"You could double your money by investing P5,000 a month for five years in mutual fund."
Sounds like a scam or hyped-selling? For some, it may.
But this is a real investment in the Save and Learn Equity Fund (SALEF) of First Metro Asset Management, Inc.
In mutual funds, there are no guaranteed returns. But historical figures from 2008 to 2012 suggest you could actually double your money, not just by lump-sum investing, but also by peso cost averaging.
(Note: lump-sum investing is not advisable for a fund that invests in volatile markets like equity funds. Please understand the risk and your risk appetite before investing.)
If you redeemed all your shares today, you would have a whooping 102% return of investment!
How? Read on.
I back-tested the figures using the FAMI SALEF chart of Bloomberg.com. I could not find another source of the daily Net Asset Value Per Share of FAMI SALEF from 2008 aside from Bloomberg.
Peso Cost Averaging strategy entails investing a fixed amount at regular interval over the long-term.
For this study, I chose P5,000 as the fixed amount. Monthly as the schedule (specifically the last or near the last day of every month). Investing horizon is from January 2008 to December 2012. Hint: the global financial crisis hit the market in 2008.
The next image shows the investing date and shares bought. This computation already took out the 2% sales load of FAMI SALEF so as to give a more accurate picture of the real world. Again, the data are from
Bloomberg.
Total Investment: P300,000
Total Shares Bought: 122,347 shares
NAVPS (as of Jan. 18, 2013): 4.9674
Total Account Value (as of Jan. 18, 2013): P607,747.13
There is still a possibility that the NAVPS will go back to P2 or even P1. Nobody knows.
Just a reminder, the money you invest is your extra money or money you won't need even when an emergency arises. You do not want to redeem you investments when the market is down as you will probably incur losses.
P.S.: This blog post is not a recommendation of which mutual fund company to invest in. I will also try to do this with Philequity Fund next time.
P.P.S.: Historical gain is not a guarantee of future returns.
P.P.P.S.
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Nice! Hopefully more Filipinos will be encouraged to invest. Keep up the great work!
ReplyDeleteI'd live to hear your take on Index Funds offered by BPI and PhilEquity :) I enoyed reading your articles
ReplyDeleteHistorically, Philequity Fund, Inc. has been consistent in giving relatively better returns in the long-run compared to its competitors. I am invested in Philequity since 2010, and I am not disappointed with their return when I compare it with other equity funds.
DeleteAs for the (BPI) Philippine Stock Index Fund, the fund performance report from BPI shows that the fund is slightly below its benchmark - the PSEi and the PSEi (Total Returns). PSEi (Total Returns) means the gains from dividends are included.
For more info on Phil Stock Index Fund, see http://www.alfmmutualfunds.com/upload/files/mutual-funds/alfm-philippine-stock-index-fund-fpr/Philippine%20Stock%20Index%20Fund%20March%202013%20-%20edited.pdf
cool article !!! Free Commodity tips
ReplyDelete