1.6.08

How to invest in Mutual Funds - Learning Some More

I am insisting on posting about investing topics despite my ignorance. Precisely.

The truth is I am really studying up, researching and finding out everything I could on mutual funds, because I might just end up in this industry soon. As consultant or as an investor myself (I :-) wish).

Different countries, different rules. That's my dilemma. There's not enough info I could get my hands on, about 'investing in mutual funds in the Philippines'. So my readings are mostly U.S. scenarios.

I guess, and I hope I could use the American model when I evaluate Philippine mutual funds.

From what I read these are some of the points stressed about mutual funds:

1. Management competency is a must. This means a track record of not less than 10 years.
2. Consider how the fund is being promoted. Rise or fall prices are fairly indicated in the last 2 quarterly reports. Fund must be fairly consistent. It is may be well to also watch fund performance both on the up and down markets.
3. Another important consideration is fund turnover. Turnover means the ratio of stocks sold vis-a-vis fund assets. High percentage points indicate that the managers are looking at short term profits and investment choices are poor.
4. Be sure that there is full understanding of the terms, yield as opposed to total return. These are technical buzzwords important in evaluating a fund.

Yield is the income derived by a shareholder for every share subscribed to. You get the yield as the percentage points resulting from adding dividends and interests on the current price offering per fund share.

On the other side, total return is the total value of the fund, considering dividends and capital gains disbursed, plus income from interest, and also including unrealized capital gains or losses.

Total return measures changes in the total value of the fund at the start of the year up to any given date.

5. Most important, understand where and what you are putting your money. Do not be intimidated by the jargon. Do your due diligence.

Wow, I am getting dizzy. My aging brain seems to conk out in mid=stream. So I need to park. There's a need for more research and better understanding. But I am not giving up. Maybe we can learn together. Why not?