Picking the Right Pooled Funds in the Market
Question: I have been hearing a lot lately about investments. I am a typical employee who works 8 a.m. to 5 p.m., Monday to Saturday, which means I can’t really monitor my portfolio’s performance during trading hours. Right now I am on the verge of catching up with time to save for my retirement because I am now in my early 40s. What are the other options in the market for me, so I can start investing? Are pooled funds suitable for me? From Terence J. Evan of Batangas City, through email address sergebargayo@gmail.com.
Answer: Allow me to stress some important aspects about investment before I directly answer your queries. In financial investment, there are three things you have to consider and understand, and these are very critical to having a successful portfolio. First is the rate of return. This is the percentage of how much you want to receive in return for your capital or seed money. Second is the initial capital. This is the liquid asset you can invest.
Lastly, time. Time is the most precious asset we have. Time is gold. When do you want to achieve your target investment? When do you want to use it? However, time will not wait for you. It will move on with or without you, so better do it yourself or let others do it for you if you want to achieve your financial goals. Also, time is the best friend of investment. They work hand in hand to help people achieve their goals.
Stock market investing
When you said you couldn’t really monitor your portfolio during trading hours, direct stock investing is what you were referring to. If you want to trade directly in the stock market, you need to monitor it from time to time. However, there are ways in which you don’t need to watch your charts minute after minute during trading hours. You can be a value investor. To become like this, you still need to further enhance your skills in picking the right company to invest in. Reading or taking up courses on the proper valuation of stocks will still take up a lot of time.
Pooled funds
For people who don’t have time to monitor the market, this is the right investment for you. This is like riding a public utility vehicle instead of driving your own car. You just pay the driver (the fund manager) to take you to your destination. If you do not know how to drive, then letting somebody drive for you is the best option.
Kinds of pooled funds
There are three famous types of pooled funds available in the market. First is the mutual fund. This kind of investment is governed by the Securities Exchange Commissions or SEC. This is where you can invest through asset management corporations. Investors can check pricing using the NAVPS (net asset value per share). You can also pick your desired kind of funds—equity fund, balanced fund, fixed-income fund and money market fund. Second is the unit investment trust fund (UITF).
This fund is governed by the Bangko Sentral ng Pilipinas or BSP. All legal aspects involving BSP for the protection of investors will be implemented in this type of fund. Like mutual funds, there are different kinds of UITFs. Pricing is based on NAVPU (net asset value per unit). Third is the Variable Unit Link or (VUL). This is different from the first two types of pooled funds that I have mentioned because it has a linked insurance component. We can’t really compare this with the other pooled funds. VULs are governed by the Insurance Commission. Similar to the first two funds, there are different kinds of VULs that you can choose from.
Identifying your need
It all boils down to what you need. The three pooled funds that I have discussed are mere tools that will help you achieve what you want financially. Imagine for a while, right now, a carpenter without tools. He decides to build a house for his family. Without tools, how can he build a house for his family? The same goes for all of us!
You need to sit down for a while and try to imagine what you really desire. Once you are clear on it, you can start drawing your blueprint for achieving it. If you don’t know how to establish your blueprint (financial plan), perhaps you can look for professionals who can help you plan your financial life. Look for independent financial planners.
Serge Barcenas Bargayo is a Registered Financial Planner of RFP Philippines based in Cebu. He is the managing director of Certa Inc. To learn more about financial planning, join the 59th RFP program in January 2017. To register, e-mail info@rfp.ph or text <name><e-mail><RFP> at 0917-9689774.
Source: http://www.manilatimes.net/picking-right-pooled-funds-market/298437/
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