🪙 Mutual funds: smart move or waste of time?

In a previous issue, we tackled the basics in Investing 101: What Every First-Time Investor Should Know. This week, I thought we’d zoom in on one of the most accessible ways to actually put those lessons into practice: mutual funds.

If you’ve ever wanted to invest but didn’t know which stocks or bonds to pick, mutual funds might be your best entry point.

They’re simple, beginner-friendly, and accessible. But not all funds are created equal. Let’s break them down.

In today’s edition, we’ll go over:

• What mutual funds are

• Difference of mutual funds from UITFs and Stocks

• How much you can earn from mutual funds

• Is it the right fit for you?

TLDR;

The Bottom Line

• Mutual funds let you grow your money without picking individual stocks. They’re professionally managed and diversified.

• Different types (equity, balanced, bond, money market) suit different goals, timelines, and risk appetites.

• Start small (PHP1,000 – PHP5,000), stay invested, and let compounding do the work. Time in the market beats timing the market.

• ⚠️ Just remember: management fees (usually 0.5%–2% annually) will also eat into your returns, so always factor that in.

The content

What exactly is a Mutual Fund?

A mutual fund is a pool of money from many investors, managed by a professional fund manager.

Your money is combined with others and invested in stocks, bonds, or both,  giving you instant diversification without needing to pick individual investments yourself.

You own “units” or “shares” of the fund, and your returns depend on how the fund performs.

In short: mutual funds = group investing, professionally managed.

In exchange, the fund charges a management fee (usually 0.5% to 2% per year) deducted from the fund’s assets.

Mutual Funds vs UITFs vs Stocks: What’s the Difference?

Quick Notes for Context

• Mutual funds & UITFs have very similar structures (both pooled and diversified), so their fees and average long-term returns are almost the same.

• Stocks historically average 8–9% annually in the Philippine market, but with higher short-term volatility. Unlike pooled funds, your return depends on your own stock picks and timing.

• Fees matter—mutual funds and UITFs take out 0.5–2% annually for professional management, which is why stock market DIYers sometimes outperform if they know what they’re doing (though risk is higher).

How Much Can You Earn from Mutual Funds?

Returns depend on type, market performance, and time horizon.

For example:

• PHP 50,000 in an equity fund earning 10% per year could grow to roughly PHP 130,000 in 10 years (without adding more).

• Add PHP 2,000 monthly? You could end up with PHP 400,000+ over the same period.

Why should you care?

When Is a Mutual Fund a Good Move for You?

A mutual fund isn’t for everyone, but it’s perfect for some. Here’s when it makes sense to put your money in one:

• You don’t have the time (or interest) to pick individual stocks. Let the professionals handle the research, buying, and selling.

• You want instant diversification. With just one investment, you’re spreading risk across dozens (sometimes hundreds) of companies or bonds.

• Your goal is medium- to long-term growth. Mutual funds shine if you can let them sit for at least 3 years, ideally 5–10 for equity funds. If you’ll need the cash next summer, a time deposit is probably a better fit.

💡 Beginner Tip: If you have high-interest debt or no emergency fund yet, focus on those first. Click here to start your EF journey.

When is a Mutual Fund Might Not the Right Fit?

• You hate fees. Mutual funds charge management fees. Small percentages add up and will eat into your returns over time.

• You want full control. Some investors like choosing exactly where their money goes and don’t trust a manager to do it for them. If you’re that type, direct stock or bond investing may feel more satisfying.

• You expect fast returns. If you’re chasing double-digit growth overnight, this isn’t it. Mutual funds are about slow compounding.

Actionable Tips to Start

1. Define your goal: retirement? house? education?

2. Know your risk tolerance: can you stomach market ups and downs?

3. Pick a platform: COL Fund Source, ATRAM, BPI, etc. (do you want a comparison of the different mutual fund offerings available? reply and let us know)

4. Start small: many funds accept as low as PHP1,000 – PHP5,000.

5. Stay invested: time in the market beats timing the market.

6. Check fees and performance: Look for funds with reasonable fees and consistent performance.

Stuff Worth Sharing

The Link Lowdown

• Missed our last issue? Check it here: Top 3 Credit Cards Every First-Timer Should Consider

• We also wrote about stocks and bonds.

  • Stocks

  • Bonds