My investing journey from being a mutual fund investor to exchange traded fund fanatic fanatic is not a wild one but a slow burn that takes years of conversion.
I started investing way back 2010. I am a fresh graduate, unemployed pero may kaunting ipon. That was the time I met IMG (International Marketing Group).
I attended their Wealth Academy training Series and got hocked up with an idea of building wealth through investing in mutual funds.
Let me explain what mutual funds is.
To put it simply, Mutual fund is an investment vehicle that invests your money for you. It’s pooled fund from many different investors and there’s a fund manager who actively manages the fund.
The fund manager invests the money to either bond, stock market or a combination of both. And MF was distributed by a Certified Investment Solicitor (CIS).
Alright! That’s it. simple diba?
Exchange Traded Fund
Now, let me explain the ETF or the exchange-traded fund.
Again, to put it simply, ETF is another type of investment vehicle that invests your money for you. Unlike mutual funds who have a fund manager that actively manage the funds, ETF is passively managed.
Passively manage means less discretion ng mga portfolio managers.
ETF involves a collection of securities. Often tracks and mimics the performance of an underlying index or a basket of securities.
ETF just like any stocks or equities, it is listed and traded in the exchange. In our case here in the Philippines, the Philippine Stock Exchange. You buy ETF the same way you buy stocks. You need to open a stock trading account first.
MF or ETF
One major difference between MF and ETF is the way you transact. In MF the transactions are only done once a day, at the closing price. While in ETF, you can transact freely throughout the trading day.
One reason that hyped me in MF is those sweet words they say that actively managed funds are superior compare to ETF in terms of performance.
Because to start with, the goal of every fund manager is to beat the index, right?
What makes me start investing in ETF is totally different.
It’s all about security. I started trading in the PSE for speculation and growth. For my capital preservation strategy, I chose ETF.
I don’t know, pero feeling ko lang na mas okay ang investment ko sa ETF, especially the one we have here in the Philippines which mimics the performance of PSEI.
ETF is very transparent. Alamin mo lang yung composition ng PSEI. Yun na Yun! ETF doesn’t hide their holdings. Because again, the ETF task is to mimic an underlying index.
The companies included in PSEI are not just average companies. They’re that best and the biggest.
The type of companies na kahit mawala ka na sa mundo dito parin sila. They’re diversified over different industries, sectors, and markets.
Journey From Mutual Fund to Exchange Traded Fund
So, way back in 2013. When the black swan (a combination of QE tapering in the US Fed and a Yolanda calamity) hit the market, I felt that the market paradigm was slowly shifting.
In the past few years, actively managed funds did not really beat the index. And aside from high fees, MF is not required to be transparent on their holdings. May trust issues ako sa mga ganyan.
2014 I slowly shift the structure of my investment portfolio. I started trading in PSE and start investing in the ETF.
If you still love investing in MF, I personally prefer the index fund type.
What about you? what’s your investing journey? Share it in the comment section.
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