability plus reasonable growth
Expected Returns: Low to Moderate
Type #3: Balanced Fund
Risks: Balanced
Type of Investors: In between conservative and aggressive
Investment Composition: Stocks and fixed income instruments
Goals: 1-3 years, longer term than bond or fixed income fund
Objectives: Medium to long term for moderate investors
Expected Returns: Moderate to High
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Type #4: Stock or Equity Fund
Risks: High
Type of Investors: Aggressive
Investment Composition: Share of stocks; “Equity Funds”
Goals: 3 years or more, longest term
Objectives: Long term, capital growth
Expected Returns: High
For a comparison and to help you decide, here is the table form of
the types of mutual funds for better visualization:
Type of Bond or
Money Stock or
Mutual Fixed Balance
Market Equity
Fund Income Fund
Fund Fund
Fund
Risks Low Moderate Balanced High
In between
Type of Moderately conservative
Conservative Aggressive
Investors Conservative and
aggressive
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Fixed Stocks and Share of
Short term
Investment income fixed stocks;
fixed income
Composition instruments income “Equity
instruments
instruments Funds”
1-3 years, 3 years or
3-6 months longer term more,
1 year, long
Goals only, short than bond longest
term
term or fixed term
income fund
Medium to
Stability plus Long
Stability plus long term
reasonable term,
Objectives minimal for
growth capital
growth moderate
growth
investors
Expected Low to Moderate to
Low High
Returns moderate high
Average
2% 6% 12% 18%
Earnings
These are the four types of mutual funds and the choice is up to
you. You must consider what you are most comfortable with and
what choice will not burden your every day expenses and needs.
However, I know that you may still have doubts as anything with
risk is difficult to commit to, most definitely when it comes to
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risking your own money. In order to help you decide if a mutual
fund investment is really for you, here are some questions and
answers provided below:
Q: What if I don’t have the background to know enough

about stock or bond investments? Or I don’t know how it
works or what stocks to purchase?
A: Good news because you don’t have to worry about

these things as the fund manager will be responsible for
such things like where to put the investments.
Q: What if I can’t manage it from time to time?
A: You don’t have to manage your mutual fund

investment; it is the fund manager’s job to do so. You can
do your own job without getting interrupted. However,
you can still ask for updates.
Q: What if I only want to invest for a short amount of

time before I decide to invest long term?
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A: That is why mutual fund is the right investment for you
because there are 4 types of mutual funds to choose from
and you can shift from one fund type to another anytime.
Q: What if I have mixed emotions with my investment

and tend to decide depending on my emotion? Is an
emotional investor suitable for investing in a mutual
fund?
A: There’s no need to worry about your emotions. It is

really important that we handle our emotions properly
and separate it from our investments. However, there are
still times that we can’t easily get rid of how we naturally
feel, especially if you are a novice in this kind of
investment. Good news is, in mutual funds, you are not
required to handle or manage your investments. Only the
fund manager will take care of your money. Therefore you
will not be too burdened about the stress that goes along
with investing in stocks or bonds.
Q: What if I am not good at investing; let’s say I am

unlucky and I always fail in my investments?
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A: Mutual funds can vary from low, moderate and high
risks. You can always pick the type which has lowest risk if
you feel you are “unlucky” in investing. However, in
investments we don’t believe in “luck” and again, the fund
managers will be the one picking the securities to invest in.
Q: I don’t have a lot of money to invest with, can I still

invest in a mutual fund?
A: Yes, you can! The minimum amount for you to invest is

only 5,000 php and if you decide to add on your
investment, the minimum is only 1,000 php.
Q: I still can’t decide. I have 5,000 php but I don’t want to

risk my money resting in something I can’t use for too
long. I want to see progress as soon as possible; can this
happen?
A: Yes. You can also see the result as early as 3 months if

your investment gains or losses. However, remember that
there are no guaranteed returns on mutual funds.
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Q: I am an OFW, how can I invest? Is there a dollar
investment option?
A: You can invest anytime and yes; you can invest using
your dollars. We have dollar denominated funds.
Investing your money in a mutual fund is a big decision, the choice

is still up to you. But it is also important to know what options you
have to earn more with the savings you have, rather than have it
stuck in a savings account with only the bare minimum in growth.
On the next section, let us check the companies here in the

Philippines that are available for mutual funding, for you to get a
bigger picture of how stable investing in mutual fund can be.
V. What are the Companies Available in the Philippines According to

Mutual Fund’s Type?
Mutual Fund Type #1: Money Market Fund
Primarily invested in peso securities:
1. Fund: ALFM Money Market Fund, Inc.

