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How to Invest in Philippine Mutual Funds Online (for Beginners)
If you’re a Pinoy beginner who wants to know how to invest in mutual funds in the Philippines online, this tutorial will help you do that.
Investing in Philippine mutual funds has never been this easy with the advent of online stock brokerage platforms. This development allows you to invest in Philippine mutual funds directly right on your computer or even mobile phone.
Unlike before where you’d normally go through an individual agent to buy mutual funds, two of the most popular online stock brokerage companies in the Philippines are now offering mutual fund investments together with their primary stock brokerage business.
These two online Philippine stockbrokerage companies are COL Financial’s Fund Source and First Metro Securities’ FundSmart.
Advantages of investing in Philippine Mutual Funds
A Philippine mutual fund is an investment company registered with the Securities and Exchange Commission (SEC), which pools money from many investors allowing them to create a bigger fund under a common objective agreed by the investors. This fund is then invested in specific types of securities to achieve its stated objective.
Economy of size makes this pooled fund as a whole “more powerful” than the initially isolated individual funds in achieving a common fund goal understanding the risks involved. It reaps advantages as a whole as compared to a tiny isolated fund by itself.
With the different possible goals for a mutual fund, four main types of a mutual fund are offered:
- Money Market Funds invest purely in short-term debt instruments (time period of one year or less).
- Bond Funds invest in “bonds” which are really long-term debt instruments offered by governments or private corporations.
- Balanced Funds invest in a mix of shares of stock and bonds.
- Stock / Equity Funds invest primarily in shares of equity or stock.
Investing in a Mutual Fund (under Balanced or Equity types) therefore is an easy alternative way to invest in the Philippine stock market which requires a lot less time and monitoring on your part.
Little time because you just basically “put down your money” as your investment and let the mutual fund manager do the job of finding where to best invest it and the needed subsequent monitoring. Compare this with direct stocks investing where you yourself (as the direct investor) do all the analysis (stocks selection) and trades (buy and sell transactions) needed, something that would obviously demand more time and skills from you.
Another good thing about Philippine mutual funds is you can start investing in them with as low as Php 1,000 only. There’s no required regular addition (or top-ups) but I’d personally recommend that you add regularly and really use it as your giant piggy bank for your long-term goals (at least five years).
Still another advantage of a mutual fund over direct stock investing is the diversification it offers. If you’re buying stocks on your own, your 1k initial capital can only buy at most one company. This makes your whole funds very risky being dependent on a single company. But when you buy a mutual fund, you’re actually effectively buying a basket of stocks and other safer securities like government/corporate bonds. Diversification is one common investment strategy in managing the risk for any investment.
Risks in Mutual Fund Investing
One downside of a mutual fund over stocks is the additional fees involved in mutual fund investing, such as management and front-end fees. Look at these costs as your “payment for joining the group” and riding on the expertise of its fund managers. The good thing about online mutual fund platforms like COL Financial & FirstMetroSec is they are waiving (as of now) the normally charged front-end fees which means more potential savings for you.
When it comes to possible returns on and of investment, with the very structure of the mutual fund, it’s easy to see that the main risk of losing money lies in the skills of its fund manager in handling the fund. A good way to judge this is to look at the consistency of the fund performance at least in the last five to ten years. (Read related blog >> Which is a better investment: Stock Market or Mutual Fund?)
Minimum Holding Period in Philippine Mutual Funds
There’s also typically a minimum holding period for your Philippine mutual fund investment, some with as short as 90-days. You can always cash out your investment earlier than this but you’ll be charged an early redemption fee.
Other details about the mutual fund, such as its performance and portfolio mix – what assets and companies it has – can be easily found as part of the resources page of your online broker, like as shown below.
How much you can earn investing in Philippine Mutual Funds
In terms of potential returns, a mutual fund is ideal to be part of your mid-to-long-term portfolio, typically with at least five years time horizon.
You can see below a representative historical performance of equity-type mutual funds in different holding periods, 1 YR, 3 YR, and 5 YR, as of December 15, 2016. It’s important to note though that just like in stocks investing, the returns of mutual funds are never guaranteed as this heavily depends on current market conditions.
In the midst of the COVID-19 pandemic, for instance, mutual funds exposed to the stock market are one of those severely battered.
In the figures below as of March 5 2021, the YTD returns of these mutual funds are still negative with the economic recovery still underway.
However, for those with a long time horizon, this could actually be an opportunity to begin their investment journey at cheaper prices available.
You can watch this video giving you guidance on how to find the best performing mutual fund in the Philippines.
How to buy Philippine mutual funds online
As I mentioned, you can invest in mutual funds either thru ‘live’ agents or do it yourself via online brokers COL Financial and First Metro Securities.
