Steps in Opening a Mutual Fund AccountOctober 20, 2017
by Erwin Baluyot
Thanks to the advent campaign of various financial advocates, associations, and companies across the globe, the Filipino public is becoming more and more aware of the benefits of investing likewise, the growing awareness of how can they participate in the earnings potential of the Philippine growth story.
“Learning the benefits of investing without execution is just entertainment.” — Rex Ma. A Mendoza
It is important for the public to take concrete actions in order to maximize their opportunities, thus changing their and their loved ones’ future.
That said, there is no better way to execute and take part than opening your own investment account. In the Philippines, there are a gamut of financial instruments to choose from. But if you are new to this, or would not have the luxury of time to study which securities to pick, nor the technical background in managing your personal portfolio, you can always invest in actively managed products such as Mutual Funds.
Excited to get started?
Here we have summarized the five simple steps to open a mutual fund account, for just 5,000 to 1,000 pesos.
1. KNOW YOURSELF
Investing is both an emotional and personal decision. You must first know yourself well before investing in anything.
Here are some important factors to be considered before concluding which mutual fund may best suit you.
— What are you investing for? Why are you investing?
Is it for your retirement? Your child’s college education? Or your future business? Whatever your financial goal is, there is a specific mutual fund that matches your financial goal. It is important to set your goal S.M.A.R.T. (specific, measurable, attainable, realistic, and time-bound).
— Risk Tolerance is the level of extent of risk in which an investor can take. Are you an aggressive, moderate, or conservative type of investor?
— You are willing to take minimal risk to achieve your financial goal. You prefer investments without too much volatility.
— You are willing to take moderate risk to achieve your goal. You are open to make adjustments and position your investments in both conservative and aggressive instruments.
— You are willing to take higher risk to achieve your goal. You know that volatility is a part of any investment and you can afford to park your funds for at least 5 years.
Do remember that there is always risk attached to investing, and there is always the possibility to gain or lose money.
Don’t worry because before anything else, the investor will be given an assessment called the Investor Risk Profile Questionnaire (IRPQ). This will help in knowing what type of investor you are.
Additionally, there are supplementary materials such as the fund Prospectus (the official document of the mutual fund company, with all features and information about the fund) and fund fact sheets (monthly fund performance reports, showing where the fund is invested in) to which you can use as reference to know more about the mutual fund you are planning to invest in.
These tools also manage your earnings expectations in mutual funds.
— For how long do you plan to invest your money? It is crucial to know the amount of your financial goal, so you can as well set your preferred term. Remember, time plays a major role in growing your investments.
2. GET RECOMMENDATIONS FROM A PROFESSIONAL
With a long list of mutual fund companies to choose from, it is a bit hard for you as a beginning investor to choose the mutual fund that suits best for your financial goal. Will be confusing for first time investors to decide which fund to invest in.
As with health, financial situation should be assessed properly. It may be good for you to get a second opinion and recommendations from professional (but anything beyond that is also wrong).
At Rampver Financials, you can get those valuable recommendations from our financial advisors — for free. You don’t have to study all the 30+ mutual fund companies, we will do that for you. You will be presented with an unbiased shortlist of selections that best suits your financial goal. We are committed to handhold and assist you through our financial literacy programs and unbiased advisory services.
3. FILL OUT INVESTMENT FORMS & SUBMIT
Opening a mutual fund account is very much like opening a bank account. Depending on the mutual fund you are planning to invest in, you fill out certain forms such as Customer Information Sheet, Investor Risk Profile Questionnaire (IRPQ), Foreign Account Tax Compliance Act (FATCA) Form, and Signature cards as part of the KYC (Know Your Customer) process.
While requirements maybe tedious — this process protects you from fraudulent transactions.
Attach two photo-bearing valid IDs (at least 1 government issued IDs) with three specimen signatures for verification.
After the forms have been accomplished, submit it to authorized receiving personnel and offices (licensed distributors and brokers). The mutual fund company will then review your forms for any missing information that you have to provide in order to complete your account opening.
4. FUND YOUR ACCOUNT
Now you can fund your mutual fund account. Make your payments only to authorized and licensed distributors or brokers, remittance centers, and bank partners of the mutual fund company. The initial investment amount is dependent on what mutual fund you chose, which can be found on the fund’s prospectus and fund fact sheets, usually 5,000.00 pesos.
TIP: You can submit your forms and fund your account simultaneously to avoid cost of delay.
With the successful form submission and funding, you will receive a confirmation (either the same banking day or one day after) through electronic mail or text messages, notifying you that you have successfully opened a mutual fund account.
For mutual fund companies that still issue hard copy receipts, these will be sent to you within 30 banking days.
5. TOP-UP YOUR INVESTMENT
“One-time investing is a bet. Disciplined investing means doing it consistently and continuously.”
– Mr. Rex Ma. A. Mendoza
You will not be able to achieve your financial goals if you only invested one-time. You cannot expect your 5,000 pesos to grow to a million pesos even in ten years if you just leave it without doing top-up investments. You must consistently invest in order to fulfill your financial goals at your target time horizon. Investing regularly helps you to manage and maximize the ups and downs in the market.
Do not worry, as your financial advisor shall also assist you to plan when, where, and how you can top-up your investment, without eating up a large chunk from budget. Usually this is also done through cash or check deposit, fund transfer, bills payment, or remittances (this shall vary depending on the mutual fund company you will be investing in).
Investing should be seen as an enjoyable task, not a painful process that obliges you a sacrifice. If this is how we perceive it, you tend to repeat it. Again, investing is both emotional and personal decision. It is psychology, use it on your side.
In the end, “always anchor everything to what truly matters.” — Mr. Rex. Ma. A. Mendoza
This article also appeared on the Rampver Financials’ official Medium Publication, Rampver Reads.