Musings of Madam-wannabee · Personal Finance

Wealth Management Series: Mutual Funds

Good morning!

I think my blogging mojo is back. For the past days, I have been regularly waking up at 4:30AM feeling refreshed. The downside is by 8:30PM, even before I finish reading a book to Aki, I am already half asleep. Good luck to me later because I have meetings until 11PM.

Anyhoo, today  I will tackle the backlog that has been sitting on my head since May last year. We started our Wealth Management Project January 2013. Read more about it here. We prioritized sealing the deals for our insurance and emergency funds. One of the cardinal rules of investing is making sure you are secured before you make investments. And by saying secured, I mean you should have enough money in the bank for emergencies and that you have insurance for your family in case something happens to you. Knock on wood.

First let me make it clear that I am no expert. I am just sharing what I know which might be wrong, incomplete or not applicable. Remember, this post was supposed to be published 15 months ago. I would be happy to answer any questions but please take everything with a grain of salt. Read personal finance books and talk to the experts before signing up for a product.

One of the many questions that I asked Efren Cruz, our financial advisor, is what is the best investment tool for us. I was really hoping that he’d suggest mutual funds because that is one product that I am already familiar with. To my relief, we both agree that mutual funds is the way to go.

So what are mutual funds? The idea is that you give your hard earned money to the experts, the fund managers and let them do what they do best, invest. Mutual fund companies decide where it would be best to invest, when to pull out, when to buy etc. My mutual fund agent released an advisory a couple of months ago after the sudden dip in PSEX. They said they had been getting inquiries and complaints as to why our fund was not performing as well as the competition. She advised that they were expecting the pull out of American investors. They waited for the stock market prices to go down so that they can buy stocks at a cheaper price. Information on foreign investor behaviour and trends is something I and probably a lot of other people, don’t have access too. And to be honest, I’d rather pay experts to take on the headaches and the heartaches. I’d rather spend my free time licking mixing bowls with Aki or giving my husband a scalp massage than research about money.

There are other ways to invest in the stock market. The old school way is if you have a lot of money, you can get a broker who will trade for you. Nowadays, you don’t need be filthy rich to invest directly. Some people I know invest thru COL Financial. They are subscribed in Bo Sanchez’ Truly Rich club. They pay a small fee, 500 bucks I think, monthly for expert advice on what to buy and when to buy. Lynn of SmockExchange blogged about it here.

You can also invest in by getting a VUL insurances. These are insurance products that comes with investment components. According to Efren, this is the most expensive option because of the admin fees. He is probably right. I asked one of our MF agents for a comparison of the performance of their VUL and their stand alone mutual fund. At that time, the VUL was at 12% while the mutual fund was performing much better at 19% year to date. VUL’s I think would be an ideal product for those who are not used to regularly saving a portion of their income. With VUL’s, because you don’t want to forfeit the earlier investments made, you will be encouraged to pay the monthly/quarterly/annual fee on time.
There are also UITF’s which is similar to mutual funds but instead of dealing with mutual fund companies, you coordinate with banks. What I like about UITF’s is the convenience. Just go to your preferred bank, tell them that you want to invest in UITF, fill out the form and then come back after several days for the UITF certificate. What I don’t like about it is that there is no agent who gives updates, provides after-sale service and sends greetings on Mother’s day. Ok, the last one is not important but my point is since the money I invested is not picked from a tree, it was something I really worked hard for, I want to be regularly updated on its performance. Funny, when I was filling out the form, the customer service rep of the bank leaned forward and in a semi whispery voice, as if she’s telling me a secret,”Mam I will teach you a trick. …………Buy low and sell high”. I just smiled and thanked her but in mind I was saying, “Naman!!! Hija, my high school economics teacher taught me that back in 1998!.”

Some info that you might be interested to know about mutual funds

– If you want to open an account, you need three things. Two ID’s and a pen. Yup just that.
– The minimum initial investment is only 5K
– Additional investments can be as low as 1K. There is no prescribed schedule for the additional investments. It is all up to you if you want your account to grow.
– Depending on the mutual fund company, the fee, I can’t remember what it is exactly called is somewhere from 2-5% of the investment.  What I really like about MF’s is that our money is fluid.  We can withdraw anytime.
– If you pull out before the 6th month,  there is also a small fee.  Before, the holding period is 2 years, I am happy that it has been shortened.
– Speaking of pull out, make sure you keep all the documents especially  the official receipts and certificates. When I pulled out the investments I made when I was still single, so Franco and I can consolidate our funds, I experienced some delays because the MF company was asking for a certificate that was never issued to me.
– Allow 7-10 days for processing before your investment could be transferred to your bank account.
– For additional investments, you can meet with your agent or you can simply email a picture of your deposit slip.
– Mutual fund companies differ in terms of how and when they send updates. We placed our money with two MF companies. The difference is very noticeable.  For one company, I get updates on the current NAVPU or the net asset value per unit, of our fund everyday, yes everyday (loooooove it! Thanks Jen!) via SMS. For the other company, I can’t even remember when was the last couriered update that we received. I visit the mutual fund page of BusinessWorld site for updates and comparisons.
– Companies also differ in terms of processing and sending the official receipt. You see, when you meet with agents, they only issue a provisional receipt. The OR will be issued once the investment has been processed. One company sent us the OR within the same week we placed our additional investments. For the other, it took weeks, I think it even took more than a month, and our agent had to follow it up with the department in charge of OR issuance.
– Since this post is 15 months delayed, there are some items that I already forgot. For one, I asked our agents what will happen to our accounts if one of us dies. One said it will be put on hold  just like what happens to bank deposits. One said for joint accounts, death of one investor has no impact so long as the account is “and/or” and not “and” only. I remember calling their hotlines and reaching out to Efren for clarifications. Unfortunately, I really can’t remember. I will update this post once I have the answers.

I hope you learned something from this post. Again, I am no finance guru. Please do your own research before signing up for any financial product.

One thought on “Wealth Management Series: Mutual Funds

  1. maqui!!! salamat sa post…. reminded me i have 1wk left off my maternity leave and i still need to work on my COL and AFPSLAI accounts…. hehehe (little trick i’ve known, AFPSLAI gives a 15-18% annual return + dividends… yun nga lang limited to AFP people and their dependents… so am taking advantage sa fact na i can still open kahit wala akong dependents ID and my dad’s retired already hehehe… pero urgh lang sa bagal kong kumilos hehehe pero sabagay i had a long yaya hiatus before this calm now…)

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