Website: http://www.alfmmutualfunds.com/.
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2. Fund: First Metro Save and Learn Money Market Fund, Inc.
Website: www.fami.com.ph
3. Fund: Philam Managed Income Fund, Inc.

Website: www.philamfunds.com.ph
4. Fund: Sun Life Prosperity Money Market Fund, Inc.

Website: www.sunlife.com.ph
Mutual Fund Type #2: Bond or Fixed Income Fund

1. Fund: ALFM Peso Bond Fund, Inc.

Website: www.alfmmutualfunds.com
2. Fund: Cocolife Fixed Income Fund, Inc.

Website: www.cocolifefunds.com
3. Fund: Ekklesia Mutual Fund Inc.

4. Fund: First Metro Save and Learn Fixed Income Fund, Inc.
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5. Fund: Grepalife Bond Fund Corp.
Website: www.grepafunds.com.ph
6. Fund: Philam Bond Fund, Inc.

7. Fund: Philequity Peso Bond Fund, Inc.

Website: www.philequity.net
8. Fund: Prudentiallife Fixed Income Fund, Inc.

Website: www.myoptimafunds.com
9. Fund: Sun Life of Canada Prosperity Bond Fund, Inc.

10. Fund: Sun Life Prosperity GS Fund, Inc.

Primarily invested in foreign currency securities:
1. Fund: ALFM Dollar Bond Fund, Inc.

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2. Fund: ALFM Euro Bond Fund, Inc.
3. Fund: ATR KimEng Total Return Bond Fund Inc.

Website: www.altram.com.ph
4. Fund: Grepalife Dollar Bond Fund Corp.

Website: www.grepafunds.com
5. Fund: Grepalife Fixed Income Fund Corp.

Website: www.grepafunds.com
6. Fund: MAA Privilege Dollar Fixed Income Fund, Inc.

Website: n/a
7. Fund: MAA Privilege Euro Fixed Income Fund, Inc.

Website: n/a
8. Fund: PAMI Global Bond Fund, Inc.

9. Fund: Philam Dollar Bond Fund, Inc

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10. Fund: Philequity Dollar Income Fund, Inc.
11. Fund: Sun Life Prosperity Dollar Abundance Fund, Inc.

Mutual Fund Type #3: Balanced Fund
1. Fund: ARTKE Philippine Balanced Fund, Inc.

Website: www.atram.com.ph
2. Fund: Bahay Pari Solidaritas Fund, Inc.

3. Fund: First Metro Save and Learn Balanced Fund Inc.

4. Fund: NCM Mutual Fund of the Phils., Inc

5. Fund: Optima Balanced Fund, Inc.

Website: www.myoptimafunds.com
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6. Fund: PAMI Horizon Fund, Inc.
7. Fund: Philam Fund, Inc.

8. Fund: Sun Life of Canada Prosperity Balanced Fund, Inc.

1. Fund: Cocolife Dollar Fund Builder, Inc.

Website: www.cocolife.com
2. Fund: PAMI Asia Balanced Fund, Inc.

3. Fund: Sun Life Prosperity Dollar Advantage Fund, Inc.

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Mutual Fund Type #4: Stock or Equity Fund
1. Fund: ALFM Growth Fund, Inc.

2. Fund: ATRKE Alpha Opportunity Fund, Inc.

3. Fund: ATRKE Equity Opportunity Fund, Inc.

4. Fund: First Metro Save and Learn Equity Fund, Inc.

5. Fund: Philam Strategic Growth Fund, Inc.

6. Fund: Philequity Fund, Inc.

7. Fund: Philequity PSE Index Fund Inc.

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8. Fund: Philippines Stock Index Fund Corp.
9. Fund: Sun Life Prosperity Philippine Equity Fund, Inc.

