EPAL Series: 1 – Investing in Mutual Funds

EPAL Series is a series inspired by the movie “Dumb and Dumber”.  One guy is a clueless but interested investor and the other guy is the EPAL friend (a know it all type who wants to give advice even if he doesn’t know anything about that particular topic).

Follow the journey of Peter and John who are very good friends.

John is a clueless investor wannabe and Peter is real estate investor and a very arrogant know-it-all guy who wants to give unsolicited advice even when he knows nothing about it.

John: Hey Peter! I have always been interested in investing in mutual funds as I want to prepare for my retirement but I don’t know how to go about it. What should I do?

Peter: Mutual Funds are risky.  I heard from a friend that his friend’s neighbor’s cousin’s sister that you can lose your entire capital.

What is wrong with this scenario?

• Peter has no right to say anything as he doesn’t know anything.
• He has no personal experience in investing in mutual funds and he didn’t give an actual and factual example.
• He should ask John to do research or maybe talk to a registered financial planner or attend Financial Literacy seminars

Financial experts usually will recommend this checklist before investing:

1. Emergency Fund – for single 3-6 months & for married 6-12 months
2. Life Insurance
3. Health Insurance
4. Know yourself – Define your objectives, risk appetite and risk tolerance
5. Know the different types of mutual funds & mutual fund companies (http://pifa.com.ph/memlist.asp)
6. Zero out debt or have a debt elimination plan

Investing in mutual funds:

PROs – low capital requirement, liquidity, diversified portfolio, safety, leverage on the professional fund managers so you can focus on what you do best like work or business, potential high returns, convenience – can do via online banking, for equity MFs you can use the companies they invest in as a guide if you want to try your hand in investing in the stock market

CONs – management fees, entry fees/sales load, exit fees, holding time & pre-termination fees, some MF companies require you to fill up forms when you do additional investment.

All investments are risky. Do your due diligence.  The first level of investing: Invest in yourself and be hungry to learn.

We have to do our due diligence through education, investigation and research to mitigate the risks and verify if the investment avenue is credible and reliable.  This is our hard earned money and we should think very hard before we invest our money in anything.

For those who are interested to know more about mutual funds, you can request a copy of a FREE ebook from my good friend Rex Holgado.  Just email him at  rex_holgado@yahoo.com.

Disclaimer:  This is a work of fiction. Names, characters, places and incidents either are products of the author’s imagination or are used fictitiously. Any resemblance to actual events or locales or persons, living or dead, is entirely coincidental.