MUTUAL FUNDS: 2010 FIRST QUARTER PERFORMANCE

Our mutual funds performs well as a good start this year, with most funds registering a positive results. As we had anticipated, our economy did not go into as bad effect of recession last year, and now show strong recovery despite the financial meltdown in the abroad and in this coming election on May. PSEI also got recovery after a bubble burst last January.





YEAR-TO-DATE PERFORMANCE OF MUTUAL FUNDS IN THE PHILIPPINES
As of the 1st Quarter of 2010 (January to March 2010)

Definitely, 2010 will be a better year for us in to our economy and business. Services sector still seen a continue to provide the major growth, with agriculture and mining that shows strong support. While manufacturing sector  continued to decline as we and most countries cannot compete with China.

Link : [HOW TO COMPUTE YOUR EARNING]

Good luck and more power to all our investors.

MUTUAL FUNDS : TOP THINGS TO KNOW

1. What exactly is a mutual fund?
A mutual fund pools money from hundreds and thousands of investors to construct a portfolio of stocks, bonds, real estate, or other securities, according to its charter. Each investor in the fund gets a slice of the total pie.

2. Mutual funds make it easy to diversify.
Most funds require only moderate minimum investments, from a few hundred to a few thousand dollars, enabling investors to construct a diversified portfolio much more cheaply than they could on their own.

3. There are many kinds of stock funds.
The number of categories is dizzying. Some examples: growth funds, which buy shares of burgeoning companies; sector funds, which buy shares of companies in a particular sector, such as technology or health care; and index funds, which buy shares of every stock in a particular index, such as the Philippine Stock Exchange.

4. Bond funds come in many different flavors too.
There are bond funds for every taste. If you want safe investments, consider government bond funds; if you're willing to gamble on high-risk investments, try high-yield bond funds, also known as junk bond funds; and if you want to keep down your tax bill, try municipal bond funds.

5. Returns aren't everything - also consider the risk taken to achieve those returns.
Before buying a fund, look at how risky its investments are. Can you tolerate big market swings for a shot at higher returns? If not, stick with low-risk funds. To assess risk level, check these three factors: the fund's biggest quarterly loss, which will help you brace for the worst; its beta, which measures a fund's volatility against the PSE; and the standard deviation, which shows how much a fund bounces around its average returns.

6. Low expenses are crucial.
In order to cover their expenses - and to make a profit - funds charge a percentage of total assets. At no more than a few percentage points a year, expenses may not sound substantial, but they create a serious drag on performance over time.

7. Taxes take a big bite out of performance.
Even if you don't sell your fund shares, you could still end up stuck with a big tax bite. If a fund owns dividend-paying stocks, or if a fund manager sells some big winners, shareholders will owe their share. Investors are often surprised to learn they owe taxes - both for dividends and for capital gains - even for funds that have declined in value. Tax-efficient funds avoid rapid trading (and high short-term capital gains taxes) and match winning trades with losing trades.

8. Don't chase winners.
Funds that rank very highly over one period rarely finish on top in later ones. When choosing a fund, look for consistent long-term results.

9. Index funds should be a core component of your portfolio.
Index funds track the performance of market benchmarks. Such "passive" funds offer a number of advantages over "active" funds: Index funds tend to charge lower expenses and be more tax efficient, and there's no risk the fund manager will make sudden changes that throw off your portfolio's allocation.

10. Don't be too quick to dump a fund.

Any fund can - and probably will - have an off year. Though you may be tempted to sell a losing fund, first check to see whether it has trailed comparable funds for more than two years. If it hasn't, sit tight. But if earnings have been consistently below par, it may be time to move on.

MUTUAL FUNDS : 2009 PERFORMANCE REPORT

Mutual funds in the Philippines ended the year 2009 on a high note, with all but one fund registering a positive return.