Buying Philippine Mutual Funds in COL Fund Source
COL Financial offers mutual fund through its online platform COL Fund Source.
This platform becomes available to you right after opening an account with them.
You can choose from 20+ of mutual funds offered by the top 6 mutual fund companies in the Philippines and buy(invest in) them with ZERO front-end fees.
With COL Fund Source, you can:
- Access 26 Mutual Funds offered by the country’s top 6 Mutual Fund Houses
- Invest in Mutual Funds with only PHP 1,000 to start
- Invest in Mutual Funds without paying for the Front-End Fees
- Automate your Mutual Fund purchases for regular investing, and
- Monitor your investments anytime and anywhere
If you already have a COL Financial account, you can readily buy your first mutual fund.
To explore and start using COL Fund Source, log in to your COL Financial Account and just click on the Mutual Funds tab.
You can also watch below video tutorial on how to buy/sell mutual fund shares in the Philippines with COL Financial Fund Source.
Buying Philippine Mutual Funds in First Metro Securities – FundSmart
Another online broker offering mutual fund is First Metro Securities under the Metrobank Group. It’s practically the same as COL Fund Source, offering mutual funds from top six mutual fund houses and also offers them with no front-end sales charges.
If you already have an account in trading broker First Metro Securities, then you can also consider buying mutual funds online as part of your diversification.
Below is a sample portfolio holding mutual fund PSFG (PHILAM Strategic Growth Fund) managed by mutual fund company Philam Asset Management, Inc. I just bought this yesterday (April 28 2017) so you will see a tiny loss, but I expect this to give returns after some time which I will update here. 🙂
UPDATE: Below is its performance as of September 19 2017 (after less than five months).
UPDATE: Below is its performance as of October 19, 2017 (after less than six months).
This day, I also redeemed my investments (converted to cash).
That is, my money has earned around 10% profit after less than six months (not bad!).
You can sell anytime
This is another benefit of investing in mutual funds.
If you get the proper timing at the start and was able to invest during crisis prices (such as Covid-19 crisis in 2020), you can sell it very easily and have decent returns even in less than a year time by the time the markets makes a substantial recovery.
While mutual funds investing is designed for a longer time period of at least five years, traders can definitely still invest here with a shorter time-horizon. This of course would need a bit of timing.
I shared below my most recent 2021 experience of selling my mutual fund investment to realize my gains.
Final Comments on Mutual Funds Investing
As a final note, while a mutual fund is an excellent choice for passive investors who simply want to have greater returns than what banks can offer, it’s important to remember the importance of goal setting and risk assessment in every investment you’ll take.
Fortunately, and in line with government regulations, online brokers offering mutual funds normally have its risk assessment questionnaire that will help you decide which type of mutual fund is best for you based on your answers to the questions.
Additionally, before you invest, ask yourself the purpose of each of your investments. This way, it will be easier for you to manage your investment (and your emotions) knowing its original intended purpose. Many newbies fall into the trap of losing this mindset when they start seeing losses even if it’s not yet done within their investing time frame. As with stocks, you’d need to allow your mutual investments to grow over time to achieve optimal returns for your goals.
Hope this helped you in your search of where to invest your hard-earned money.
If you’ve got more questions, you can send them to me through my contact page.
Have fun investing,
oMeng
P.S If you want to learn more about another type of pooled-fund investment for passive investors, you can watch the video below discussing UITF (Unit Investment Trust Fund) available in the Philippines.)
Every new top-up is considered a new investment with its own 90-day (depending on the fund) holding period.
Hello. Kung every month po akong mag iinvest sa mutual fund, paano po yung holding period non? 90 days po ba from the last month na naglagay ako ng pera? Thank you.
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Wow thank you so much sir for this one. I really needed this guide. Thanks for sharing your knowledge with us.
Hi Sir. Could you please expound on your interpretation of the behavior behind the different 1/3/5 year return performances? I went to a seminar and the speaker said that the best way to check the performance of a fund is through the 5 yr return. However, you mentioned that it’s actually the YTD. Just wondering if there’s analysis or psychology behind that. For example, if basing on 1 yr return is too volatile, etc.
Hope my question was quite clear. Thank you for the informative video!
Ah sorry, the video I watched got cut pala. Nasa dulo yugn explanation. But if you have additional inputs hope you can share please. 🙂
I think the speaker who said it’s best to check the 5-yr return is highlighting consistency of the performance of the fund. It’s a good way to avoid funds which are only performing well in bull market. With 5-yr time period, you can see how the fund performs both in good and bad times within the 5-yr long period.