Website: www.sunlifefunds.com
10. Fund: United Fund, Inc.

Website: www.cocolifefunds.com
1. Fund: ATR KimEng AsiaPlus Recovery Fund, Inc.

As of January 31, 2016, the top 3 performers are:
1. Fund: Philequity PSE Index Fund

Type: Equity Fund
2. Fund: Philequity Fund, Inc.

Type: Equity Fund
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3. Fund: First Metro Save and Learn Fixed Income Fund, Inc.
Type: Bond Fund
VI. What are the Advantages and Disadvantages of Investing in

Mutual Fund?
Every investment has its own advantages and disadvantages. Let’s

discuss the advantages of investing in a mutual fund first.
Advantages of Investing in Mutual Fund:
1. Professional Management
If you want to invest your money into something, you need to be

a professional. This means that you have to be knowledgeable in
the type of investment you are going to make.
To be a professional, you need a degree, experience and must
know every corner of the market and how every part of the
system works, and the full details of your preferred type of
investment. In short, you must be an expert since you handle
other people’s money.
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In a mutual fund investment, your money will be professionally
managed by fund managers (for a fee). This may be handled by
an individual, group of people or a department or an institution
like a bank. The fund manager is the one who handles the fund
and its operation.
You don’t have to be on-hand with your investment in a mutual
fund because it is the fund manager’s job and duty because they
are being paid to do so.
2. Simple
It is very simple to invest in a mutual fund. You can go to any

mutual fund company, complete the requirements and choose
your desired type of mutual fund and you are good to go.
3. Convenient
Aside from being simple, it is also easy to invest in a mutual

fund. Thanks to modern technology, you can fill up the forms in
your home and just ship them to your preferred company. You
can also track your investments online.
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4. Lower Capital Needed
Investment in mutual funds do not require a large amount of

money. Unlike other types of investments, you will only need
5,000 php to start investing in a mutual fund and as low as 1,000
php additional investment per month.
As stated earlier in #1 advantage, a fund manager will take care

of your money so you can take advantage of having a fund
manager at a lower fee. Unlike with other types of investments,
hiring a manager can take a big chunk out of your budget. But in
a mutual fund, even a small time investor can have a
professional manager who works for him.
5. Diversification of Risk Reduction
As your grandmother always told you, “Do not put all your eggs
in one basket!”. This principle is very popular especially in the
financial industry. In mutual funds, you can take advantage of
diversification wherein you can maximize the potential of your
money. Mutual fund that is broadly diversified is a good
investment, in this case, the risk of losing is reduced.
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6. Liquidity
You can have your mutual fund investment converted to cash

any time you want or need it. The process is simple. There is no
way a fund manager can hold your money if you decided to pull
it out. They are mandated by law to buy back the shares you
invested in whenever you want it.
7. Possibility of Higher Returns
Compare to self-managed investments, mutual funds has

greater possibility of higher returns because it is professionally
managed by skilled fund managers.
Disadvantage of Investing in Mutual Fund:
1. Professional Mismanagement
Yes, it can be mismanaged but very rarely since these mutual

funds are tightly regulated. Whether you have gains or losses,
your fund manager will still be compensated. There is a
possibility that the management will be abused like unnecessary
trading.
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2. Cost
There are funds that require higher rates of sales charge so if

possible, avoid these types of funds. Always be cautious with
mutual fund expense ratios and sales charges.
Always ask your agent or financial advisor the corresponding
costs in your mutual investments and be wise on choosing
investment companies, just as wise as when you are deciding on
the outfit you will wear for a very important interview: it must
be appropriate and contribute to a successful outcome.
3. Dilution Resulting by Over-diversified
Mutual funds can be overwhelming, so make it a point that you

do not invest in funds that are over-diversified. It is also
important to know the credibility of the fund manager and their
past performance. Check their returns for the last 5 years and
assess if they are showing promising results with their methods
of investment.
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4. Loss of Control
Because your mutual fund is managed by fund managers, you

