What is a Mutual Fund?

What exactly is a mutual fund? Many have heard about this but what exactly is it? I too had this question long ago so let me share what I learned.

A mutual fund, is a pool of funds from different investors. Investor X invest 100,000, investor Y invest 50,000, investor Z invest 5,000. This is combined and now we have a pool of funds otherwise called as the mutual fund.

With this pool of funds, these will be invested. (stock market, bonds, etc.)

Mutual fund investing are done through mutual fund companies and these mutual fund companies have money being invested as well. Individuals can invest in the mutual funds with 5000 Pesos as starting. (This is the usual opening of a mutual fund account.)

So for example, Company X has 1 million pesos being invested in the stock market, now you, a saver and an aspiring investor would like to join in, how, through the mutual fund. You now invest 5000 Pesos with Company X, Company X then will add your money to their 1 million Pesos. So it’s now 1 million and 5 thousand pesos being invested.

If Company X earns 20%, they earn 20% from their 1 million and you will get 20% from your 5000! That’s it!

Whatever they earn, you will earn too! The good thing about this is that you do not need to do anything, in the mutual fund company, there are tons of expert managing your money, so they will do all the complicated things, the result, this turn to passive income for you. In exchange, a little fee is applied when you invest in the mutual fund, this is around 2% to 3.5%. (e.g 5000 Pesos x 2%)

Sounds good? Remember, this is an investment so returns may vary, if the market does good, you will earn good, if market is not good, you will receive the same.

Scary? No, unless you have proper Financial Education.

You can learn more about this through the IMG-Wealth Academy and not only you will learn about mutual funds and investments, you will learn how to manage your money!

Series 1 is absolutely free! If you are in Cebu, you can catch Wealth Academy in 2nd floor, JY Square, Lahug. Every Wednesday and Saturday, 6:30PM.

If you are in Manila, you can catch this at 3rd Floor King's Court 1 Building, Pasong Tamo cor Dela Rosa St. Makati. Every Wednesday and Saturday, 6:30PM.

I hope I have simplified this for you and I hope this will help you in your investing!

Cheers!

Picture is not mine. All credit goes to http://www.topnews.in/files/AUM-MF-Industry.jpg.