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Are you fond of funds? |

The Budgetarian

Are you fond of funds?

FQ (Financial Quotient) - Rose Fres Fausto -
Are you fond of funds?
So why settle for funds and not just go straight? Why pay management fees if you can directly buy the instruments?

There are two ways to invest in paper assets. 

1. By purchasing the financial instrument directly – e.g buying bonds, stocks, and other instruments

2. By purchasing funds – i.e. buying shares in the fund companies that invest in these financial instruments.

To the regular Juan, direct purchase is more salient. He can say, “I am a part owner of Company A.” after he buys shares of Company A, or “Company A owes me.” after he buys bonds of Company A. 

So why settle for funds and not just go straight? Why pay management fees if you can directly buy the instruments?

What is a fund?

A fund is a pool of money that is allocated for a specific purpose. It is invested and professionally managed in order to generate returns for its investors.

Let’s now answer the earlier question why settle for funds instead of directly investing by enumerating the reasons.

Advantages of fund investing

1. Lower initial investment. With a very low amount, one can already start investing in funds. For some funds, it is P1,000 or even lower. 

2. Diversification. This could be the biggest benefit because for a small sum of money, you can already spread your investment in various assets, compared to direct investing where you have to purchase each and every instrument with several minimum investment amounts that would not allow you diversification with just a thousand pesos or so. 

3. Professional management. Even if everyone needs to invest in paper assets, not everyone is equipped to pick the right instruments for their needs. Think of it as relying on your doctors and lawyers to give you the right prescription for your medical and legal concerns.

4. Less time and effort. Investing in professionally managed funds eliminates the need for you to allocate resources to research and analyze individual assets in managing your portfolio. 

Conversation with the head of a Retail Accounts Trust Department

A few days ago, I had the chance to have a conversation with Pat Alvarillo, the head of the Retail Accounts Department of the Trust and Investments Group of BDO. In our conversation, she debunks some misconceptions about investing, namely:

1. Investing is only for the rich.

2. Investing is for pros and is hard.

3. Investing is not accessible. 

In the Philippines, you can invest in two general categories of funds: Mutual Funds and UITFs (Unit Investment Trust Funds). She discussed the latter which they offer in their bank. To date, they offer a variety of UITFs that investors can choose from.

1. Money market fund – a low risk fund that is primarily invested in short-term, fixed income securities.

2. Bond fund – a medium risk fund that is primarily invested in bonds or instruments of indebtedness. 

3. Multi-asset funds – a blended fund that has bonds and stocks.

4. Equity fund – a fund that is primarily invested in stocks or equity.

5. US equity index feeder fund - a fund that invests in a US equity fund that is invested in US stocks that is part of the S&P500.

The above choices are denominated in Philippine pesos or US dollars. Further discussions on the above plus more are available in our next podcast episode. 

The reality is that we all need to invest in order to live a financially healthy life and not be a burden to others. Since not everyone is equipped to do their own asset picking, funds should be our financial best friends. No matter what your profession is, you can still benefit from the fruits of proper investing because you can access these funds. So, shouldn’t you be fond of funds?


1. Join us on FQ Mom Youtube Channel for an insightful discussion on UITF (Unit Investment Trust Funds) with Ms. Pat Alvarillo of BDO Unibank. 

2. If you want to know where you are in your FQ journey. Click here.

3. If you want to know your FQ, buy our books. Click here.

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