10 Questions
What type of fee is charged to the investor upon redemption of their shareholdings?
Redemption or Exit Fee
What is the primary purpose of forward pricing in mutual funds?
To calculate the NAVPS on a daily basis
What is the formula to calculate the Net Asset Value per Share of a Mutual Fund?
FM 5 Investment and Portfolio Management Assets − Total Liabilities
What type of tax is computed at 12% of the fees charged?
Value Added Tax
What is the effect of the sales fee on the cost per share?
It increases the cost per share
What type of fee is charged to the investor upon reinvestment of their earnings?
Reinvestment Fee
How often are the Net Asset Value per Share of Mutual Fund computed?
Daily
What type of investment is being discussed in the context of fees and charges?
Mutual Fund
What is the purpose of managing emotions in investing?
To avoid impulsive decisions
Why is it important to consider the fees and charges associated with Mutual Fund investing?
To make informed investment decisions
Study Notes
Types of Mutual Funds
- Stock/Equity Funds: considered to be the riskiest but with potential for the biggest returns in the long term, investing primarily in stocks and equities.
- Bond Funds: invests in fixed-income investments, offering lesser volatility and potential for capital growth and safeguarding against inflation.
- Balanced Funds: a mix of stocks, bonds, and/or money market funds, suitable for investors with moderate risk appetite.
- Money Market Funds: invests in short-term debt securities, considered safest but with least returns, recommended for short-term investments.
Mutual Funds (MF) vs. Unit Investment Trust Funds (UITF)
- MF: owned shares, making you a shareholder, with potential dividends and shareholder rights, reports are transparent, and has higher regulation.
- UITF: managed by a bank, no ownership, no dividends, and no shareholder rights, but with easier set-up and lower fees.
Advantages of Investing in Mutual Funds and UITF
- Better potential returns for your money
- Professional fund management
- Diversification
- Low initial investment costs
- Liquidity
- Protection against inflation
- Easy to set up and manage
- Compound interest
How to Start Investing in Mutual Funds in the Philippines
- Be mindful of your current financials
- Determine your investor type
- Do your due diligence
- Gain more financial knowledge
- Past performance may not be indicative of future results
- Consider investment duration
- Be mindful of fees and charges
- Manage your emotions
- Don't limit yourself to MF and UITF investing
Investor's Transaction Cost
- Sales Fee (Front-end load): increases cost per share
- Redemption or Exit Fee (Back-end load): reduces net proceeds from redemption
- Reinvestment Fee: charged upon reinvestment of earnings
- Value Added Tax (VAT): computed at 12% of fees charged
Net Asset Value (NAV) Per Share of Mutual Fund
- Refers to the excess of assets at current value over liabilities
- Computed on a daily basis
- Forward Pricing: computing NAVPS every trading day after the close of the stock market at mid-day
- Formula: (Per Share basis) = Assets - Total Liabilities
Test your knowledge of mutual funds, including equity funds which invest in stocks and equities, and bond funds which invest in fixed-income investments. Learn about the risks and potential returns of these investment options.
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