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Portfolio Chunk Series: What are the Different Types of Mutual Funds?

Portfolio Chunk Series: What are the Different Types of Mutual Funds?

Now you’ve read the mutual funds primer (visit related article Portfolio Chunk Series: Mutual Funds 101 – Why Your Portfolio Needs This).

And you’ve learned how to strategize your buy and sell of mutual funds (read related article The Game Plan on Mutual Funds – How to Choose and Why Mutual Funds).

You are well-versed with the PIFA website, formerly ICAP. Here you can track the performance of the mutual funds through looking how the NAVPS trends through time (read article ICAP is PIFA – Track Daily NAVPS of Mutual Funds Here).

Let us learn the different types of mutual funds available here in the Philippines:

Balanced Funds

Balanced funds contain both equities and bonds. Equities are those company shares listed in the Philippine Stock Exchange. Bonds are those issued by government or companies. Because of this breakdown of the fund, balanced funds are said to show moderate gains given the probably high returns of equities, and stable returns from bonds.

(To zoom in the images, please click the table):

Bond Funds

Bond funds are designed for retirees or those whose risk appetite is conservative. Bonds usually in the Philippines range its rate of return from 5% – 10%, depending on term and payout periods. Bonds are usually subject to withholding tax hence direct bond buyers get net of bond premiums. Due to the nature of these fixed income securities, bond funds are good for people who aim capital preservation.

Money Market Funds

Money market funds typically are fixed income securities, but with term one year of less. This means that this is actually a short-term fund that also bears conservative returns.

Stock Funds

Stock funds or most commonly known as equity funds are designed for high-risk takers. The fund is wholly invested in Philippine Stock Exchange listed companies, and the most highly volatile of all funds in terms of returns. This is due to the nature of stocks whose prices can relatively change abruptly. Hence, the high return high risk nature of the fund. In my personal observation though, fund managers tend to underspeculate, meaning they invest in stable companies such as fund staples PLDT, BPI, etc. If you’re young and you have all the time in the world to recover any potential losses, invest in stock funds.

Which ones will you choose? My current mutual funds holding are actually diversified, but concentrated over equity funds. Why? Because I have a high-risk profile and I believe I am young to enjoy the economic rides of boom and bust.

Credits to the PIFA website for the fund names and contact details in each table above.

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