If you own shares of the Sun Life Prosperity Bond Fund, your investment has increased in value since the fund was launched on April 5 of last year. However the value of shares of the Sun Life Prosperity Balanced and Sun Life Equity Funds has decreased slightly. And unless you sell these shares, you have not lost a single centavo. This is what is referred to as a “paper loss”. The loss only becomes “real” if you actually sell your shares.

Why has the value of these shares decreased?
Worldwide, equity markets continue to correct. Investors remain nervous after the fall in technology shares in April and sharply higher interest rates in May.

In the Philippines, the market correction was more severe due to the recent flow of negative news. The hostilities in Mindanao and bombings in Metro manila caused crisis of confidence and resulted in sell-offs of Philippine assets. While the fundamentals of individual stocks remain sound, their values have dropped sharply as investors temporarily stay away until the political concerns are resolved.

Statistics worth looking at…
The graph below demonstrates the value of a P1 investment in the Philippine Composite Index, since 1987. If you start your analysis by following the red line, you will notice that in 1990, a P1 investment was only worth 80 centavos, but by 1993, just 3 years later, that same peso had increased 397% to P 3.95.

Selling that investment in 1990, would have generated a loss, but holding on to it would have generated a very impressive return by 1993.

Granted, this year it would be worth P1.86, but that is still an 86% increase of the original investment, and probably low, compared to where it could possibly be, 5 or 10 years from now.

By the way, if that peso was not invested to earn any interest, after inflation, it would only be worth 28 centavos, while the equity investment, after inflation, taxes, transaction fees and broker commissions, would still be worth 52 centavos.

Mutual funds are long-term investments
Mutual funds are long-term investments. While markets fluctuate downwards, they eventually go up – over time.

It is important to keep in mind that every investment involves a certain risk, and its return is proportionate to the level of risk of the investment: the lower the risk, the lower the return, the higher the risk, the higher the return.

Buy and Hold
When markets are down, don’t sell your investment. This is a mistake often made by first time investors. Instead, you should be investing additional money, as share prices are more affordable. You may be interested in noting that investors in the U.S. poured $ 4.3B net of new money into mutual funds in April of last year.

Peso-Cost Averaging
The best strategy for times like these is called Peso-Cost Averaging. It is a simple strategy which guarantees that you will buy less shares of a Prosperity Fund when they are expensive, and more shares when they’re cheap – always. And isn’t this precisely how you want to invest?

The strategy is simple: invest an equal amount of money, on a regular basis. For example, if you invest P10,000 today, and the price of the mutual fund shares is P1, you will receive 10,000 shares. If you invest the same amount, at the same time next month, and the price of the share is 90 centavos, you will have purchased 11,111 shares. The average price per share purchased would be 95 centavos.

If instead you had tried to time the market, and invest when the market was at its lowest, in the example above, you had a 50% chance of buying at the wrong time.

Remember, if the value of your investment has decreased, don’t sell it. Chances are that over the long-term it will probably increase. Mutual funds are long-term investments.

The graphs used in this document are not meant to forecast future returns of the Prosperity Funds, they were included to demonstrate the importance of long-term investing.

Important information about the Sun Life Prosperity Funds is contained in their simplified prospectuses.

For additional information, please see your Sun Life Financial registered Mutual Fund representative.