What is Balanced Mutual Fund?

by Gily Tenorio on May 24, 2012

in Mutual Funds


In my previous post, I have talked about equity mutual fund and its advantages and disadvantages as an investment. In this article, I would like to discuss further another kind of mutual fund available in the Philippines that you can invest in.

I’m talking about balanced mutual fund. I bought my first balanced MF in January of 2010 and then sold it in September 2011 to get additional cash for the payment of our house. I’m still planning to buy this type of mutual fund in the future. By the way, I bought the FAMI SALBF (Save and Learn Balanced Fund).

A balanced mutual fund is a type of mutual fund that invests its assets in a mixture of high and low risk investments. Usually, balanced fund invests in stocks, bonds, high yield savings account and treasury notes. The allocation of where to invest the fund is in the discretion of the fund manager.

It is called balanced because the fund is invested in a “balanced” investment, a combination of high growth and high risk investments with low risk and low return investments. This is unlike equity mutual fund where the asset is only invested in stocks or equities.

You don’t have to worry about where the fund is invested because you will know it through the quarterly fund’s performance report that is being published by the investment company. You can also see it tho their website if it is regularly updated. Nonetheless, you may request it to them by sending an email to your account manager who takes care of your account.

The minimum amount to open a mutual fund account is only P5,000. In the succeeding investment, you can invest a minimum of P1,000. Not really big amount compared with other types of investments so this is very good for employees and small business entrepreneurs.

Benefits of Balanced Mutual Fund

If you are a kind of person who wants to experience both worlds, a balanced fund is the right for you. Here are some of the advantages and benefits that you can receive when investing in this kind of mutual fund.

1. More Diversification

Since a balanced fund invests in mixtures of investments, the risk of losing money is lower. The fund is spread out into different levels of risk and growth.

For example, if the stock market is down, balanced fund will also go down but not as much compared with equity fund since balanced fund is already invested in bonds and low-risk investments. It is like other investments equalize the loss on stock investments.

balanced mutual fund

Perhaps you already read and learn that diversification is very important in investing. It is not wise to put all your money in one basket like your house, car or business. Keep your investments diversify!

2. Lower Risk than Equity Mutual Fund

The risk of investing in balanced fund is lower than equity mutual fund since the fund is invested in different types of investments with varying risk. For example, bonds and treasury notes are low-risk investments while equities are considered as a high-risk investment.

3. Professional Management

Similar with other kinds of mutual funds, balanced fund is professionally managed by a competent and experienced fund manager. He is the one that takes good care of the fund to make it grow and reach its goals based on what is indicated in the prospectus.

I want also to add that mutual fund companies are regulated and administered by the Securities and Exchange Commission (SEC) while bank companies are regulated by the Bangko Sentral ng Pilipinas (BSP). Therefore, you are rest assured that your money is in the safe hands and not invested in scams.

List of Balanced Mutual Funds in the Philippines

If you are interested in investing in balanced mutual fund, here are the top mutual fund companies in the Philippines that offer this type of fund as of May 24, 2012.

Primarily invested in Peso securities NAVPS 1 Yr. 3 Yr. 5 Yr. YTD
ALFM Growth Fund, Inc 209.75 14.09% 31.24% n.a. 12.93%
ATRKE Philippine Balanced Fund, Inc. 1.7516 11.4% 18.9% 5.28% 10.76%
Bahay Pari Solidaritas Fund, Inc. 1.6781 16.37% n.a. n.a. 17.23%
First Metro Save and Learn Balanced Fund Inc.* 2.3683 23.69% 32.51% n.a. 11.72%
GSIS Mutual Fund, Inc. 3.4453 17.02% 27.32% 10.7% 16.85%
NCM Mutual Fund of the Phils., Inc 1.6874 17.92% n.a. n.a. 14.01%
Optima Balanced Fund, Inc. 1.4189 15.33% 18.83% 8.37% 10.16%
Philam Fund, Inc. 15.1342 19.1% 28.02% 10.82% 16.32%
Sun Life Prosperity Balanced Fund, Inc. 2.9853 10.75% 18.42% 7.42% 9.66%
Primarily invested in foreign currency securities
Cocolife Dollar Fund Builder, Inc. $0.03193 4.92% n.a. n.a. 4.31%
PAMI Asia Balanced Fund, Inc. $0.929 -8.92% n.a. n.a. 0.98%
Paradigm Global Growth Fund Inc. $0.02396 1.44% n.a. n.a. 1.44%
Sun Life Prosperity Dollar Advantage Fund, Inc. $2.7032 -0.04% 2.59% 1.42% 1.96%

*Source: ICAP

Wrapping Up

Choosing which type of mutual fund will you invest depends on your investment goals and the risk appetite you have. If you want a moderate growth on your money and average risk of investment, a balanced mutual fund will be the best choice.


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About the Author:

GilGil Tenorio is a blogger, a husband, a father, and an active Christian. He likes playing guitar, C.S. Lewis, Plants and Zombies and NBA. Follow him at Facebook, Google+, YouTube and Twitter. Thanks!



Image Source: FreeDigitalPhotos.net

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