Mutual Fund Truth: Investment Ba Or Expenses?
Ang mutual fund ba ay investment or expenses?
“Investment syempre! Hello! Mutual Fund nga eh!”
That is the typical answer you wpuld get if you ask any Filipino Investor.
We consider mutual funds as no-brainer na investment vehicle.
Are they really though?
Well, let us both find out.
Anything you will read beyond this point will be supported with data to ensure no lies are being spread.
I will post references so you can also verify things yourseleves.
Lets start with the basics.
Ano ang mutual funds?
Mutual funds are pooled funds that is being invested/managed by a fund manager na ang goal ay growth ng pera.
Generally ay may apat na uri ng Funds sa mutual fund.
Bond Fund which is invested in bonds and debt instruments.
Equity Fund which is invested in stocks.
Balanced Fund which is invested in a mix of bonds and stocks.
Money Market Fund which is invested in certificates of deposits (CDs), treasuries, bankers’ acceptances, and repurchase agreements.
They are often rated as per their carried risk. Stocks (Equity Fund) are high risk investment meaning high din ang reward if kumita. Money market and balanced funds are of moderate risk meaning meaning moderate din ang reward if kumita. Bond fund which is low risk with low returns.
(Source: https://www.moneymax.ph/personal-finance/articles/mutual-funds-philippines)
Yan ang basics ng mutual funds.
Punta naman tayo sa di halos dinidiscuss. Yung fees.
“Huh? What fees?”
Syempre may magmamanage ng pera mo alangan naman libre lang yun diba?
Mutual fund is a business and hindi yan charity. In order for the business to grow and operate ay kailangan nito ng income. Yung income ng mutual fund ay galing sa fees.
Yes. Galing sa pera na iniinvest mo ang income nila.
“no matter how the fund performs. You may have to pay an annual fee for fund management, usually based on a small percentage of your shares’ total value.”
“Fees are collected to keep the operation of the fund, pay compensation for advisors, pay brokerage fees, and other such expenses.”
Front-end fee
The front-end fee, also called sales load, is taken off from your investments every time you open or add. Some companies waive the fee. Others have a tiered policy; the higher you invest, the lesser the fee becomes or even none at all. So let’s say you put up ₱5,000 to a fund with a front-end fee of 2%. What actually gets invested is ₱4,900.
- Initial investment: ₱5,000
- Front-end/Sales load: 2%
- Sales load amount: ₱5,000 x 2% = ₱100
- Actual invested amount: ₱5,000 – ₱100 = ₱4,900
To better illustrate this point, imagine that you have a mutual fund with 1%, 3% or 5% front-end fee. The fund requires ₱10,000 initial investment, and then you decide to re-invest ₱1,000 consistently every month. If we assume that the it grows 10% annually, then here’s the comparison between no fees and with the fee.
Fees of Index funds
| YEAR | DEPOSIT | ZERO FEE | 1% | 3% | 5% |
|---|---|---|---|---|---|
| 1 | 22,000 | 23,670 | 23,434 | 22,960 | 22,487 |
| 2 | 34,000 | 38,767 | 38,380 | 37,604 | 36,829 |
| 3 | 46,000 | 55,440 | 54,886 | 53,777 | 52,668 |
| 4 | 58,000 | 73,853 | 73,114 | 71,637 | 70,160 |
| 5 | 70,000 | 94,187 | 93,246 | 91,362 | 89,478 |
| 10 | 130,000 | 232,489 | 230,165 | 225,515 | 220,865 |
| 15 | 190,000 | 459,697 | 455,100 | 445,906 | 436,712 |
| 20 | 250,000 | 832,972 | 824,642 | 807,983 | 791,323 |
| 25 | 310,000 | 1,446,237 | 1,431,775 | 1,402,850 | 1,373,926 |
| 30 | 370,000 | 2,453,819 | 2,429,281 | 2,380,205 | 2,331,128 |
| NAME | INITIAL | ADD | SALES LOAD | EXIT | HOLD | FEE |
|---|---|---|---|---|---|---|
| PAMI Equity Index Fund, Inc. | 1,000 | 500 | 3.36% | 1.12% | 6months | 1% |
| Philequity MSCI Philippine Index Fund, Inc. | 1,000 | 500 | 5% | 1% | 90 days | 3% |
| Philequity PSE Index Fund Inc. | 1,000 | 500 | 3.5% | 2% | 1yr | 1% |
