Mutual Funds 101

A mutual fund is an investment company that pools together money from different investors and invests it in various securities based on the investment objective of the fund.

When you invest in mutual funds, you purchase shares or units of your chosen funds. These are multiplied by the net asset value per share/unit (NAVPS/NAVPU) of your chosen fund to determine the total value of your investment. 

Mutual funds are a great option for beginners with limited capital. They not only give you access to the expertise of professional fund managers but also allow you to start investing with as little as ₱100.

To get started:

• Click here 
• Accomplish the Investor Suitability Assessment to determine your risk profile and investment experience
• Click Buy Now or Talk to an advisor

You can choose from 4 basic types of mutual funds with varying investment time horizons and levels of risk:

• Money market fund: short term, low risk
• Bond fund: short to medium term, low to moderate risk
• Balanced fund: medium to long term, moderate to high risk
• Equity fund: long term, high risk 

Your choice should align with your risk tolerance and financial goals. Before making a decision, ask yourself questions such as: 

• Do I want something that offers lower returns in exchange for more stability?
• Am I okay with more volatility in exchange for a higher earning potential?
• How many years am I willing to wait to potentially see returns?

Accomplishing the Investor Suitability Assessment will help you better in this decision making. 

Pro tip: In addition to diversifying across different types of funds, you can also switch funds as your goals evolve over time. If you need more guidance, please talk to your Sun Life Advisor. 

Certain mutual funds offer non-guaranteed dividends that you can either:

• Withdraw as cash
• Reinvest to purchase additional shares or units, potentially enhancing your future earnings

Please note that:  

• Dividend payments are not always assured
• The amount you receive can vary significantly based on:
  • The performance of the fund’s underlying investments
  • The total value of your investment in the fund 

Neither one is inherently better than the other. It all depends on personal factors such as:

• Risk tolerance
• Investment goals
• Capital
• Investing experience

For new investors, mutual funds present the following compelling advantages: 

• A quick and easy way to buy units or shares
• The ability to start investing with as little as ₱100
• Built-in diversification, which can help mitigate the risks normally associated with investing in individual stocks
• Access to professional fund management, which eliminates the need for investing experience, complex decision making, and constant hands-on management

Experienced investors, on the other hand, might consider individual stocks over mutual funds because they offer higher potential returns and greater control over one’s investments. 
 
Please note, however, that regardless of your investing experience, stock investing comes with certain challenges, including: 

• Higher risk due to increased volatility
• Higher capital requirement to achieve proper diversification 
• The need for constant monitoring and rebalancing of individual stock positions 
  

The main difference between mutual funds and unit investment trust funds (UITFs) lies in their structure and regulation.

Mutual funds are typically structured as corporations, managed by investment companies, and regulated by the Securities and Exchange Commission. When you invest in a mutual fund through a company like Sun Life Asset Management, you become a shareholder or unitholder of that fund.

UITFs, on the other hand, are trust products offered by banks and other trust entities regulated by the Bangko Sentral ng Pilipinas. When you invest in a UITF, you become a participant in the trust rather than a shareholder.

Despite these structural differences, both mutual funds and UITFs are pooled investment products that offer similar compelling benefits to beginner investors, including:

• A quick and easy way to buy units or shares

• Low minimum investment requirements 

• Built-in diversification as each fund invests in a variety of underlying securities ·

• Access to professional fund management, which eliminates the need for investing experience, complex decision making, and constant hands-on management.

Sun Life offers both mutual funds and UITFs.

You can easily withdraw from them anytime and receive the proceeds depending on the redemption settlement of the mutual fund. 

Pro tip: Only withdraw from your mutual funds when absolutely necessary or once you hit your target amount. Constant withdrawals will limit your investment’s earning potential.

If you're unsatisfied with the performance of your chosen funds, you have 5 options:

• Switch to a different fund
• Set a loss limit and cash out once it is hit
• Buy more shares/units
• Switch to SLIMTC UITF
• Cash out

Let’s take a closer look at each one:

• Switching to a different fund

Instead of immediately cashing out, you can consider putting your money in better-performing funds to potentially offset the loss over time.

• Setting a loss limit and cashing out once it is hit

There’s a chance that a fund that's not performing at optimal levels will eventually bounce back. This is why it may be a good idea to wait before cashing out. That said, it’s also important to know when to cut your losses. A good way to do that is to set a concrete loss limit (e.g., 5%, 10%, or 20%). Once your chosen funds hit your loss limit, it’s time to cash out or switch to a different fund.

• Buying more shares/units

When your chosen funds are not performing at optimal levels, they're essentially on sale. If you feel like they will eventually go up, then putting more money now is a great way to get more shares/units for cheap. Doing so puts you in a position to see higher returns once the funds recovers.

• Switching to SLIMTC UITF

Please click here for more details.

• Cashing out

If you feel like the underperforming funds will never bounce back, then cashing out is a good way to cut your losses.

Please note that before you make a decision, it’s best to first assess which option matches your financial goals with your Sun Life Advisor.