Mutual funds are fixed income investments and therefore do not pay out a fixed rate of return. Mutual funds are invested in stocks listed on the stock exchange as well as bonds issued by the government and corporations where values differ daily. As a result, the value of your investment fluctuates daily depending on the performance of its underlying instruments. Funds’ earnings are not fixed but are very flexible, at an average of 6-18% a year. Over the long run, mutual funds usually outperform traditional time deposit placements or short-term money-market funds.
As with any investment instrument, investing in mutual funds involves a certain amount of risk. Stock and bond prices go up and down daily so does the value of your mutual fund investments. Depending on market conditions, there may be periods when the value of your investment can be lower than the actual amount that you invested.—“paper loss”. But unless the investor redeems these shares, these paper losses will not be realized. Additionally, there are ways in which fund managers apply investment strategies in order to seize opportunities and avoid losses, and while there are risks in mutual fund investing, the returns can also be very rewarding most especially in the long-run.
No. A mutual fund is not a deposit product, therefore, it does not need to be covered by the PDIC. However, mutual fund shareholders are entitled to their proportional share in the total assets of the fund. The PDIC on the other hand, can only insure up to P500,000.00 of your total deposits with a bank and not your entire investment amount. Moreover, mutual funds are liquid instruments as these are invested in marketable securities.
You can invest in a mutual fund by buying its shares from fund management companies or through licensed brokers. The money you will invest will be converted into number of shares. This is computed by dividing the amount invested by the current price or the Net Asset Value Per Share or NAVPS.
Your investment will form part of your estate and will be distributed to your heirs (usually surviving spouse and children) accordingly. However, it will be subject to estate tax which your immediate family would have to settle first before they will be allowed to claim the investment proceeds. To ease the transfer of the fund shares of a deceased investor, assigning a co-investor upon initial investment is suggested.
RSA is separate from the Mutual Fund Company. Your investment will remain intact because you are invested directly in the mutual fund company and not in RSA. RSA is the financial intermediary between the fund management companies and the investorsAre Mutual Fund gains taxable?
NO. Mutual Fund gains are exempted from taxes based on CTRP. This was done in order to promote long-term investing in the country.Is there a strategy for investing in Mutual Funds?
No one can exactly time the market. “Time in the market” is better than “Timing the market” Long-term Investing and Peso Cost Averaging.