The funds reversed the losses incurred in 2008 as markets turned optimistic. Two funds, one equity (Philequity Fund) and one balanced (ALFM Growth Fund) even managed to beat the 63% return of the Philippine Stock Exchange index in 2009.

For the entire year, equity funds earned an average of 46.7%. This means an investment placed at the start of the year earned almost half of the total money invested.

Balanced funds trail closely, ending the year with an average return of 35.6%.
Peso bond funds produced an average return of 5.38%, while money market funds increased value on average by 1.36%.

Summarized below is the full-year performance of Philippine mutual funds, side by side with their return and rank during the preceding year.

PERFORMANCE OF MUTUAL FUNDS IN THE PHILIPPINES
For the Years Ended 2009 and 2008

Other Sources or References
•    www.icap.com.ph – official website of the Investment Company Association of the Philippines (ICAP), the organization of mutual fund companies in the country.
•    www.sec.gov.ph – official website of the Securities and Exchange Commission (SEC), the regulatory body for Philippine mutual fund companies.

MUTUAL FUNDS : HOW TO COMPUTE YOUR EARNINGS

I've been holding my back-up investment at Sun Life Prosperity Phil. Equity Fund, Inc. (Mutual Fund) for a year now,  and for 2009 it geared at-least 43.52% yields. When I discussed with it to my fellow investors... amazingly,  lot of them are still at a loss regarding how their income from this investment is computed. We’ll try to simplify how it’s being done in this discussion.

Step 1: Determine how many shares you own
When you invest in mutual funds, you are actually buying “shares” of the mutual fund company. (See Introduction to Mutual Funds) The price you pay is the NAVPS or the Net Asset Value per Share, a figure that changes every day since it represents the market values of the investment assets the mutual fund company owns.

Let’s assume you want to invest P100,000. When you checked with the mutual fund, the NAVPS price is P1.75. The number of shares you will then get is:
•    P100,000 divided by P1.75 = 57,142 shares
Your total fund value that day is:
•    57,142 shares x P1.75 NAVPS = P99,998.50

Since you paid P100,000 but the amount of the shares you bought is only P99,998.50, the company would actually return P1.50 to you.

For simplicity purposes, we did not consider any fees or sales loads charged by the fund. Do note, though, that most funds will charge a fee either upon investment (entry fee) or when redeeming your mutual fund shares (exit fee). We’ll defer computations including fees in a succeeding article.

Step 2: Determine the current NAVPS
At any day, you can compute the value of your mutual fund investment. The only two things relevant to you are:
1.    Number of shares you own
2.    NAVPS price on that day

Let’s assume that at the end of 1 year, the NAVPS of your mutual fund is P2.50. Your profit is simply the difference between the current NAVPS and the NAVPS when you bought your shares. Multiply this with the number of shares you own and you’ll get the amount of your profit.

Mathematically:
•    Current NAVPS = P2.50
•    Original NAVPS = P1.75
•    Difference in NAVPS prices = P2.50 – P1.75 = P0.75
•    Number of Shares Owned = 57,142
•    Profit = P0.75 x 57,142 = P42,856.50

This same amount can also be computed by comparing the current total fund value and initial fund value.:
•    Beginning fund value = 57,142 shares x P1.75 NAVPS = P99,998.50
•    Current fund value = 57,142 shares x P2.50 NAVPS = P142,855.00
•    Difference in fund values = Profit = P42,856.50
 
One major point to remember, though. This profit is still “paper profit” or “unrealized income.” That’s because you have not redeemed the shares yet. Any day afterwards, the NAVPS will still change which means your fund value and profit will also change.

We’ll show this in the next example.

Step 3: Calculate actual profit at time of redemption
Let’s assume you wanted to encash and redeem your shares at the end of the 2nd year. Before we proceed, you need to know that the fund value and NAVPS price at the end of Year 1 are now irrelevant. Whatever “profit” you gained before was not realized since you did not redeem the shares.

