Question:

I am one of the many readers of your books. I don’t regret of having bought your book since it gives me insight on how I can save for my future.

I am an ordinary employee working in a sugar factory in Negros Occidental. I wanted to start my saving in mutual fund but as I inquired from my bank, which is one of the biggest banks in the Philippines, they told me its a risky investment and its only good for big businessmen with big capital.

These had bothered me, as in your book an ordinary person can invest in a mutual fund for as low as P5000. This prompted me to ask help from you, what investment instrument requires a small starting capital?

Francisco Colayco:

Unfortunately, your Bank contact person does not even know that one of the companies affiliated with their bank has mutual funds and accept a minimum of P5,000 as an initial investment. Certainly, P5,000 can be a big amount for the ordinary income earner but definitely this is a small amount for the big businessman with big capital. Why should a mutual fund allow a minimum of P5,000 if mutual funds are only for big businessman?

Your contact person also does not understand mutual funds. While big businessmen invest in mutual funds, it is precisely one investment option that allows the ordinary income earner to be in the same level as the big businessman. The one share of the ordinary income earner is entitled to exactly the same benefits as the one share of the big businessman. The big businessman just owns more shares.

Mutual funds have risks as I have explained in my books. However, I believe that these risks can be lessened if you are ready to invest for a long period of time of say 3 to 5 years, at least. As I have just explained in my last article, mutual funds that are invested in equities will be affected by the swings in the stock market. However, note that mutual funds invest in a large number of company shares spread among a broad range of industries. As such, the risks are managed and the possibility of losing your entire principal investment is remote. Morever, because they are managed by full time professionals, they have the knowledge and the ability to buy and sell the shares to the full advantage of the investors. Their continuing goal is to maintain and increase the Net Asset Value (NAV) of the mutual funds so that the investors will enjoy higher valuation of their investments.

You just have to be able to stay “cool” during periods when the market is down. What is important is that you invest regularly like maybe P1000 (minimum allowed after your first investment) every month whether the market is up or down and if you can, invest more when the market is down.

What is the morale of your story? It was good that you read and educated yourself and not just relied on other people’s information. Many times, even people who claim they know can be wrong and only your own investigation can lead you to more information. After your investigation, you can make your own decision.