Philippine Stocks or Mutual Funds: A Newbie’s Guide

Philippine Stocks or Mutual Funds – Hello newbie! Are you ready to start your journey in the world of investing?

For most Filipinos, Investing is a big, shmancy word.

When we think of ‘investing’, we think of these smug faces in Wall Street:

And these Wall Street guys throw away these kinds of intimidating ‘intellectual’ jargon:

Investing seems like a very intimidating world–especially for a Filipino and a woman (and coincidentally, I am both).

Some of the most common misconceptions Filipinos say about investing are that ‘it’s only for the rich’ or ‘I’m not smart enough to understand it’ …but these are just lame excuses!

I started investing in mutual funds at 16 when I was in college, and directly invested in the stock market at 18.

I’ve been very lucky to have parents who have been active in the investing space for decades. Through them, I got an early head start in understanding money markets.

And the truth is, investing is not rocket science! Don’t get intimidated!

Being an Investor – What people think vs. what I really do

If you are a newbie investor, two of the best investment vehicles to get started is in stocks and mutual fund investing.

Philippine Stocks vs. Mutual Funds – what, where and how? We’ll try to answer them in the simplest terms.

Philippine Stocks vs. Mutual Funds

Definition

When you invest in stocks, it means you invest directly in the stocks of the company. On the stock market, you are purchasing shares of publicly listed companies.

You earn in stocks through:
  • Stock Price Appreciation. The price of the stock goes up, and you resell it at a higher value
  • Dividend Income. Some publicly-listed corporations, especially profitable ones, distribute a portion of their earnings to shareholders called dividends from 1 to 4 times a year

When you invest in mutual funds, you are getting a collective investment that pools the money from a large number of investors to purchase a number of securities in stocks, FDs, bonds, and other money vehicles.

A mutual fund employs fund managers, whose primary job is to pick the best performing securities depending on the objective of the fund. Fund managers take charge in managing the fund, picking securities, and evaluating risks based on data-backed analysis and trends in the market.

Income in mutual funds is typically earned in the following ways:
  • Dividend income from stocks and interest on bonds are shared annually in the form of a distribution. Funds can choose to give investors an option to receive a check payout or to reinvest the earnings to acquire more shares.
  • Capital gain earned from securities sold by a fund. The profits is also shared to investors in a distribution.
  • If fund shares increase in price then when you originally bought it, you can sell off your mutual fund shares for a profit in the market.

– Risk and Returns

Stock investing has a very high return potential. We’ve heard of the legendary guys in the likes of Warren Buffett, Peter Lunch, George Soros, who made a fortune investing in stocks.

On the other side of the story, majority of people also lose money in the stock market. We’ve all heard of how bad the Great Depression was for everyone following the Wall Street Crash of 1929:

Warren Buffett displays these news headlines all over his Omaha office
as a cautionary reminder of how unexpected life can be.

If you don’t know what you’re doing, we advise you not to try day trading. 90% of people never earn money through day trading. It’s impossible to time the market (just my two-cents though).

As a beginner in stock investing, it is recommended for you to do long position instead, and not touch your money for at least ten years. Given the historical numerical data, the stock market is volatile–in the short term.

If you wait out, stock value will always go up in the long run.

Foolproof strategy is Buy (easy part) and hold (hard part)

Mutual funds, on the other hand, give modern returns to shareholders. Although they might not be as high stocks, the risk is moderate and give decent annual returns.


Do you want to be the driver, or do you want to be the passenger?

if you’re just starting out and still a bit wary, you can start with mutual funds. The fund manager will take care of everything for you.

However, if you’re opportunistic and a risk-taker who wish to make higher returns, invest directly in the stock market.

IN A NUTSHELL

Stock MarketMutual Funds
5,000 PHPMinimum Investment1,000 PHP
Moderate to HighRisk AppetiteLow to Moderate
Price per shareValueNet Asset Value
Self ManagementProfessional Fund Manager
YesVoting RightsNo

– Where to Invest in Stocks

Where to invest in stocks in the Philippines? There are many trading platforms out there

I personally have two stock trading accounts from two different platforms: COL Financial and MyTrade.

My first account was with COL Financial in 2009 (then called Citisec Online) and recently, with MyTrade Philippines most recently.

Interestingly, I started both my accounts during times of crisis–the Global Financial Crisis 11 years ago and the COVID-19 Pandemic Crisis. I take advantage of and buy my favorite stock pickings at a discount.

When it comes to price, there’s really little difference which platform you will use. The trading platforms are regulated by SEC, fees are more or less uniform.

Choose a platform where you are most comfortable with. I found the application process in COL much faster, while I like the customer service of MyTrade. COL’s interface is clean and no-fuss, while MyTrade is more customizable (Think COL like Apple and MyTrade like Android). It took me a while to get used to the interface of MyTrade, but once I got used to it, I enjoyed its usability immensely.

Other stock platforms out there that I am aware of are BDO Nomura, BPI Trade, and FirstMetroSec.

– Where to invest in Mutual Funds

There are four main types of mutual funds available in the Philippines today: index funds, balanced funds, ETF funds, bond funds, and money market funds.

Here are the top 10 mutual funds of 2019 via ROI (data from Pesolab).

FundTypeROI
Philam Bond FundBond11.54%
Sun Life
Prosperity Bond Fund, Inc. 
Bond11.20%
Sun Life Prosperity
GS Fund, Inc. 
Bond10.47%
Soldivo Bond Fund, Inc. Bond8.03%
Philequity Peso
Bond Fund, Inc. 
Bond7.71%
PAMI Horizon Fund, Inc.Balanced7.21%
First Metro Save and Learn
Fixed Income Fund, Inc. 
Bond6.79%
Philam Fund, Inc. Balanced6.61%
Philam Managed
Income Fund, Inc. 
Money market6.35%
Sun Life Prosperity
Balanced Fund, Inc. 
Balanced5.81%

(As in the previous section, I promise to do a separate post on mutual funds with a more detailed overview)

I have funds with Philequity, First Metro Save and Learn, Soldivo Fund, and during the pandemic, I purchased some units from Gcash Invest Money – ATRAM.

The income on mutual funds is something I just ‘forget’ about. I don’t intend to touch them in the next five years.

Should I Invest Now?

Absolutely. My advise is to start investing now while we are still at the height of the pandemic.

At the start of the lockdown, I chose to purchase more shares in the stock market (I have a higher risk appetite). The PSE index went below 4000 and many of my favorite blue chips were at a grand discount. I have bought consistently (mainly blue-chip) in the last 8 weeks. I am now on hold position as the index is now above 6000 and has netted around 30,000. While in my pajamas.

Take advantage of the discounted prices now. You know what they say: when people are fearful, be greedy. Buy low and sell high; buy when people want to sell.

Also Read: Investing and Earning During a Crisis

START HERE on the simple Foolproof 5-Step Financial Guide

Still Confused? Maybe I can help

Whatever your decision in Philippine Stocks vs. Mutual Funds, feel free to message and connect with us on email or social media! We are happy to answer any business- and investing-related questions.

Hopefully, we can drive more Filipinos into an investment-driven lifestyle.

Connect with Economerienda!


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