Assume that at the end of Year 2, the NAVPS price is P2.00. As in Step 2, we can compute the profit by comparing the current and original NAVPS:
•    Current NAVPS = P2.00
•    Original NAVPS = P1.75
•    Difference in NAVPS prices = P2.00 – P1.75 = P0.25
•    Number of Shares Owned = 57,142
•    Profit = P0.25 x 57,142 = P14,285.50

At the end of Year 2, your total investment earned P14,285.50. If you redeemed all 57,142 shares, you can now actually earn and get P14,285.50 cash as profit.

The total money you would get from the mutual fund is this profit plus the original investment (P14,285.50 + P99,998.50), which can also be computed this way:
•    Current NAVPS = P2.00
•    Number of Shares Owned = 57,142
•    Total Fund Value = P2.00 x 57,142 = P114,284.00

Again, be reminded that this computation does not consider any fees charged by the fund. Your fund value will be reduced by those fees.

In any case, I hope this gives you an idea how to compute your mutual fund income.

Sources or References
•    www.icap.com.ph – official website of the Investment Company Association of the Philippines (ICAP), the organization of mutual fund companies in the country.
•    www.sec.gov.ph – official website of the Securities and Exchange Commission (SEC), the regulatory body for Philippine mutual fund companies.

MUTUAL FUNDS : HOW IT WORKS AND LIST OF COMPANIES IN THE PHILIPPINES

A mutual fund is a company that pools investors' money to make multiple types of investments, known as the portfolio. Stocks, bonds, and money market funds are all examples of the types of investments that may make up a mutual fund.

The mutual fund is managed by a professional investment manager who buys and sells securities for the most effective growth of the fund. As a mutual fund investor, you become a "shareholder" of the mutual fund company. When there are profits you will earn dividends. When there are losses, your shares will decrease in value. The value of a share of the mutual fund, called the Net Asset Value (NAV), is calculated daily based on the fund’s total value divided by the total number of outstanding shares.

Mutual funds are, by definition, diversified, meaning they are made up a lot of different investments. That tends to lower your risk (avoiding the old "all of your eggs in one basket" problem).

Because someone else manages them, you don't have to worry about diversifying individual investments yourself or doing your own record keeping. That makes it easier to just buy them and forget about them. That's not always the best strategy, however -- your money is in someone else's hands, after all.

Since the fund manager's compensation is based on how well the fund performs, you can be assured they will work diligently to make sure the fund performs well. Managing their fund is their full-time job!
Mutual funds can be open-ended or closed-ended. But many people consider all mutual funds to be open-ended, while putting closed-ended funds in another category.

"Open-ended" means that shares are issued in the fund (or sold back to the fund) whenever anyone wants them. With closed-ended funds, only a certain number of shares can be issued for a particular fund, and they can only be sold back to the fund when the fund itself terminates. (You can sell closed-ended funds to other investors on the secondary market, though.)

Load refers to the sales charges added to a mutual fund when you purchase it. The load charge goes to the fund salesperson as a commission and payment for their research services. Load charges can be up to 8.5 percent of the selling price and can be figured in as a front-end load (meaning you pay it when you buy the mutual fund) or a back-end load (meaning you pay when you sell the mutual fund).

Many mutual funds are no-load funds. Yes, that means there is no sales fee charged and the fund is direct-marketed so you can buy it without the help of a salesperson. With the wealth of information on the Internet today, it is certainly easier to make smart choices yourself to save money.
In addition to no-load funds, there are also funds that charge up to 3.5 percent as a sales fee. These are called low-load funds and can still be a good deal.

Mutual funds fall into three categories:
•    Equity funds are made up of investments of only common stock. These can be riskier (and earn more money) than other types.
•    Fixed-income funds are made up of government and corporate securities that provide a fixed return and are usually low risk.
•    Balanced funds combine both stocks and bonds in the investment pool and offer a moderate to low risk.

While low risk may sound good, it is also accompanied by lower rates of return-meaning you risk less, but your investment won't earn as much. You have to decide how much risk you're willing to take on before you invest your money.

