In my previous post, I wrote about how mutual funds in the Philippines have such expensive fees. The Motley Fool admonishes that sales loads are “one of the things that a Fool should never pay when purchasing a mutual fund,” but one doesn’t have much of a choice in the Philippines, where almost all mutual funds are actively managed and charge entry and exit fees.
There is certainly a dearth of low-cost, no-load mutual funds in the country, unlike in the US. The only no-load Philippine mutual funds that I know of are the ALFM Mutual Funds, which are managed by BPI Asset Management, a subsidiary of Bank of the Philippine Islands (BPI).
One of their mutual funds is the Philippine Stock Index Fund (PSIF), which is an index fund that tracks the Philippine Stock Exchange Composite Index (PSEi). In the US, many financial experts recommend index funds over actively-managed equity funds because index funds consistently outperform managed funds year after year. One of the reasons for this is the former’s low fees. Take the famed Vanguard 500 Index Fund (VFINX), a no-load mutual fund that tracks the Standard & Poor’s 500 Index (S&P 500) — its annual management fee, or expense ratio, is only 0.17%.
PSIF’s annual fee of 1.5% pales in comparison, but the lack of sales load makes it far more attractive than the only other stock index fund in the country, the Philequity PSE Index Fund (PPSE), whose sales load are as high as 5% (whaaat?).
Being the lesser of two evils, I chose PSIF as my index fund. The fact that it was indeed the top-performing peso equity fund in 2012 doesn’t hurt, either.
Like investing in BPI UITFs, which I detailed in my previous post, it’s quite easy to invest in ALFM Mutual Funds if you already have a BPI deposit account enrolled in their online banking facility, BPI Express Online. Just follow the same procedure, but go to Investments > Apply Now > Mutual Funds instead. PSIF is restricted only to “aggressive” investors, so choose “D” as much as possible on their risk profile questionnaire.
Now that I’ve invested in an index fund, I look forward to see how it will fare this year vis–à–vis Philequity Fund (PEFI), my managed equity fund. Also, here’s hoping Philippine mutual fund companies will follow the lead of ALFM Mutual Funds and waive their dratted sales loads.