will loss the full control of your investment. You cannot manage
your own portfolio. As stated earlier, the driver is the fund
manager, you just have to ride the motorcycle and see what
happens.
With every investment, there are always advantages and

disadvantages and we do not have to sugar coat this topic. We
want you to have a clear and transparent idea of what the risks and
rewards are. Remember, with any successful venture, there are
risks. But with the incredible possibilities of rewards with mutual
funds, we still highly recommend investing in mutual funds because
of its potential and safe and secure nature. Now, let’s talk about
the requirements so you can already start investing as soon as you
are ready to take on the opportunity to have your savings grow.
VII. What are the Requirements in Investing in Mutual Fund?
Basically, investing in mutual funds is like opening a new savings

account in a bank. The usual requirements are:
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• Valid ID
• Recent Photo
• Duly filled-up personal information forms
• Signature card
• Assessment form
• Miscellaneous requirements depending on the funds
After the requirements have been submitted, you will receive a

confirmation of your mutual fund account.
VIII. What are the Required Fees?
The required fees may vary depending on the company you will be
putting your investment into. There are three required fees that
you should know:
1. Sales Load Fees
This must be paid upon the purchase of mutual fund.
2. Management Fees
This is the fees that will be deducted in your investment for the
payment you have to give to the fund manager.
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3. Exit Fees
Most mutual fund companies give exit fees for free, depending
on the years you have invested: usually at least 5 years. This fee
is required to be paid if you decided to pull out your mutual fund
investment.
IX. Are you Required to Pay Taxes from Gain in Mutual Funds
Investment?
This is one of the advantages of investing in mutual fund. It is tax-

free and this is why many people prefer to invest in mutual funds
compared to other forms of investments.
According to the Republic Act No. 8424 Tax Reform Act of 1997,
Section 32 (B) (7) (h) that you can find in the BIR’s website:
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X. What are the Similarities and Differences Between Mutual Fund
and Unit Investment Trust Fund?
Mutual fund is often compared or associated with Unit Investment

Trust Fund or UITF. Let’s take a look at how they are similar and
different from each other.
Similarities between Mutual Fund and UITF:
1. They are both pooled by different investors such as individuals,

group of people or organizations.
2. They are both managed professionally by fund managers.
3. They are both open-ended investment that when you feel like
pulling out your investment, you can do so anytime you want it.
4. They both offer money market fund, bond fund, balanced fund
and equity fund.
5. They are both risky and not guaranteed.
6. They both have a greater possibility of higher returns.
Differences between Mutual Fund and UITF:
1. What is the Regulatory Body:
Mutual Fund - it is regulated by the Security and Exchange

Commission or SEC
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UITF - it is regulated by the Bangko Sentral ng Pilipinas or BSP
2. What is the applicable law:
Mutual Fund - “Investment Company Acts of the Philippines”
UITF - “Philippine Banking Law”
3. How to open an account:

Mutual Fund - your point person is a licensed mutual fund
agent. You need to talk with this kind of agent first before you
open an account. He/she will help you decide on whether
mutual fund is the right investment for you.
UITF - on the other hand, your point person is a trust

representative from a bank. You need to talk to this person first
before you open an UITF account.
4. Fund managers:
Mutual Fund - the fund manager is appointed by the investment
company.
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UITF - the fund manager is the trust group deparement of the
bank.
5. How long is the holding period:
Mutual Fund - it takes at least 6 months holding period but

there are also few that gives only 30-days holding period.
UITF - it takes at least 30 days holding period.
6. How much is the minimum investment:
Mutual Fund - usually, the minimum amount required to open a

mutual fund account is 5,000 php. This may vary depending on
the companies offering mutual fund investment.
UITF - usually, at least 10,000 php is the minimum required

amount in investing.
7. What is the price of funds:
Mutual Fund - the price is expressed in Net Asset Value Per

