Mutual Funds: The Bento Box of Investments


If you’re reading this right now, it’s probably because you’re smart enough to think about investing your hard-earned money but confused about what option you should go with.

And you ask yourself, are mutual funds the right investment for me?

Imagine yourself in any of these situations:

You go to a restaurant for the first time….

You try a new cuisine…

You are overwhelmed with the number of decisions…

What will you do?

Well, instead of agonising over the multitude of choices, one can go for a bento box or set meal options. The bento box is very common in Japanese cuisine where set meals are designed for specific needs and appetites. Bento boxes comes in different sets. For example, if you’re a fish eater, you can go for a salmon bento box. If you want a heavy meal, a 5-course bento is for you.

As an investment, think of mutual funds as a bento box.

You can select individual companies to invest in and determine the best combination. Or, you can pick a bento box (a mutual fund) composed of a variety of companies or securities selected by a professional investment manager.

In a mutual fund, Investment companies pool funds from a large group of people and invest the money on their behalf in stocks, bonds market, and other similar assets. Each investor owns shares of the mutual fund and is the rightful owner of the profit or loss which generated by the investment.

Like bento boxes, there are different types of mutual funds depending on your risk appetite and needs. Basic types are bond funds, money market, equity funds, and balanced funds. 

How A Mutual Fund Works

1. Money is pooled or collected from the investors

2. Fund or investment managers invest the fund in securities

3. Fund generates return or profit

4. Investors receive profit as dividends

Benefits of investing in a Mutual Fund

Professional Management

The primary advantage of investing in mutual funds is not having to pick stocks and manage investments by yourself. Instead, a professional investment manager takes care of all this. Mutual funds are suitable for people who do not have the time or the expertise to manage their own money, or they don’t have access to the same kind of information that a professional has.

Another benefit is potentially higher return since there are professionals who work 24/7 and invest the fund’s capital and attempt to produce capital gains and income for the fund’s investors.

Inexpensive

A mutual fund is relatively inexpensive way for a small investor to get a full-time manager to make and monitor their investments. You can start investing for as low as ₱5,000.

Safe

Mutual funds are regulated and have proper disclosures. You can read their fund prospectus, reports, and even check their asset value. Mutual funds are governed by the Securities and Exchange Commission (SEC).

Liquid

You can sell your mutual fund shares anytime. Companies are mandated and required by law to buy back shares that investors want to sell. However, there are companies that require a holding period (from 7 days to a few months). If you sell your shares before the holding period, you have to pay an exit fee.

Straightforward

Buying a mutual fund is fairly straightforward. Many banks or brokerage firms sell mutual funds, and the minimum investment is often small. Most companies also have automatic purchase plans whereby a small amount of money can be invested on a monthly basis.

So what kind of investor are you? Would you prefer to go on your own? Or would you want a professional manage your fund?

If you don’t want to risk your hard-earned money,

If you don’t have 24/7 to study the market,

If you don’t want to be burdened watching the ups and downs of stock market

If you have to start with small investment,

Then mutual fund is perfect for you.

Last two questions.

1. When is the best time to start investing?

The best time to invest was yesterday, the second best time is today. - Anonymous

2. How?

You can Google the different companies available. Or you can download Olivia app here. Olivia app helps first time investors set goals, and connects you with right investment companies, so you don’t get overwhelmed with the many options. 

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