How To Get Started in Mutual Fund

In my previous post, i have explained that a Mutual Fund is an investment company that pools the funds of many individual and institutional investors to form a massive asset base.  Think of mutual fund similar to group buying sites. A fund manager pools or collects money from different individual and invests them in various companies. In group buying sites, the site gathers individual buyers to form a group and have to power to bargain for lower cost. Similarly, investing mutual fund allows you to have exposure in various companies and industries otherwise you cannot purchase by your own.

Let's take for example Sunlife's Balanced Fund. As of February 28, 2011, the fund has the following companies as part of its Top 5 Equity Holdings. If you want to buy all of these companies on your own, you'll have to have P23,518 on the minimum.

However, with Mutual Fund, you can gain exposure for the same set of companies for just P5,000 pesos.

How does Mutual Fund work? 

Assuming you are interested to invest your P5,000 in Sunlife Mutual Fund, you'll get 1,986 shares based on the fund's Net Asset Value Per Share (NAVPS) of 2.5165 as of March 23, 2011. This means you own that number of shares of the Mutual Fund Company. Remember, you will not directly own the five companies listed above. Instead, you'll get shares of the Mutual Fund Company who in turns owns the shares of the listed companies.

How will you earn or (lose) in Mutual Fund?

NAVPS fluctuate daily depending on the performance of the Mutual Fund which is related to the performance of the companies that the Mutual Fund Owns. You will earn when NAVPS increase and you will lose when NAVPS decrease. For example, if you joined MF last February 3, 2011, the NAVPS was 2.4845. Using the March 23, 2011 NAVPS, you could have earned P64.40 or 1%. 

On the other hand, if you joined last January, you will lose P226.13 or 5%. 

The numbers might not appear to interesting but if you think longer horizon, the numbers are more attractive. Back in January 4, 2010, the NAVPS was 1.9888 so you could have earned 27% return in one year.

One advice that i got was peso cost averaging. Read it here

Summary

Mutual Fund's is a good way to have investment tool because your money will be managed by fund managers (who does that as a career) and will not require too much money.

Track Your Expenses, Discover A Story

Back in August 2010, i said i started tracking my daily expenses. It was difficult but fun. 

Tracking daily expenses and summarizing them told me stories about who i am and what my priorities are.

By tracking expenses and summarizing them, i realized that i was spending too much on unplanned expenses such as gifts, dine outs and unscheduled vacation. In my mind, my priority was saving money and investing but my actual actions tells me that my priority was destressing and relaxation.

The information i got from tracking me expenses, opened my eyes to the reality so i took action. Beginning that time, i started monitoring and watching where i spend my money. I followed money making tips and think of ways how to save money.

If you are interested in tracking your expenses, there are various ways you can do it. 

1. Manual paper listing
2. Phone Apps
3. Excel Trackers

I never really did manual tracking but based on other materials that i have read you can list down at the end of your day all your expenses in a notebook and summarize it. 

What really got me going was using Handy Expense. Since i carry my phone everywhere, i can easily record expenses as soon as i made the purchase. The application also allows me to export the file in CSV format which i then use to import in excel.

Another tool that i have tried is the iphone app Money Journal. The iphone app costs $2.99 but that cost is compensating with ready made charts and budget comparison tool. The added bonus is that you can upload the data inputted in the app directly to Google Docs. The only hassle is that the apps takes so much key presses that i really sticked to Handy Expense. Less key presses works better for me.

Lastly, you may use excel. The spreadsheet is a great tracking tool. Also, if you are interested, there are seven free excel budget/expense tracking tool here