Share or NAVPS. In mutual funds, you will purchase shares.
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UITF - on the other hand, in UITF you will purchase units so the
price of fund is expressed in Net Asset Value Per Unit or NAVPU.
8. What are the fees and charges:
Mutual Fund - for some funds, there may be entry fee,

management fee and exit fee.
UITF - there is no entry fee but only trust fee and exit fee in case
you decided to withdrawn your funds before the holding period.
XI. How do Inflation Affects your Mutual Fund Investment?
Whether we like it or not, inflation takes place. It is where the price

of a commodity is increasing but the buying power of a consumer is
decreasing.
For example, this year the price of your favorite burger is 50 php
then by next year it will increase by 10% so the new price for next
year is 55 php. If your income will not increase, your buying power
will be less. Your purchase value of burger is diminishing in the next
coming years.
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Inflation affects your mutual fund investment; it can outgrow your
investment. If this happens, the power buying of your investment
will lose its power. However, you can actually protect your buying
power by your investment.
Let’s take your monthly grocery as an example. Let’s say that the
inflation rate in the basic commodities like rice, meat, sugar, oil and
sardines is 3% so every year the prices will increase by 3%. If your
income will not increase with the same 3%, you will buy less than
what you are expecting. This year your 1,000 php maybe sufficient
to feed a family of three in a week but next year, it will not be
sufficient anymore because of inflation rate. So, the solution is to
invest in investment products such as mutual funds, stocks, etc.
Make sure to monitor the return rate per annum of your

investment. If the return rate is lower than 3%, you will still won’t
have enough to purchase food for three in the next coming years.
The return rate must be at least 3% to suffice your needs.
To prevent inflation rate out growing your investment then make

sure that the return is always higher or at least breaks even with
the inflation rate. You should always remember that your money
should grow more than you lose (inflation).
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XII. What is Peso-Cost Averaging?
Peso Cost Averaging is a tested and proven method of investing,

many Pinoys are already taking advantage of this. It is where you
regularly invest or purchase a share, you can do this once a month,
twice a month depending on your investment goal. In peso cost
averaging, you have a target goal in which you invested your money
on a regular basis until you reach that goal.
The peso cost averaging is very simple, you may be using this
strategy in your life but you are not aware of it. Just follow these
three steps:
Step #1: Determine how much money you will invest.
As a Pinoy, it is common to us to spend all our money during pay

day and before the next pay day arrives, we often struggle. It is
because we are not frugal and wise with spending our money. We
ought to sacrifice today and enjoy later but most of us enjoy today
and suffer later. This is why peso cost averaging is very ideal in
mutual fund investment. If you can set aside at least 20% of your
regular income, then that is a good start.
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Step #2: Determine how often you are going to invest or fund
your investment.
You need to set a time-monthly, twice a month, every other month,

quarterly or anytime you can for as long as it is at a regular basis.
Most investors choose to invest monthly.
Step #3: Determine how long you are planning to invest.
It is important that we set goals, financial goals. The longer you fund
your investment, the more likely it is that you’ll have financial
security.
You can take advantage of peso cost averaging in your mutual fund
investment and you will see the benefit of creating a habit.
XIII. How to Calculate Mutual Fund’s Shares and Gains?
Calculation of Shares:
For example, you have invested 10,000 php in ABC Investment
Company that has 2.5% sales load and currently at 24.59 php per
share. So, let’s see your investment and compute the share:
Fund Name: ABC Investment Company

Gross Investment: 10,000 php
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Sales Load: 2.5%
NAVPS: 24.59 php
Let’s now compute the net investment. You can get it by deducting
the sales load from the gross investment:
Net Investment= 10,000 php – 2.5%

Net Investment= 9,750 php
Now, let’s compute how many shares your net investment can
purchase by dividing it with the NAVPS:
Shares= 9,750 php / 24.59
Shares= 397 (round to the nearest)
You now own 397 shares from the ABC Investment Company
Calculations of Earnings:
Let say that the ABC Investment Company is now at 30 php per
share. Let’s compute how much your investment gain or loss:
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Fund Name: ABC Investment Company
Total Shares: 397
Previous NAVPS: 24.59 php
Current NAVPS: 30 php
Let’s see if you have gain or loss by subtracting the previous NAVPS
from the current NAVPS:
Gain or Loss= 30 php – 24.59 php

