COLfinancial is now selling Mutual funds

Good news for us investors, our favorite Philippine online broker is now offering mutual funds.

Most people don't know what's a mutual fund and what it's used for.

To simplify things, mutual funds pool money in order to buy a basket of stocks. A manager chooses and buys stocks he believes to be most profitable. By investing in a mutual fund, you buy a little bit of all the stocks included in the basket.

Thanks to COL financial, you can now access a list of dozen mutual funds.

I own some mutual funds in my portfolio but there are pros and cons of it.

PRO:

- they are safer because they are more diversified
- they are supposed to be managed by successful portfolio manager

CONS:

- they charge a fee
- you don't have control of what stocks the fund holds
- badly managed funds costs more money to operate
- many studies shows that mutual funds don't outperform the financial market

As you can see, there are more cons than pros but it doesn't mean it's a bad investment. I particularly advise it for beginner investors.

My concerns are more with the fees they charge and how successful is the manager.

Fees range from 1.5 to 3 percents annually. Which means that every year, you must pay the fund 3% of your money which can greatly impact your profitability.

Many studies show that funds underperform compared to the stock market. Mostly because the fees they charge negatively affects the returns on the investment.

I'd advise you to invest in low fee type of funds. They are also called index funds. An index fund is not actively managed so the fund company will charge a lower fee.

The XALSIF is an index fund operated by BPI that invests in the same companies listed in the Philippine Stock Exchange index (PSEi). It's a great way to start investing.

The minimum investment is 5,000 pesos.