| Philippine Stock Index Fund Corp. | 5,000 | 1,000 | 1.5% | 1% | 3months | 1% |
| Sun Life Prosperity Philippine Stock Index Fund, Inc. | 1,000 | 1,000 | 2% | 1% | 6months | 1% |
Fees of Equity Funds
| NAME | INITIAL | ADD | SALES LOAD | EXIT | HOLD | FEE |
|---|---|---|---|---|---|---|
| ALFM Growth Fund, Inc. | 5,000 | 1,000 | 3.00% | 1.00% | 90 days | 2% |
| ATRAM Alpha Opportunity Fund, Inc. | 50 | 50 | 5.60% | 1.12% | 90 days | 2% |
| ATRAM AsiaPlus Equity Fund, Inc. | $150 | $50 | 2.24% | 1.25% | 90 days | 0.5% |
| ATRAM Philippine Equity Opportunity Fund, Inc. | 50 | 50 | 5.60% | 1.12% | 90 days | 2% |
| Climbs Share Capital Equity Investment Fund Corp. | 500 | 1,000 | 2.00% | ? | ? | ? |
| First Metro Consumer Fund on MSCI Phils. Inc. | 5,000 | 1,000 | 2.00% | 1.00% | 6 months | 1.750% |
| First Metro Save and Learn Equity Fund,Inc. | 5,000 | 1,000 | 2.00% | 1.00% | 6 months | 1.875% |
| MBG Equity Investment Fund, Inc. | 100,000 | 10,000 | 5.00% | 5.00% | 1 year | 2% |
| One Wealthy Nation Fund, Inc. | 5,000 | 1,000 | 3.00% | 1.00% | 6 months | 1.875% |
| Philam Strategic Growth Fund, Inc. | 5,000 | 1,000 | 3.00% | 1.00% | 6 months | 2% |
| Philequity Dividend Yield Fund, Inc. | 1,000 | 500 | 5.00% | 2.00% | 90 days | 3% |
| Philequity Fund, Inc. | 1,000 | 500 | 5.00% | 2.00% | 90 days | 1% |
| Soldivo Strategic Growth Fund, Inc. | 5,000 | 1,000 | 3.36% | 1.12% | 6 months | 2.25% |
| Sun Life Prosperity Philippine Equity Fund, Inc. | 1,000 | 1,000 | 2.00% | None | None | 2% |
| Sun Life Prosperity World Voyager Fund, Inc. | $1,000 | $200 | 2.00% | None | None | 1.75% |
| United Fund, Inc. | 1,000 | 500 | 2.00% | 3.50% | 1 year | ? |
Fees of Balanced funds
| NAME | INITIAL | ADD | SALES LOAD | EXIT | HOLD | FEE |
|---|---|---|---|---|---|---|
| ATRAM Dynamic Allocation Fund, Inc. | 50 | 50 | 5% | 1.12% | 90 days | 1.75% |
| ATRAM Philippine Balanced Fund, Inc. | 50 | 50 | 5% | 1.12% | 90 days | 1.75% |
| Cocolife Dollar Fund Builder, Inc. | $1,000 | $500 | 0.5% | 1.5% | 1 year | ? |
| First Metro Save and Learn Balanced Fund Inc. | 5,000 | 1,000 | 2% | 1% | 6 months | 1.875% |
| Grepalife Balanced Fund Corporation | 5,000 | 500 | 2% | 2% | 1 year | 1.875% |
| NCM Mutual Fund of the Phils., Inc. | 100,000 | 10,000 | 3.36% | 1% | 6 months | 1.8% |
| PAMI Asia Balanced Fund, Inc. | $200 | $50 | 3.36% | 1% | 6 months | 2% |
| PAMI Horizon Fund, Inc. | 5,000 | 1,000 | 2.8% | 1% | 6 months | 1.8% |
| Philam Fund, Inc. | 1,000 | 500 | 3% | 1% | 6 months | 2% |
| Solidaritas Fund, Inc. | 5,000 | 1,000 | 1.5% | 1% | 6 months | 2% |
| Sun Life of Canada Prosperity Balanced Fund, Inc. | 1,000 | 1,000 | 2% | None | None | 2% |
| Sun Life Prosperity Achiever Fund 2028, Inc. | 1,000 | 1,000 | None | 5% | 5 years | undefined |
| Sun Life Prosperity Achiever Fund 2038, Inc. | 1,000 | 1,000 | None | 5% | 5 years | undefined |
| Sun Life Prosperity Achiever Fund 2048, Inc. | 1,000 | 1,000 | None | 5% | 5 years | undefined |
| Sun Life Prosperity Dollar Advantage Fund, Inc. | $1,000 | $200 | 2% | None | None | 1.5% |
| Sun Life Prosperity Dollar Wellspring Fund, Inc. | $1,000 | $200 | 2% | 1% | 180 days | 1.5% |
| Sun Life Prosperity Dynamic Fund, Inc. | 1,000 | 1,000 | 2% | 1% | 30 days | 2% |
Fees of Bond funds
| NAME | INITIAL | ADD | SALES LOAD | EXIT | HOLD | FEE |
|---|---|---|---|---|---|---|
| ALFM Dollar Bond Fund, Inc. | $500 | $100 | 5% | 1% | 6 months | 1.25% |
| ALFM Euro Bond Fund, Inc. | EUR 500 | EUR 100 | 5% | 1% | 6 months | 0.75% |
| ALFM Peso Bond Fund, Inc. | 5,000 | 1,000 | 1.25% | 1% | 90 days | 1% |
| ATRAM Corporate Bond Fund, Inc. | 50 | 50 | 2.24% | 5% | 6 months | 1.2% |
| ATRAM Total Return Dollar Bond Fund, Inc. | $150 | $50 | 5% | 5% | 2 years | 1% |
| Cocolife Fixed Income Fund, Inc. | 1,000 | 500 | 2% | 3.5% | 1 year | ? |
