As we all know, the assets of equity and balanced mutual funds and UITFs are wholly or partly invested in stocks. So why not simply skip these vehicles altogether and invest directly in the stock market? Nowadays, the average Juan can easily purchase shares of stocks in the Philippine Stock Exchange (PSE) through online brokers, and their fees are considerably much lower than those of mutual funds and UITFs.
Still, I opt to forgo stocks and invest in mutual funds and UITFs instead, for one simple reason: stock investing requires much more of one’s time and attention. Aside from the crucial step of picking the right stocks, one has to keep abreast of the latest financial news, study stock price patterns, etc etc etc…I’m investing for the long run, and don’t have any inclination to do all these and be an active trader.
Many moons ago, my father happened to buy shares of Pilipino Telephone Corp (Piltel) and kinda just forgot about it. It would’ve been great if this story ended like the movie Blast from the Past, where they discover stock certificates of AT&T, IBM, and Polaroid in some old boxes, become instant millionaires, and live happily — and wealthily — ever after. Unfortunately, Piltel went in the red, was bought out by PLDT, and got ultimately delisted from the PSE (ouch). This served as a cautionary tale that with stocks, one can definitely not just “set and forget”.
Mutual funds and UITFs aren’t completely set-and-forget, but at least their shares and units already represent diversified portfolios, and won’t turn completely worthless when one company, out of many, goes out of business. (One also hopes that the fund managers have since unloaded stocks of said company way before such a turn for the worst.) Also, one generally needs a large amount of capital to attain a well-allocated portfolio in stocks. For as low as PHP 1, 000, one can already invest in a mutual fund with a wide array of assets. In the stock market, the same amount of money will only get you less than ten shares of Jollibee.
“But mutual fund and UITF fees are so high! Stock brokers charge so much lower commission rates!” Well, that’s the price of convenience. We can’t have our cake and eat it too.
Perhaps my risk appetite and interest level will change in the future and I buy some individual stocks, but until then, I’m content with mutual funds and UITFs.