Everyone who is about to invest always would want to know how much they could expect to earn in return for entrusting their money. Whether it’s investing in real estate, business or investment fund, it’s the question that is first and foremost in our minds.
In this article, I’m going to discuss just exactly how much you can possibly earn from mutual funds that are offered in the Philippines. If you haven’t already, please consider checking these articles for brief overview.
Article table of contents
Mutual fund earnings
The earnings from mutual funds depend on so many factors.
If you’ve read the articles above, you would understand that your potential gain are subject to the following:
- Fees and charges
- Non-guaranteed returns
The fees and charges obviously negatively impact your investment. The higher they are, the lower would be what you could possibly receive.
In this article, I’m going to show the effect of 1.) sales load, which is taken off every time that you put money in, 2.) the management fee that goes to pay the operation and management of the fund, and 3.) the exit fee. If you’re interested, you may read how you can avoid sales load.
And lastly, earnings are also not guaranteed. They’re not like savings account, time deposit, or LTNCD (long term negotiable certificate of deposit) where interest is fixed and predictable.
In short, there’s no way to tell how much return on investment (ROI) you’re going to get. This is because gains (or in some cases losses) usually depend on the kind of mutual fund that you get.
The list below is roughly arranged from high to low returns, which also reflects their risks. The higher the return, the higher the risk.
The effect of mutual fund sales load on earnings
If you want to know how much can earn in mutual funds, the first thing that you need to be concerned about is the sales load.
Almost all mutual funds charge sales load. It is a fee that you either pay when you put money in or redeem your investment.
When it is paid upon deposit, it is called front-end fee. If it is paid when you want to get your money back, then it is called back-end fee. This can range between 1% to 5.6%.
For a more complete discussion, read this list of fees and how to avoid sales load.
Below, you see a sample comparison between a fund that charges no sales load and one that charges 1%, 3% or 5% sales load. The table has the following assumptions:
- Compound interest of 10% yearly.
- Initial ₱10,000 and monthly ₱1,000 investment.
- Time horizon is 30 years.
| Year | Deposit | Zero fee | 1% | 3% | 5% |
|---|---|---|---|---|---|
| 1 | 22,000 | 23,670 | 23,434 | 22,960 | 22,487 |
| 2 | 34,000 | 38,767 | 38,380 | 37,604 | 36,829 |
| 3 | 46,000 | 55,440 | 54,886 | 53,777 | 52,668 |
| 4 | 58,000 | 73,853 | 73,114 | 71,637 | 70,160 |
| 5 | 70,000 | 94,187 | 93,246 | 91,362 | 89,478 |
| 10 | 130,000 | 232,489 | 230,165 | 225,515 | 220,865 |
| 15 | 190,000 | 459,697 | 455,100 | 445,906 | 436,712 |
| 20 | 250,000 | 832,972 | 824,642 | 807,983 | 791,323 |
| 25 | 310,000 | 1,446,237 | 1,431,775 | 1,402,850 | 1,373,926 |
| 30 | 370,000 | 2,453,819 | 2,429,281 | 2,380,205 | 2,331,128 |
As you can see, the higher the fee the lower that you get in the end.
The effect of management fee on mutual fund earnings
Another fee that needs to be considered is the management fee.
You don’t have to pay this fee out of pocket the same way as the sales load. Instead, this is reflected on the net asset value per share and it generally a percentage of the entire worth of the fund.
See below the list of management fees. You may observe that it ranges from 0.25% to as high as 3%.
