On mutual funds

Churchill Aguilar

I WAS recently invited by a friend to join him as financial adviser and become one of the unit managers of Insular Life. Since I have not had much engagements lately, I took the licensure exam from the Insurance Commission thinking it would not hurt to have an added income, and I passed.

As I began to learn our products I could not help but appreciate what mutual funds in general are offering the public. I say it is by far the better way for ordinary people to save, invest and get protected at the same time.

You see, most of us don’t have the habit of saving for rainy days. We are so used to borrowing money from families and friends during emergencies. Only a small percentage of the population have bank accounts and very few know how to invest on stocks. Most of the time we just set aside whatever extra income we have, if and when we have extra. That is why when misfortune such as sickness or accident gets in our way we easily get buried into debts and it would take us years to get out of it.

For those with the habit of saving money, some buy pieces of gold jewelry since they are as good as cash while most of us save through banks. We think banks are safer because we can just withdraw our money if and when we need them. As to the mode of bank saving, some of us put our money on time deposits with the goal of making it grow at a bigger interest rate while some on ATM savings so that we can have access to it “24/7.”

While those things are true and good in themselves, mutual funds offer quite a range of mode of saving that may just be better than traditional banks.

Mutual funds, by the way, are those that are offered by insurance companies. It is called mutual fund since we are not the one directly trading our money on stocks exchange. Rather, we have fund managers who do it for us. They allow us to choose how we would like our money to grow depending on our risk appetite and our needs. You see, we have conservative savers and we also have risk takers.

For our conservative savers who are afraid to risk their money on stocks, we can put our money on fixed income category where our fund managers use it to purchase government bonds with fixed monthly interest. In this category, our money earns from the interest and interestingly these interests are higher than what the banks offer in their time deposits.

For those with highisk appetite, they can put their money on equity funds where the fund managers use them to buy shares of stocks from the top 30 companies such as San Miguel Corp. or Jollibee Corp. While there is risk involved, it is highly improbable that these companies would get bankrupt anytime soon. In this category, our money has greater chance of growing faster over a period of time.

There are other categories of the mutual funds that involve higher risks with possible higher rewards as well but I would  not personally recommend them. To top this, mutual funds also provide life insurance for policy owners ultimately providing us with protection, savings, and investment rolled into one.

Our money in the banks are more liquid of course, but I think we only need about three or four months of our operational expenses to be liquid. As with the rest of our resources, it is always better to invest them so it will grow.