| Ekklesia Mutual Fund Inc. | 5,000 | 1,000 | 2% | 1% | 6 months | 0.875% |
| First Metro Save and Learn Dollar Bond Fund, Inc. | $1,000 | $100 | 1% | 1% | 6 months | 1.75% |
| First Metro Save and Learn Fixed Income Fund, Inc. | 5,000 | 1,000 | 2% | 1% | 6 months | 1.75% |
| Grepalife Dollar Bond Fund Corp. | $100 | $100 | 2% | 2% | 1 year | ? |
| Grepalife Fixed Income Fund Corp. | 5,000 | $1,000 | 2% | 2% | 1 year | ? |
| PAMI Global Bond Fund, Inc | $5,000 | $1,000 | 3% | 1% | 6 months | 2% |
| Philam Bond Fund, Inc. | 1,000 | 500 | 3% | 1% | 6 months | 1.5% |
| Philam Dollar Bond Fund, Inc. | $2,000 | $100 | 3% | 1% | 6 months | 1.5% |
| Philequity Dollar Income Fund Inc. | $2,000 | $1,000 | 1% | 1% | 2 years | 1.5% |
| Philequity Peso Bond Fund, Inc. | 10,000 | 5,000 | 1% | 1% | 2 years | 1.5% |
| Soldivo Bond Fund, Inc. | 5,000 | 1,000 | 3.36% | 1.12% | 6 months | 1.5% |
| Sun Life of Canada Prosperity Bond Fund, Inc. | 1,000 | 1,000 | 2% | None | None | 1% |
| Sun Life Prosperity Dollar Abundance Fund, Inc. | $1,000 | $200 | 2% | None | None | 1.5% |
| Sun Life Prosperity GS Fund, Inc. | 1,000 | 1,000 | 2% | None | None | 1% |
Fees of Money market funds
| NAME | INITIAL | ADD | SALES LOAD | EXIT | HOLD | FEE |
|---|---|---|---|---|---|---|
| ALFM Money Market Fund, Inc. | 5,000 | 1,000 | 5% | 1% | 7 days | 0.5% |
| First Metro Save and Learn Money Market Fund, Inc. | 5,000 | 1,000 | None | 1% | 7 days | 0.5% |
| Philam Managed Income Fund, Inc. | ? | ? | ? | ? | ? | ? |
| Sun Life Prosperity Dollar Starter Fund, Inc. | $500 | $100 | None | 0.25% | 7 days | 0.25% |
| Sun Life Prosperity Money Market Fund, Inc. | 100 | 100 | None | 0.25% | 7 days | 0.25% |
(Source: https://pesolab.com/compare-mutual-funds-list-of-philippines-mutual-fund-companies/)
Those that distribute mutual funds aside sa mismong company ay may fee din.
I’m not that privy sa fees ng mutual fund distributors or agents so I cannot exactly reveal how much they are being paid but if I had to guess ay small percentage yan ng total na perang iinvest mo. They are doing a job/service syempre alangan naman free yun.
Now, you would normally say na “okay lang yan kasi kumikita naman ang pera mo sa mutual fund.”
Let’s find out.
May way naman para macheck ang NAVPS ng lahat ng mutual funds kaya let us do that.
If you think about the fees you pay and the real returns you get ay masasabi mo na right now ay expenses siya kesa sa investment.
It will only be an investment once kumita na siya pero sa ngayon even yung 5-year return niya ay nasa negative. Yung highest return sa 5 years was 3% na galing sa isang bond fund. Yung highest na loss sa 5 years ay -7% which came from an equity fund. Add mo pa ang binabayaran mo na fees regardless sa performance ng fund mo. It becomes more of an expense kesa sa investment if you really look at it.
If mag improve ang market ay baka maging investment na ito but its not like attributed ito sa panget na market now. May data way back 5 years eh. That was before pa ng Pandemic.
If I say na parang expenses ang mutual fund, what now?
Syempre magtatanong ka kung ano ang better na investment.
You cannot just see a problem tapos wala naman palang solusyon diba?
If you are looking for an investment then I suggest you should check this one out.
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If trip mo naman na ikaw mismo ang hahawak sa pera mo without any fees from anyone or without anybody touching your money ay pwede mo itry yung DIVINA STRATEGY namin.
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If stock trading naman ang gusto mo ay pwede ka magtry sa TDS mentorship namin.
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Whatever path you chose sa financial future mo is your decision. Decide wisely and God Bless!
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