| Name | Type | Management fee |
|---|---|---|
| ATRAM Dynamic Allocation Fund, Inc. | Balanced | 1.750% |
| ATRAM Philippine Balanced Fund, Inc. | Balanced | 1.750% |
| Bahay Pari Solidaritas Fund, Inc. | Balanced | 2.000% |
| Cocolife Dollar Fund Builder, Inc. | Balanced | ? |
| First Metro Save and Learn Balanced Fund Inc. |
Balanced | 1.875% |
| Grepalife Balanced Fund Corporation | Balanced | 1.825% |
| NCM Mutual Fund of the Phils., Inc. | Balanced | 1.800% |
| PAMI Asia Balanced Fund, Inc. | Balanced | 2.000% |
| PAMI Horizon Fund, Inc. | Balanced | 1.800% |
| Philam Fund, Inc. | Balanced | 2.000% |
| Sun Life of Canada Prosperity Balanced Fund, Inc. |
Balanced | 2.000% |
| Sun Life Prosperity Achiever Fund 2028, Inc. |
Balanced | undefined |
| Sun Life Prosperity Achiever Fund 2038, Inc. |
Balanced | undefined |
| Sun Life Prosperity Achiever Fund 2048, Inc. |
Balanced | undefined |
| Sun Life Prosperity Dollar Advantage Fund, Inc. |
Balanced | 1.500% |
| Sun Life Prosperity Dollar Wellspring Fund, Inc. |
Balanced | 1.500% |
| Sun Life Prosperity Dynamic Fund, Inc. | Balanced | 2.000% |
| ALFM Dollar Bond Fund, Inc. | Bond | 1.250% |
| ALFM Euro Bond Fund, Inc. | Bond | 0.750% |
| ALFM Peso Bond Fund, Inc. | Bond | 1.000% |
| ATRAM Corporate Bond Fund, Inc. | Bond | 1.200% |
| ATRAM Total Return Dollar Bond Fund, Inc. | Bond | 1.000% |
| Cocolife Fixed Income Fund, Inc. | Bond | ? |
| Ekklesia Mutual Fund Inc. | Bond | 0.875% |
| First Metro Save and Learn Dollar Bond Fund, Inc. |
Bond | 1.750% |
| First Metro Save and Learn Fixed Income Fund,Inc. |
Bond | 1.750% |
| Grepalife Dollar Bond Fund Corp. | Bond | ? |
| Grepalife Fixed Income Fund Corp. | Bond | ? |
| PAMI Global Bond Fund, Inc | Bond | 2.000% |
| Philam Bond Fund, Inc. | Bond | 1.500% |
| Philam Dollar Bond Fund, Inc. | Bond | 1.500% |
| Philequity Dollar Income Fund Inc. | Bond | 1.500% |
| Philequity Peso Bond Fund, Inc. | Bond | 1.500% |
| Soldivo Bond Fund, Inc. | Bond | 1.500% |
| Sun Life of Canada Prosperity Bond Fund, Inc. |
Bond | 1.000% |
| Sun Life Prosperity Dollar Abundance Fund, Inc. |
Bond | 1.500% |
| Sun Life Prosperity GS Fund, Inc. | Bond | 1.000% |
| ALFM Growth Fund, Inc. | Equities | 2.000% |
| ATRAM Alpha Opportunity Fund, Inc. | Equities | 2.000% |
| ATRAM AsiaPlus Equity Fund, Inc. | Equities | 0.500% |
| ATRAM Philippine Equity Opportunity Fund, Inc. |
Equities | 2.000% |
| Climbs Share Capital Equity Investment Fund Corp. |
Equities | n/a |
| First Metro Consumer Fund on MSCI Phils. Inc. |
Equities | 1.750% |
| First Metro Save and Learn Equity Fund,Inc. |
Equities | 1.875% |
| MBG Equity Investment Fund, Inc. | Equities | 2.000% |
| One Wealthy Nation Fund, Inc. | Equities | 1.875% |
| Philam Strategic Growth Fund, Inc. | Equities | 2.000% |
| Philequity Dividend Yield Fund, Inc. | Equities | 3.000% |
| Philequity Fund, Inc. | Equities | 1.000% |
| Soldivo Strategic Growth Fund, Inc. | Equities | 2.250% |
| Sun Life Prosperity Philippine Equity Fund, Inc. |
Equities | 2.000% |
| Sun Life Prosperity World Voyager Fund, Inc. |
Equities | 1.750% |
| United Fund, Inc. | Equities | n/a |
| PAMI Equity Index Fund, Inc. | Index | 1.500% |
| Philequity MSCI Philippine Index Fund, Inc. |
Index | 3.000% |
| Philequity PSE Index Fund Inc. | Index | 1.000% |
| Philippine Stock Index Fund Corp. | Index | 1.000% |
| Sun Life Prosperity Philippine Stock Index Fund, Inc. |
Index | 1.000% |
| ALFM Money Market Fund, Inc. | Money market | 0.500% |
| First Metro Save and Learn Money Market Fund, Inc. |
Money market | 0.500% |
| Philam Managed Income Fund, Inc. | Money market | ? |
| Sun Life Prosperity Dollar Starter Fund, Inc. |
Money market | 0.250% |
| Sun Life Prosperity Money Market Fund, Inc. |
Money market | 0.250% |
So I’ve created a comparison on the effect of the management fee. Just like what I did with the table on sales load, it has the following assumptions.
- Compound interest of 10%.
- Sales load of 2%.
- Initial ₱10,000 and monthly ₱1,000 investment.
