While browsing reddit, somebody asked about investing in mutual funds through PM and I tried to help them as best as I can by providing information that I know (like my previous articles on it). While I was chatting with one of the redditors, they asked me how compound interest works on funds and stocks. I answered that it doesn’t directly work that way as most investments are affected by the quality of the company and the markets movements. Compounding, however, is a good way to explain why you should invest early, and invest often in excellent assets if you want to earn a lot over time.
If you’ve ever wanted to improve your financial life then you probably learned the importance of reducing your expenses, saving money first, and then investing what you saved in assets or things that generate more money. There are lots of investments out there such as stocks, bonds, mutual funds, ETFs, money markets, real estate, gold, silver, FOREX, options, antiques, trading cards, and more so which ones should you choose?
Well if you’re just starting out then these are the main kinds of investments you should look out for.
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On October 24, 2017, the First Metro Investment Corporation and MSCI, Inc. officially launched a brand new customized stock index called the First Metro Index on MSCI Philippines IMI.
First Metro Investment Corporation is a part of the Metrobank group and it’s one of the biggest investment banks in the Philippines. It has received several awards such as the Best Investment Bank of 2016 by Global Finance magazine and by Euromoney, multiple Best Bond House awards by FinanceAsia, and many more. Through their subsidiary, the First Metro Asset Management, Inc. (FAMI), First Metro partnered with MSCI, Inc. which is a world-renowned index provider that has over $11 Trillion worth of assets benchmarked to their indexes as of 2016.
Now why is that important? How can you use that new index to improve your investing strategy and investment portfolio? Well first off, let’s learn a bit more about indexes, mutual funds, and passive investing.
For this week’s lesson, let’s start with the basics! Today we’ll cover the investment vehicle called mutual funds. So what are they? Imagine this scenario. 10 of your friends want to start investing, but most of you don’t know how to choose good companies’ stocks and bonds. One of your friends, however, is an investing expert who studied business in college and they’ve worked and invested at the stock exchange for more than 20 years. Because he’s good at choosing investments, you all decided to pool your money together and have him handle it for you (you also give him a small commission). You all earn some profit depending on how well your friend’s investments work and how much money you’ve invested with the group. That is basically how a mutual fund works.
A mutual fund is an investment where lots of people pool their money together to invest in assets like stocks, bonds, money market, or other assets. These funds are operated by professional money managers and their goal is to invest the fund’s resources to earn money for the shareholders. That’s you when you invest in a mutual fund by buying their shares.
Now why should you consider investing in them?
It all started with “do you want to win a free car?”
Several years ago when I was in college studying psychology, I went to SM Megamall in Metro Manila, Philippines to attend a convention. It was around 6pm when it happened. While walking at the top floors of the mall where art galleries, travel agencies, and convention centers are located, I happened to pass by a large booth surrounded by a group of people in business attire. One portly woman who looked to be in her 30s broke off from the group to approach me and asked if I wanted to win a free car.
I was certainly interested, yet I knew enough not to trust them completely. While it wasn’t a scam or anything, I had no idea I was about to walk into one of the worst sales strategies that I have ever experienced yet.