Advantages of Getting One Type of Mutual Fund in Philippines

Below are some of what I think the advantages of getting just one type good mutual fund.

1. My investment capital will not be diluted, meaning, if the NAVPS of the mutual fund I subscribe increases, my gain will be much more higher but of course the risk is that, if the NAVPS goes down the more also is my loss. That's why I study first the funds I intend to invest in so that, I can confidently choose what type of mutual fund will fit my goal and risk appetite.

2. I don't need to "mamangka sa dalawa o tatlong ilog" which means in this case if I were to endorse mutual fund, I will have to endorse only one, the one that I invested in. So that, those who might be interested and subscribe also will likely not dilute their capital investment. Though it may sound bias nevertheless, the fund that I invested in speaks for itself in terms of performance and feature. With this logic, I and those who were encourage to invest will help increase the asset of the fund, in return will also increase the value of the NAVPS therefore, likely, the value of my share will also increase. Remember the NAVPS formula ((Asset-Liabilities)÷Outstanding Share).

3. Based on how I understand mutual fund, if I get more than one but the same type of mutual fund, I am not diversifying actually. Like say for instance, If I subscribe equity funds at company "A" and equity fund also at company "B" and the same with company "C". If the equity market goes down, likely, all of the mutual funds I subscribe in will also go down since they all invest in equity. Another is that, aside I guess from their investment strategy and fund managers, one of the reason perhaps why the same type of mutual fund is better than the other one is simply because that mutual fund has built in a good reputation and is more popular. Thus, more are interested to invest therefore increasing the asset value more compare to the other mutual fund resulting to increase in NAVPS and, finally increase also on the share value.

4. If I invest in more than one MF and since, I'm working abroad and don't have the bank account on the mutual funds I subscribe in, I will have to spend extra more on the remittance fee so as to add fund separately as, every mutual fund has different account number. I find it not very convenient at all.

By the way I invest in PDYF Click the link:  Why I Choose to invest PhilEquity Dividend Yield Fund. And, since I opened the account, to date the sales load has already been more than compensated.

Life Insurance, Making Sense of it

First, I want to ask 2 question:

Does anyone of you here have no dependents (wife/children/parents) and enough asset to pay off your debt and the cost of dying ( funeral, estate lawyer's fees, etc.)?

How about with dependents (wife/children/parents) and have enough assets to provide for them after death (investments, trusts, etc.).

If anyone of you are in this situation, insurance is probably an unnecessary expense for you

However, if we have dependents (especially if we are the primary provider) or significant debts that outweigh our assets, then we likely will need insurance to ensure that our dependents are looked after if something happens to us.

Allow me to show you a sample on how an insurance suppose to help our dependents and how much ideally should be in our policy.

Say we are the primary provider at the time of accident and unfortunately the total balance amount to be paid in our mortgages and car loan are around 500K and 100K respectively.

At this point in time, we would wish that the total debt balance has been paid off. We certainly don't want the burden to be pass on to our dependents right? Therefore, we would wish that our lump sum policy coverage is at least 600K (add a little bit more to cover the debt interest). This only covers our debt alone.

How about our income, we surely wish that our dependents after the accident will have continues stream of cash inflow, right?

Now,  say we have a net income amounting  600K annually. We would wish that this cash amount will continue to flow in yearly right? So, we would wish that our dependents will invest in such that the investment will yield 600K per year. If we don't trust that our dependents will invest, we might want to hire trustees or financial planners to do it for them. Say, our dependents/trustees/financial planners somehow knew where to invest that will possibly yield 10% every year. To replace our income, they will need at least 6M when the policy pay off and a little bit more to guard against inflation. This 6M if invested at 10% annually will yield 600K yearly, enough to replace the lost income.

So now, to cover our total debt and to replace our income we will need at least a policy that will pay off at least 6.6M. 6M for investment that will replace the income and 600K to payoff the total debt.

These are just 2 factors in considering the amount of policy we need to have, others would be like when we want our child to study in a university which we need to consider the cost also. Say we need 3M for his/her study. We would wish to add it up to our policy.

Maybe now, insurance make sense to us. But for me, we don't need a life insurance that need to pay premiums throughout our lifetime. So long as we strive to be financially secured someday, what we should get is a renewable term insurance. Remember my question number 2? That's the situation we intend to be in. Our goal is to increase our assets in a certain period where these assets are sufficient or even more than enough to provide for our dependents. When we reach this point in time in His grace, insurance is the least of our worries. By this time, our worries should already be diverted on how to make sure that these assets will be pass on rightfully to our dependents otherwise it will be all for nothing. 

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