- Time horizon is 30 years.
| Year | Deposit | Zero-fee | 1% | 2% | 3% |
|---|---|---|---|---|---|
| 1 | 22,000 | 23,670 | 22,965 | 22,733 | 22,501 |
| 2 | 34,000 | 38,767 | 37,301 | 36,675 | 36,053 |
| 3 | 46,000 | 55,440 | 52,914 | 51,704 | 50,513 |
| 4 | 58,000 | 73,853 | 69,916 | 67,905 | 65,942 |
| 5 | 70,000 | 94,187 | 88,431 | 85,370 | 82,404 |
| 10 | 130,000 | 232,489 | 208,861 | 195,384 | 182,815 |
| 15 | 190,000 | 459,697 | 393,310 | 355,538 | 321,684 |
| 20 | 250,000 | 832,972 | 675,807 | 588,687 | 513,740 |
| 25 | 310,000 | 1,446,237 | 1,108,473 | 928,099 | 779,352 |
| 30 | 370,000 | 2,453,819 | 1,771,136 | 1,422,205 | 1,146,695 |
Looking at the table, it’s obvious that going for the lowest management fee is the right choice.
The effect of exit fee on mutual fund earnings
Another fee that you have to be careful too would be the exit fee.
It is assessed starting from the day that you put your money in even if it’s your additional investment or top-up.
There’s really nothing special that you need to do. So you can avoid paying the exit fee, just choose the fund either no holding period, pick a fund with the shortest holding period or withdraw your money after the holding period.
| Name | Type | Exit fee | Holding |
|---|---|---|---|
| ATRAM Dynamic Allocation Fund, Inc. | Balanced | 1.12% | 90 days |
| ATRAM Philippine Balanced Fund, Inc. | Balanced | 1.12% | 90 days |
| Bahay Pari Solidaritas Fund, Inc. | Balanced | 1.00% | 6 months |
| Cocolife Dollar Fund Builder, Inc. | Balanced | 1.50% | 1 year |
| First Metro Save and Learn Balanced Fund Inc. |
Balanced | 1.00% | 6 months |
| Grepalife Balanced Fund Corporation | Balanced | 2.00% | 1 year |
| NCM Mutual Fund of the Phils., Inc. | Balanced | 1.00% | 6 months |
| PAMI Asia Balanced Fund, Inc. | Balanced | 1.00% | 6 months |
| PAMI Horizon Fund, Inc. | Balanced | 1% | 6 months |
| Philam Fund, Inc. | Balanced | 1.00% | 6 months |
| Sun Life of Canada Prosperity Balanced Fund, Inc. |
Balanced | None | None |
| Sun Life Prosperity Achiever Fund 2028, Inc. |
Balanced | 5% | 5 years |
| Sun Life Prosperity Achiever Fund 2038, Inc. |
Balanced | 5% | 5 years |
| Sun Life Prosperity Achiever Fund 2048, Inc. |
Balanced | 5% | 5 years |
| Sun Life Prosperity Dollar Advantage Fund, Inc. |
Balanced | None | None |
| Sun Life Prosperity Dollar Wellspring Fund, Inc. |
Balanced | 1% | 180 days |
| Sun Life Prosperity Dynamic Fund, Inc. | Balanced | 1% | 30 days |
| ALFM Dollar Bond Fund, Inc. | Bond | 1% | 6 months |
| ALFM Euro Bond Fund, Inc. | Bond | 1% | 6 months |
| ALFM Peso Bond Fund, Inc. | Bond | 1% | 90 days |
| ATRAM Corporate Bond Fund, Inc. | Bond | 5% | 6 months |
| ATRAM Total Return Dollar Bond Fund, Inc. | Bond | 5% | 2 years |
| Cocolife Fixed Income Fund, Inc. | Bond | 3.50% | 1 year |
| Ekklesia Mutual Fund Inc. | Bond | 1% | 6 months |
| First Metro Save and Learn Dollar Bond Fund, Inc. |
Bond | 1% | 6 months |
| First Metro Save and Learn Fixed Income Fund,Inc. |
Bond | 1% | 6 months |
| Grepalife Dollar Bond Fund Corp. | Bond | 2% | 1 year |
| Grepalife Fixed Income Fund Corp. | Bond | 2% | 1 year |
| PAMI Global Bond Fund, Inc | Bond | 1% | 6 months |
| Philam Bond Fund, Inc. | Bond | 1% | 6 months |
| Philam Dollar Bond Fund, Inc. | Bond | 1% | 6 months |
| Philequity Dollar Income Fund Inc. | Bond | 1% | 2 years |
| Philequity Peso Bond Fund, Inc. | Bond | 1% | 2 years |
| Soldivo Bond Fund, Inc. | Bond | 1.12% | 6 months |
| Sun Life of Canada Prosperity Bond Fund, Inc. |
Bond | None | None |
| Sun Life Prosperity Dollar Abundance Fund, Inc. |
Bond | None | None |