If you have invested in a college savings fund or a 401k account, chances are good that already own a few mutual funds. Mutual funds are great for long-term investments like these. You can also buy mutual funds directly from a mutual fund company.

Most of these offer no-load funds (or sometimes low-load funds). You can find lists of mutual fund companies on the Internet and purchase shares by simply filling out an application and mailing a check. Once you are a shareholder, you will receive statements telling you how the fund is doing as well as how much your own investment is growing. You can also set up monthly bank transfers to automatically buy more shares every month.

Choosing which mutual funds to invest in ultimately depends on the investor’s growth goal and risk tolerance. If the purpose is capital growth, equity funds are the way to go. Bond funds are chosen, on the other hand, if the investor prefers capital preservation over risky capital growth. For those who want medium risk and medium growth, balanced funds are the best option. Money market funds are for those who wish to earn a conservative amount of return in the short-term.

Remember to do your research and select a mutual fund that fits the level of risk you are willing to take with your hard-earned cash. Then just sit back and hope for the best!


List of Mutual Fund companies in the Philippines
Stock Funds
•    ATR- Kim Eng Equity Opportunity Fund – www.mutualfund.com.ph
•    DWS Deutsche Philippine Equity Fund, Inc.
•    First Metro Save and Learn Equity Fund – www.fami.com.ph
•    Philam Strategic Growth Fund, Inc. – www.philamfunds.com
•    Philequity Fund, Inc. – www.philequity.net
•    Philequity PSE Index Fund Inc.
•    Sun Life Prosperity Phil. Equity Fund, Inc. – www.sunlifefunds.com
•    United Fund, Inc.
Balanced Funds
•    ALFM Growth Fund, Inc.
•    First Galleon Family Fund, Inc.
•    First Metro Save and Learn Balanced Fund Inc.
•    GSIS Kinabukasan Fund
•    MFCP Kabuhayan Fund – www.mutualfund.com.ph
•    Optima Balanced Fund, Inc.
•    Philam Fund, Inc. – www.philamfunds.com
•    Sun Life Prosperity Balanced Fund, Inc. – www.sunlifefunds.com
•    Sun Life Prosperity Dollar Advantage Fund, Inc. – www.sunlifefunds.com
Bond Funds
•    AIG Global Bond Fund Phils., Inc.
•    ALFM Dollar Bond Fund, Inc.
•    ALFM Euro Bond Fund, Inc.
•    ALFM Peso Bond Fund, Inc.
•    Cocolife Fixed Income Fund, Inc.
•    DWS Deutsche Philippine Fixed Income
•    Ekklesia Mutual Fund Inc.
•    First Metro Save and Learn Fixed Income
•    Grepalife Dollar Bond Fund (USD$) – www.grepafunds.com
•    Grepalife Fixed Income Fund, Inc. – www.grepafunds.com
•    MAA Privilege Dollar Fixed Income Fund, Inc. – www.maa.com.ph
•    MAA Privilege Euro Fixed Income Fund, Inc. – www.mutualife.com.ph
•    Philam Bond Fund, Inc. – www.philamfunds.com
•    Philam Dollar Bond Fund, Inc. – www.philamfunds.com
•    Philam Managed Income Fund
•    Philequity Dollar Income Fund Inc.
•    Philequity Peso Bond Fund
•    Prudential Fixed Income Fund Inc.
•    Sun Life Prosperity Bond Fund, Inc. – www.sunlifefunds.com
•    Sun Life Prosperity Dollar Abundance fund – www.sunlifefunds.com
•    Sun Life Prosperity GS Fund – www.sunlifefunds.com
Money Market Funds
•    ATR Kimeng Money Market Fund, Inc.
•    Sun Life Prosperity Money Market Fund, Inc. – www.sunlifefunds.com

BANKS: 2009 PERFORMANCE OF "UNIT INVESTMENT TRUST FUND" (UITF)

Unit Investment Trust Funds or UITFs in the Philippines ended the year 2009 also on a high note just like the mutual funds.

