The service of full-time professional managers whose job is to analyze the various investment products available in the market and select those that would give the best possible returns to the fund and its shareholders affords it's investors, particularly the small ones.
Low Capital Requirement
Direct investment usually requires substantial capital. The minimum investment amounts for Treasury Bills and commercial paper, for instance, range from Php 100,000 to Php 1 Million depending on the bank or investment house you are dealing with. This holds true for stocks because while an investor may be able to buy one "lot" (shares are sold in board lots of 10 to 1 Million shares depending on the price at which these shares are traded) for as low as Php 1,000 to Php 5,000 he may not find a stockbroker who will service his account because they prefer to deal with high net worth individuals or at least with people who have substantially more than just Php 5,000 to invest. In contrast, most mutual funds in the Philippines require a minimum initial investment amount of only Php 5,000 and subsequent investments of Php 1,000.
Diversification
An important investment principle that requires holding several securities to reduce the risks associated with investing in individual securities is called diversification. When people invest in mutual fund, they achieve instant diversification because the fund is usually invested in a wide array of securities. As the saying goes " Do not put all your eggs in one basket. This adage is specially true in the world of investments which is full of uncertainties.
Liquidity
Liquidity
Liquidity is the ability to readily convert investments into cash. Other investment products require investors to find a buyer so that he can liquidate his investment. That is not the case with mutual fund shares because the fund itself stands ready to buy back these shares at the prevailing Net Asset Value Per Share. While the law provides that redemption proceeds must be given within seven banking days from the date of the redemption request, most funds are able to pay the redemption proceeds within a day. Mutual funds are, therefore, considered very liquid investments.
Safety
Safety is a very important consideration for most investors. Sometimes even more important than potential returns. Mutual funds are highly regulated by the Securities and Exchange Commission under the Investment Company Act and its implementing rules. They are prohibited from investing in particular investment products and engaging in certain transactions. They also have to submit regular report to the SEC as well as to their shareholders. All of the fund's assets must be held by a custodian bank for a safekeeping.
Potential Higher Returns
Because a mutual fund is managed as a single portfolio, it is able to take advantage of certain economies of scale. For example, with it's millions under management, it can negotiate for lower stock brokerage fees or command higher interest rates on fixed-income investments. In the end, however, it is still the investment adviser who really makes the big difference between making direct investments and investing in mutual funds because very few individual investors can match the experience and skill of full-time professional fund managers.
Convenience
The popularity of mutual funds in the Philippines is fast catching up. Funds offer a variety of other services, including monthly or quarterly account statements, tax information, and 24 hour phone and computer access to fund and account information.
Transparency
Investment company advisers provide investors with updated information pertaining to the fund. All material facts are disclosed to investors as required by the SEC.
Flexibility
Investors are allowed to modify investments strategies over time by transferring or moving from one fund to another within a mutual fund family.
Source: PIFA
Safety
Safety is a very important consideration for most investors. Sometimes even more important than potential returns. Mutual funds are highly regulated by the Securities and Exchange Commission under the Investment Company Act and its implementing rules. They are prohibited from investing in particular investment products and engaging in certain transactions. They also have to submit regular report to the SEC as well as to their shareholders. All of the fund's assets must be held by a custodian bank for a safekeeping.
Potential Higher Returns
Because a mutual fund is managed as a single portfolio, it is able to take advantage of certain economies of scale. For example, with it's millions under management, it can negotiate for lower stock brokerage fees or command higher interest rates on fixed-income investments. In the end, however, it is still the investment adviser who really makes the big difference between making direct investments and investing in mutual funds because very few individual investors can match the experience and skill of full-time professional fund managers.
Convenience
The popularity of mutual funds in the Philippines is fast catching up. Funds offer a variety of other services, including monthly or quarterly account statements, tax information, and 24 hour phone and computer access to fund and account information.
Transparency
Investment company advisers provide investors with updated information pertaining to the fund. All material facts are disclosed to investors as required by the SEC.
Flexibility
Investors are allowed to modify investments strategies over time by transferring or moving from one fund to another within a mutual fund family.
Source: PIFA
BENEFITS OF A MUTUAL FUNDS
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