| Sun Life Prosperity GS Fund, Inc. | Bond | None | None |
| ALFM Growth Fund, Inc. | Equities | 1.00% | 90 days |
| ATRAM Alpha Opportunity Fund, Inc. | Equities | 1.12% | 90 days |
| ATRAM AsiaPlus Equity Fund, Inc. | Equities | 1.25% | 90 days |
| ATRAM Philippine Equity Opportunity Fund, Inc. |
Equities | 1.12% | 90 days |
| Climbs Share Capital Equity Investment Fund Corp. |
Equities | n/a | n/a |
| First Metro Consumer Fund on MSCI Phils. Inc. |
Equities | 1.00% | 6months |
| First Metro Save and Learn Equity Fund,Inc. |
Equities | 1.00% | 6months |
| MBG Equity Investment Fund, Inc. | Equities | 5.00% | 1 year |
| One Wealthy Nation Fund, Inc. | Equities | 1.00% | 6months |
| Philam Strategic Growth Fund, Inc. | Equities | 1.00% | 6months |
| Philequity Dividend Yield Fund, Inc. | Equities | 2.00% | 90 days |
| Philequity Fund, Inc. | Equities | 2.00% | 90 days |
| Soldivo Strategic Growth Fund, Inc. | Equities | 1.12% | 6months |
| Sun Life Prosperity Philippine Equity Fund, Inc. |
Equities | None | None |
| Sun Life Prosperity World Voyager Fund, Inc. |
Equities | None | None |
| United Fund, Inc. | Equities | 3.50% | 1 year |
| PAMI Equity Index Fund, Inc. | Index | 1.12% | 180 days |
| Philequity MSCI Philippine Index Fund, Inc. |
Index | 1.00% | 90 days |
| Philequity PSE Index Fund Inc. | Index | 2.00% | 1 year |
| Philippine Stock Index Fund Corp. | Index | 1.00% | 90 days |
| Sun Life Prosperity Philippine Stock Index Fund, Inc. |
Index | 1.00% | 180 days |
| ALFM Money Market Fund, Inc. | Money market | 1% | 7 days |
| First Metro Save and Learn Money Market Fund, Inc. |
Money market | 1 | 7 days |
| Philam Managed Income Fund, Inc. | Money market | ? | ? |
| Sun Life Prosperity Dollar Starter Fund, Inc. |
Money market | 0.25% | 7 days |
| Sun Life Prosperity Money Market Fund, Inc. |
Money market | 0.25% | 7 days |
Non-guaranteed returns
Mutual funds have non-guaranteed returns.
There’s no way to predict how much your money would grow from year to year, and this is especially so with equities funds, index funds, and balanced fund.
Sure, you can actually see the past returns. In fact, you may visit the Philippine Investment Fund Association (PIFA) and you can view the 5-year returns of most funds.
While these figures are helpful, they actually are not reliable in terms of knowing the future worth of your investments. That’s why a better alternative is to actually forecast under different rate of return.
In the table that you will see investments under different return on investment (ROI): 4%, 8% and 12%. As always, here are the following assumptions.
- Sales load is 2%.
- Initial ₱10,000 and monthly ₱1,000 investment.
- Time horizon is 30 years.
| Year | Deposit | 4% | 8% | 12% |
|---|---|---|---|---|
| 1 | 22,000 | 22,210 | 22,866 | 23,529 |
| 2 | 34,000 | 35,116 | 36,978 | 38,906 |
| 3 | 46,000 | 48,539 | 52,218 | 56,128 |
| 4 | 58,000 | 62,498 | 68,678 | 75,416 |
| 5 | 70,000 | 77,016 | 86,455 | 97,019 |
| 10 | 130,000 | 158,795 | 199,085 | 250,729 |
| 15 | 190,000 | 258,292 | 364,577 | 521,618 |
| 20 | 250,000 | 379,344 | 607,738 | 999,018 |
| 25 | 310,000 | 526,623 | 965,022 | 1,840,360 |
| 30 | 370,000 | 705,811 | 1,489,989 | 3,323,091 |
Takeaways
1. Avoid paying the sales load and here’s how.
2. Choose the mutual fund with the lowest management fee according to categories: equities, index, balanced, bond or money market.
3. Choose a fund with no holding period or with the least exit fee. Or you can withdraw money
4. Because returns are non-guaranteed, all you can do is to make a forecast in scenarios of varying returns.
Tags
