The most challenging part of investing in mutual funds is choosing what mutual fund company you’ll be investing in. And of course, you’ll probably looking for the best. The problem is, as I have mentioned in previous post, “best” is something subjective. It differs from one person to another.
There’s really no such thing as one size fits all. The same applies in mutual funds. Your need is different from your friends.
Let me share with you a thought process that could help you in identifying which mutual fund company you will be investing in.
1. Know what type of mutual fund fits your personality.
And when I say personality, I mean your attitude towards risk. There are people who are more adventurous than others. Some people just love taking risks, some people are just unease with it, that’s just the way it is.
On the previous posts, we have discussed that there are three types of mutual funds – equity funds, fixed-income funds, and balanced funds. You learned there that these types of mutual funds are classified as such because they tend to cater different risk profiles – aggressive, conservative, and moderate investors.
To make the identification process simple, just think about this. Each fund has a potential to earn, on a yearly basis, a return or a profit similar to as follows (more or less):
- Equity Fund – 30%
- Fixed-Income Fund – 10%
- Balanced Fund – 20%
It means that if you have invested P10,000.00 and earned 30%, the value of your investment will be more or less P13,000.00 after a year. But since all investment entail risks, your money could potentially lose value by the same amount.
Of course, that is not the objective of the fund manager, so it is less likely, but it is always possible.
Now, ask yourself, how much risk can you (comfortably) handle in making an investment in mutual funds? Then use the matrix above as a guide in choosing the right type of mutual fund for you.
2. Identify the top performing Fund Managers.
When searching for the top performing mutual fund managers, check out how they were doing for the past five years. We are publishing here in Mutual Fund PH the performance of Mutual Fund Companies on a monthly basis.
As of date of posting of this article, these are the top Mutual Fund Managers here in the Philippines:
- First Metro Asset Management Inc. (FAMI)
- Philam Asset Management Inc. (PAMI)
- Sunlife Prosperity Funds
The moment you have decided what type of mutual fund fits you (from no. 1), check from the top performing fund managers if they are offering these types of mutual funds.
3. Identify which banks the mutual fund companies use in receiving funds from their investors.
At this point, you already have a few mutual fund companies in mind, and because of the first two criteria we had, those mutual fund companies are already the best choice for you. Either of them, you’ll be able to make the most out of your hard earned money already.
To finally make a decision, identify which banks these mutual fund companies use in receiving funds from their investors. This is with the assumption that you’ll be making additional investments several times in the future.
Choose the mutual fund company where you have an existing bank account, or better yet, where you have an existing internet banking account. This will make funding your investments more convenient.
There you have it! At this point, you already have chosen which mutual fund company to invest in. The next step is to find out what the requirements are for opening an account with them. You may refer in our “How to Start Investing in Mutual Funds” page for more resources.
This process may take you a while to get through. It make take some effort. But always remember, it is worthwhile to do the hardwork today rather than having regrets in the future. Besides, you’ll be entrusting your hard-earned money to these mutual fund companies, which makes it worth it to know the best one for you.
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