Gain or Loss= 5.41
Since the value is positive so it means that you have gain. Let’s
compute how much you will gain:
Gain= 397 php x 5.41 php

Gain= 2,147.77 php
This is how you compute your shares and your earnings.
XIV. How to Invest in Mutual Fund?
If you want us to assist you with free financial consultation, please

message the one who gave you this book or ebook.
41
It is easy to invest in mutual funds. To start your investment, just
follow this step by step guide:
Step #1: Make an assessment.
You will be assisted by a mutual fund licensed adviser or

representative. You will be asked to answer the Investor Profile
Questionnaire. The result of this assessment will help your adviser
to determine which type of investor are you.
Step #2: Choose your fund and go to your chosen mutual fund’s
website.
You can choose from the list above in chapter V. You can also find
the website of your chosen mutual fund investment company
above. Once you are in their website, you can now download your
preferred fund’s prospectus. It is important that you study it before
you decide.
Step #3: Gather all the requirements.
The requirements depend on the investment company so make

sure to get a copy of the list of requirements from your chosen
fund. Also make sure to complete all the requirements and avoid
counterfeit documents.
42
Step #4: Open and fund your account.
Once you have submitted the complete requirements, you can now
open and fund your account. If you wish to increase your
investment, you can always add at least 1,000 php in your mutual
fund investment.
If you want us to assist your mutual fund investing and with free
financial consultation, attend our Free Financial Planning Workshop
in Makati or online. Register here --> Reservation Form
XV. What are the Risks in Investing in Mutual Funds?
Everything, especially an investment, will always have risks. There

are six types of risks that are very common in investments:
Risk #1: Market Risk
This happens when the value of your investment drops. There are
instances that are unavoidable that cause these risks. All types of
investments are affected by this kind of risk.
43
Risk #2: Liquidity Risk
This is where there are no one interested in buying or no buyers

who are willing to invest because the value of the investment is
declining. In this instance, the fund can’t sell. Just like the first one,
all types of investment can be affected.
Risk #3: Credit Risk
This happens when a bond issuer can no longer repay the bond.
This usually happens in insurance investments. This risk affects the
fixed income securities.
Risk #4: Interest Rate Risk
This happens when the interest rates increases more than the value
of fixed income, and securities will decrease. This risk also affects
the fixed income securities.
Risk #5: Country Risk
This happens when there is a current political issues in the

Philippines or other countries that result to economy related issues
that will affect the investment. This affects the foreign investments.
The value of their investments will decline due to the issues.
44
Risk #6: Foreign Exchange Risk
This happens when the base currency of the country is being

denominated by other currencies during a financial transaction.
XVI. Summary
Unlike other types of investments, a mutual fund is easier to

understand and to manage. In fact, you will no longer need to
manage it because the investment company will provide a fund
manager. The fund manager can be an individual, a department or
an agency who will do the transaction for you. All you need to do is
to invest your money and the fund manager will do the work for
you. As we advise, do it consistently and as often as possible. The
more you do, the better the chances to earn from your investment.
Again, mutual fund started in the Philippines in the 1950s. This is

also around the same time that it grew in popularity in the United
States. The concept of mutual fund is very similar to our
“bayanihan” concept and this is why many Pinoy investors became
interested in investing in this type of investment.
45
Mutual funds are a lot simpler as most people believe it to be. It
just doesn’t seem it at first as we are new to it. You need to invest
your money and entrust it to a fund manager and then they will
invest the money on securities such as stocks and bonds and it will
then generate a return. The return can be a positive or a negative
return.
There are four types of mutual funds, the money market fund,
bond or fixed-income fund, balanced fund and stock or equity fund.
The types of mutual fund that is right for you entirely depends on
what mutual fund type you are comfortable with and patient
enough with to tolerate. There are many investment companies
here in the Philippines that you can choose from.
Like any investments, there are advantages and disadvantages. One

