Mutual funds for P1,000 a month
By Doris Dumlao
Philippine Daily Inquirer
First Posted 18:28:00 08/17/2008
Filed Under: Economy, Business & Finance,Personal Finance
INVESTING is like getting into sports; the earlier in life you start doing it, the better your chances of winning the gold. And it, too, requires a lot of discipline and patience.
But a typical salaried employee--even one without a knack for entrepreneurship or any inkling of how the stock, bond or money markets work--can now become an investor much faster than he can ever be an athlete. After all, there are so many investment options these days aside from putting up one's own business or buying physical assets such as real estate or livestock.
Philam Asset Management Inc. (Pami), the local mutual fund unit of global financial conglomerate AIG, recently launched a personal investment program (PIP) that allows retail investors to participate in its mutual funds for as low as P1,000 a month.
It is intended primarily for companies with employees who may want to set aside funds for their future through an affordable savings scheme.
"We established PIP because we want more people to avail of the benefits of mutual funds. We're primarily targeting employees. Pami is going through the extra mile by pitching this to company executives, for them to institutionalize the PIP within their organization," Pami executive vice president Gina Goco-Morales says.
A mutual fund, invented by financial wizards for people who have neither the time nor expertise to manage their own funds, pools money and allows the investors to benefit from professional fund management and portfolio diversification.
An investor with a small contribution in the fund gets the same rate of return as the investor with large equity. Thus, even a call center agent fresh out of college can start building up wealth by setting aside a portion of monthly earnings--simply by skipping some gourmet coffee or a night of club-hopping with friends.
Less intimidating
The PIP intends to make investing less intimidating, thereby encouraging people to start investing no matter how small the amount.
Small investors can take advantage of the scheme where they can make monthly investments according to their budget. Pami hopes to distribute mutual funds in partnership with the human resources (HR) divisions of various companies.
For employees of company-endorsed PIP, the minimum initial investment is P1,000, and the required minimum participants in a company is 10 employees. For other individuals, minimum initial investment is P10,000. For both investor types, minimum amount for succeeding investments is only 1,000 monthly over a specified term, whether 12, 18, 24 months or more.
"The objective is to make companies realize that they can offer PIP as an optional savings scheme through salary deduction. It's additional work for the human resources and payroll departments, but it will be worth it. Employees will see the endorsement of PIP by their companies as one of their non-cash benefits--their company's way of showing it cares by enabling them to prepare for their future," Morales says.
Morales observes that a lot of benefits offered by companies to employees, such as salary loans, usually encourage spending instead of saving.
"What we're saying is these could actually go hand in hand. When you encourage spending you should also offer benefits that encourage savings or having an investment," she says. "We prefer an endorsement from the HR but if HR will not endorse us, investors can also do it on their own."
Investing made easy
Investing is made easy as this is done via salary deduction or issuance of post-dated checks.
"Similarly, Pami's PIP program becomes an outlet for companies to provide a provident or retirement fund for the staff. Employee loyalty is consequently improved and this can make the company more attractive to top talents looking for stable jobs," adds Pami senior AVP Ricky So.
Pami is one of the first asset management companies in the country to manage a family of funds and is a major contributor to the development of the Philippine mutual fund industry. It has the biggest market share in the industry in terms of shareholder accounts, both individual and institutional.
"With PIP, we are broadening our customer base--providing these often-reluctant investors an easy way to build their future millions. We are, in effect, extending to small investors the advantages of diversification, liquidity and financial expertise that only organizations with extensive financial muscle like Pami can provide," Morales says.
The program actually evolved from an internal investment scheme offered by Pami to its own employees years ago.
Philamlife president Jose Cuisia Jr. himself was among the pioneering investors, contributing P5,000 out of his monthly salary to support the program. During client calls, Pami officials found out there's demand for such a retail investment program, inspiring the rollout of the PIP to the public.
PIP is akin to acquiring shares in a mutual fund on an installment basis, like using financing to purchase a car or a household appliance.
The investor has an array of mutual funds managed by Pami to choose from, depending on individual risk appetite. The company currently administers, distributes and provides investment advisory to seven mutual funds: the Philam Bond Fund, Philam Dollar Bond Fund, Philam Managed In come Fund, Philam Fund, Philam Strategic Growth Fund, GSIS Mutual Fund and the AIG Global Bond Fund Philippines.
The conservative investor will usually go for funds which invest only in fixed income instruments while the aggressive will put his money in equity-based funds which provide prospects of higher yields over a long-term horizon.
The moderate investor who's neither conservative nor aggressive can stick to balanced funds, which are invested in a combination of fixed income and equity instruments.
"The reason why we went into PIP is that this product is actually indifferent to market volatility. It's long-term in perspective, so if you come in on a monthly basis, you're not too sensitive to changes in the market," Morales explains.
"Because remember, you're acquiring shares. So it's good for the investor ... You can never get the timing right when you invest, but if you're doing it on a monthly basis, you're indifferent to how the market moves, because your objective is really to reach a certain amount in terms of investment over a certain period of time," she says.
Cognizant of the market's demand for better yield, Pami allows switching from one fund to another.
"What we're really pushing for is diversification, maybe have a certain bucket in fixed income, a certain basket in equity-based funds and then a certain portion in the peso and dollar funds," Morales says.
Thinking long-term
Like an athlete who needs a lot of time to train before bringing home the gold, Pami aims to educate the Filipino investor into thinking long term instead of going for short-term gains.
"Because of the preeminence of time deposit and money market placements, a lot of them are still into this guaranteed concept, so having to educate them toward long-term investment is actually a challenge for us," Morales says.
"But we have decided to take on the challenge by providing them an education on how to invest in our funds both on fixed income and equity-based funds. We're also encouraging (conservative) investors to perhaps take a little bit more risk by investing in the balanced funds."
Fortunately, more Filipino investors are now turning from savers into investors, learning to accept more risks in exchange for the possibility of making higher returns--and by investing in pooled funds, letting the professionals worry about making their money grow.
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