Personal Finance

It’s PBA championship season once again (granted, it happens three times a year, but we digress), and two teams that we don’t usually see at this stage are battling for the crown. Barangay Ginebra San Miguel, arguably the country’s most popular team, just made its first trip to the finals since 2013. The team hopes to capture its first championship since 2008. Meanwhile, the Meralco Bolts reached the finals for the first time since its formation, way back in 2010.

As of press time, Ginebra is one win away from being declared champions. If you bet on Ginebra, you must be excited that victory is close. If you bet on Meralco, you must be praying fervently right now. GoBear bet on neither, but he might end up winning regardless who ends up with the championship. The thing is, this bear has money on both sides of the fight, via an investment vehicle called a mutual fund.

What’s your problem with me betting on Ginebra or Meralco, though?

Of course, it’s fun to bet. But do you know what happened since Ginebra last won a championship? We’ve changed presidents twice. About 12 million Filipinos were added to the population. The global economy has gotten in and out of a financial crisis. And what happened to the money you spent on betting that Ginebra will win in the finals in the three other chances (out of 19 possible tournaments) it had since? Well, let’s assume that you bet P5,000 on Ginebra every chance they reach the finals. You win P5,000 more when Ginebra wins, you lose the money otherwise. Meanwhile, GoBear shelled out P5,000 just once on a mutual fund during the last time Ginebra were champs. What happens to our money? Well, there’s this:


We haven’t even considered the gains GoBear might actually have when he also put in P5,000 in the mutual fund whenever Ginebra reaches the finals.

What is this mutual fund sorcery?

A mutual fund is a vehicle through which investment companies collect money from folks like you and me, combine them into a fund, and invest the money in various assets, like bonds, stocks, and more. In the Philippines, there are 56 mutual funds currently in operation, classified into four different types: money market, bond, equity, and balanced.

A money market fund is invested mainly in short-term securities such as time deposits and close-to-maturity bonds. A bond fund is invested in fixed income securities such as government-issued and corporate bonds. In the case of the equity fund, most of the investments are in stocks that trade in the Philippine Stock Exchange. A balanced fund contains a mix of investments in bonds and stocks; this mix fluctuates depending on how the economy fares. This fund bulks up on stock assets when the stock market is doing good, and shifts to more bond-related investments when the economy is bad.

Fun fact: When GoBear said earlier that we have money on both sides of the fight, we mean that the mutual funds we invested in can contain investments in bonds and stocks owned by Meralco and Ginebra maker San Miguel Corp., two large companies that a lot of mutual funds are invested in.

As investments go, the ones that carry the least risk are also usually the ones with the least potential for growth. A money market mutual fund contains the least risk and, therefore, the lowest growth opportunities. If you prefer high-risk, high-reward action, you may opt to go with equity mutual funds. But whatever your approach to risk is, betting on mutual funds is better than betting on basketball teams.

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