Equity UITFs performed particularly strong last year, with two funds easily surpassing the 63% return of the Philippine Stock Exchange index (PSEi). AB Capital’s Equity Fund and Unionbank of the Philippines‘ Large Capitalization Equity Portfolio earned a full-year return of 90.10% and 85.27%, respectively — which means if you placed an investment in either fund at the start of the year, your money would have almost doubled by the end of 2009.

Below is a summary of the full-year return of each UITF.

PESO - PERFORMANCE OF UNIT INVESTMENT 

TRUST FUNDS (UITF) IN THE PHILIPPINES

For the Year Ended 2009

The Dollar-denominated Unit Investment Trust Funds or UITFs also performed well in 2009, just like their Peso UITF counterparts.

In addition, most of the funds reversed and surpassed the 2.45% depreciation of the US Dollar versus the Peso last year, which could have reduced the value of the dollar investment.

Below is a summary of the full-year return of each dollar-denominated UITF.

DOLLAR - PERFORMANCE OF UNIT INVESTMENT 

TRUST FUNDS (UITF) IN THE PHILIPPINES

For the Year Ended 2009

The performance of each individual UITF can also be viewed at the Trust Officers Association of the Philippines (TOAP) site http://www.uitf.com.ph.

Where is the best place to put my money?

You have to determine for yourself the right investment portfolio that will work for you given your goals and financial situation. Study the different investment vehicles available and see where best you can park your money:

1. BANK DEPOSITS

Pros: They are safe since the Philippine Deposit Insurance Corporation (PDIC) insures deposits up to P250,000. They provide steady interest income. They are also easily accessible. A savings and current account can help you manage your day-to-day expenses.
Cons: Interest on savings and current accounts are minimal.

What to do: Consider investing in a time deposit for higher interest. The secret to earning in a time deposit is to hold it for a long term at an interest rate higher than the inflation rate. You can also have investment in foreign currency to take advantage of higher rates depending on the market.

2. GOVERNMENT SECURITIES

Pros: They are relatively reliable since these are guaranteed by the Philippine government. They also provide steady income. You can easily access them and sell them through the money market as handled by banks.

Cons: Interest may be lower as compared to other investments.

What to do: Hold some government securities as part of your portfolio. You may want to invest directly in Treasury bills or join a mutual fund or unit investment trust fund investing in fixed income instruments like government securities.

3. BONDS

Pros: As fixed income instruments, they give fixed interest income for a specified number of years. This rate is usually higher than that offered by government securities or bank deposits.

Cons: Bonds come with a risk. They are not guaranteed by an insurance company like PDIC. The higher the interest offered, the higher the risk that the company will default on payments.

What to do: Put some money in bonds depending on your financial goal to let you realize more returns. Hold it for the long term. Choose only bonds with good rating. You may want to join a mutual fund or unit investment trust fund directly investing in bonds to save you the trouble of identifying the best performing bonds in the market.

4. STOCKS

Pros: When there is a bull run in the market, stocks perform well. You also gain a lot when you get good stocks during the initial public offering. In the long run, stocks may outperform bonds in terms of yield.

Cons: There is a big risk of losing your capital as market prices change daily.

What to do: Invest only what you can afford to lose. Hold your stock investment for the long term to ride out market price fluctuations. You may also invest in stocks via a mutual fund or a unit investment trust fund.

5. REAL ESTATE

Pros: You may earn a lot as the price of property appreciates over time.

Cons: Sometimes the real estate market is down and you may not get a good market value for your property. It is also not very accessible since you need time to sell it off should you need the funds. Maintenance costs may also be high.

What to do: When buying real estate, time it right when you can get a good price for your property. If you can rent it out, you can use the money to invest elsewhere.

So have you decided where to invest?