In the Philippines, a mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests typically in investment instruments like stocks, bonds, money market instruments, other mutual funds and commodities like gold and silver.
The mutual fund is managed by a fund manager that buys and sells the fund’s investments in accordance with the fund’s investment objective. In the Philippines, you can buy mutual funds in a mutual fund company. which is regulated by Securities and Exchange Commission (SEC). Mutual fund has many types depending on where the fund will be invested. The list below summarizes various types of mutual funds in the Philippines you can buy.
1. Stock/Equity Fund
Stock or equity mutual fund is the most common type of mutual fund which is a fund invested purely on equities or stocks. The fund manager selects stocks that he determined to be profitable to invest in. This type of mutual fund is the riskiest among mutual fund since the performance of this fund depends on the stock market but will give you the highest return. When you buy equity mutual fund, it is just like investing in stock market indirectly.
2. Balanced Fund
Balanced mutual fund is a type of mutual fund invested in stocks and bonds which has less risk compared to equity fund. Balanced fund will give you an average return of investment.
3. Fixed-Income Fund
Fixed income mutual fund is invested in any instruments that yield fixed regular income. This type of fund has the least risk of losing your money because this is not dependent on the stock market but will give you lesser return then equity or balanced-fund.
4. Money Market Fund
Money market fund is a type of mutual fund invested in short term debt securities. Money market fund limits loss of investment that may be cause by market, credit and liquidity.
Depending on your investment goals, you can buy several types of mutual funds. Normally, in the Philippines when you apply for a mutual fund account in a mutual fund company, they will give you a set of questionnaires so that they can determine which mutual fund is best for you.
In my case, I bought Equity and Balanced mutual fund in First Metro Asset Management, Inc. (FAMI), a reputable mutual fund company in the Philippines. If you want your money to be at the safest mutual fund, you can choose the fixed income fund, however, it will give you very minimal return.