of the advantages is the lower capital needed for as low as 5,000
php you can open an account. On the other hand, one of the
disadvantages is a possible mismanage of mutual funds as there are
some fund managers that are abusive.
46
It is very easy to invest in mutual funds, you need to complete the
requirements and fund your account. One good news about mutual
fund is it is tax-free. There are only three fees that you should be
familiar with: the entry fee, the managing fee and the exit fee.
Mutual fund is often compared with UITF, they have similarities but
they have also big differences.
Inflation also affects your investment and so does peso cost

averaging. You can take advantage of these two things. Just like
inflation, there are also other risks that can affect your investment.
As they always say, the higher the risk, the greater the return.
Mutual fund is a great investment especially for first timers or for

people who want to invest but have limited time and budget. You
don’t have to be familiar with all corners of this type of investment,
all you need to do is to entrust your money with a trained and
experienced fund manager.
47
Thank you for Reading and Congratulations!
I hope and pray that you start investing as soon as you read this book.
God bless you always!
Laurent Dionisio, CPA, RFP
www.ascendfinancials.ph
PS. If you want us to assist your mutual fund investing and with free
financial consultation, attend our Free Financial Planning Workshop in
Makati or online. Register here --> Reservation Form
48

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Build Your Wealth

Thru Mutual Funds

By Laurent Dionisio, CPA, RFP

There is certain time in our life that we all contemplate on the

It has become a common traditional plan for investing that we take

In the Philippines, most people assume that a savings account is

Although it is common that almost every working Pinoy has a

A mutual fund is made up of a pool of collected funds. The funds

A mutual fund is managed and operated professionally by a fund

A mutual fund is like a corporation that is funded by a group of

However, if the driver will be reluctant in driving, then the

The origin of mutual fund started in Netherlands in the 18 th

In the Philippines, it started way back in the early 1950’s. The

III. How Mutual Fund Works?

First, there must be a set of investors such as different individuals

Fourth, the money that is invested will generate returns. The

Fifth, after the investments generate returns, then it will be passed

Here is a simple text illustration to understand the flow better:

RETURNS FUND MANAGER

There are four basic types of Mutual Funds in the Philippines

Type #1: Money Market Fund

Type #3: Balanced Fund

Q: What if I don’t have the background to know enough

A: Good news because you don’t have to worry about

Q: What if I can’t manage it from time to time?

A: You don’t have to manage your mutual fund

Q: What if I only want to invest for a short amount of

Q: What if I have mixed emotions with my investment

A: There’s no need to worry about your emotions. It is

Q: What if I am not good at investing; let’s say I am

Q: I don’t have a lot of money to invest with, can I still

A: Yes, you can! The minimum amount for you to invest is

Q: I still can’t decide. I have 5,000 php but I don’t want to

A: Yes. You can also see the result as early as 3 months if

Investing your money in a mutual fund is a big decision, the choice

On the next section, let us check the companies here in the

V. What are the Companies Available in the Philippines According to

Mutual Fund Type #1: Money Market Fund

Primarily invested in peso securities:

1. Fund: ALFM Money Market Fund, Inc.

3. Fund: Philam Managed Income Fund, Inc.

4. Fund: Sun Life Prosperity Money Market Fund, Inc.

Mutual Fund Type #2: Bond or Fixed Income Fund

1. Fund: ALFM Peso Bond Fund, Inc.

2. Fund: Cocolife Fixed Income Fund, Inc.

3. Fund: Ekklesia Mutual Fund Inc.

6. Fund: Philam Bond Fund, Inc.

7. Fund: Philequity Peso Bond Fund, Inc.

8. Fund: Prudentiallife Fixed Income Fund, Inc.

9. Fund: Sun Life of Canada Prosperity Bond Fund, Inc.

10. Fund: Sun Life Prosperity GS Fund, Inc.

Primarily invested in foreign currency securities:

1. Fund: ALFM Dollar Bond Fund, Inc.

3. Fund: ATR KimEng Total Return Bond Fund Inc.

4. Fund: Grepalife Dollar Bond Fund Corp.

5. Fund: Grepalife Fixed Income Fund Corp.

6. Fund: MAA Privilege Dollar Fixed Income Fund, Inc.

7. Fund: MAA Privilege Euro Fixed Income Fund, Inc.