A closer look at Philippine mutual funds, part 2By Randell Tiongson on September 14th, 2010
The big question in the minds of many: ‘will the local market continue with its good run in the months to come?’ Some sectors are claiming that we are headed into a ‘bull’ territory and see the market continue to gain further; while others are cautioning that the market is in a ‘bubble’ and it will correct itself, if not crash soon. Analysts using fundamental and technical techniques can argue hard for both ways. I’ve spoken to someone who is dead serious that the market is in for an imminent crash because them Elliott Wave Theory says so. On the other hand, you can read that the markets will continue to ride to growth territories because the economy is growing.
Here’s my take on all these: past performance is never an indication of future performance! While historical data can be helpful in determining which investment route to take, I wish to caution the readers not to rely too much on historical data. Many factors can affect future performance like taking too aggressive or too conservative positions in their investment policies. The argument by many advocates of index investing is that they can trust the index better than active managers. Experience in many countries supports such an argument but clearly, the same argument is not the case in the Philippines – another “only in da pilipins” claim we can make.
When investing, regardless of what instrument you chose, always invest according to your investment objective, risk tolerance and time frame. If you are still unsure of the 3 factors I mentioned, take time to find out first before letting go of your hard-earned money. Further, when you do invest in instruments such as mutual funds or UITF (available in Banks), pay particular attention to the fee structure; some funds charge more than the others.
Oh, one more thing (last na!) – whenever you are investing, never invest in something you don’t understand. Take time to learn about the investment which you are planning to take and don’t worry, investing need not be rocket science and try to practice being prudent in as much as you can.
A simple man believes anything, but a prudent man gives thought to his steps. – Proverbs 14:15, NIV.